First Solar Suffers A Setback On Panel Reliability Issues

by Trefis Team
First Solar
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First Solar (NASDAQ:FSLR) stock took a beating in last Friday’s trading, losing 11% of its value after an analyst from Avian Securities cut its rating on the stock, citing reliability issues concerning the company’s solar panels. The problem was said to be related to the junction box of some of the panels which could potentially cause fire or electric shocks. [1] First Solar shortly confirmed the issue, stating the defect affected about 232,000 panels manufactured between October 2008 and June 2009. The company said that it was working with its customers to repair or replace the faulty panels.

Implications for First Solar

The defect is believed to be more of a concern for rooftop panels rather than utility-scale solar fields. Replacement of roof mounted panels may prove to be more expensive for First Solar since it intends to bear the costs of removal and re-installation, in addition to the replacement costs. [2] It was not immediately clear as to what proportion of the defective panels were roof-mounted.

For its part, First Solar has stated that repair or replacement of the defective panels will not have a significant impact on its annual earnings, and it added that the impact was considered in its earnings guidance released in August.

Even if the financial implications of the recall do not turn out to be significant, the incident can dent First Solar’s brand image mainly because it involves safety issues. As the world’s largest manufacturer of thin-film solar panels, First Solar has built a strong brand recognition with system integrators, utilities and project developers. The company is recognized as the cost leader in the solar industry with module manufacturing costs reported as low as 0.75/watt.

First Solar has experienced mechanical issues related to its panels even in the past, which raises questions about its manufacturing process. For the fourth quarter, the company reported a $164 million charge related to warranty payments for replacing equipment that caused power losses in certain panels. [1]

We have a price estimate of $22.13 for First Solar, which is about 10% ahead of its current market price.

Understand What Drives a Stock at Trefis

  1. First Solar Slides On Concerns Of Product Reliability, Reuters [] []
  2. FSLR Off 10%: Avian Goes Negative, Co. Downplays Module Issue, Barrons []
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  • commented 9 years ago
  • First Solar is a fairly new company and has no proven record of reliable and safe technology. The track record of rejects and recalls of late is a confirmation of this fact.
    And yet, in the August issue of Photovoltaics International their engineers claim that their CdTe PV modules have a long term track record, for which they use data from a 17 years field testing done by NREL.
    In it, they show long term successful test results, and conclude that their CdTe modules are more efficient and reliable, including use in high temperature conditions, than the competition.

    Here are several problems:.
    1. The test modules were made by Solar Cells Inc. in 1995, 4 years before SCI was taken over by First Solar, so the test modules are quite different than the present day product,
    2. The test modules were made via manual process, almost 10 years before First Solar started mass production. Because of that, the processing of the test modules cannot be considered relevant to the present day production process as well,
    3. The weather in Golden, CO, at over 5600 ft. above sea level, is often cloudy and 40 degrees cooler than the high temperature areas (the deserts, where most CdTe modules are installed presently), so this test cannot be considered high temperature test, and finally
    4. Only 600 Wp (half a dozen) modules were used in the test, which is statistically insignificant, and no reliable scientific data can be derived from it, so it has no practical value.

    Even ignoring all this, we still have to wonder about the reliability of the CdTe technology, because it is too new, and has not been proven reliable and safe for long term desert use.
    Not to mention that CdTe PV modules contain toxic, carcinogenic cadmium heavy metal. We, therefore, can only guess what could happen next, in addition to the sudden power degradation problems and junction box malfunctions experienced by the CdTe modules; untested and unproven for long term use in the mega-fields in the US deserts.
    The big question here is, "Is this just an isolated case of ignorance and negligence on behalf of several engineers, or is there a company policy of hiding and misrepresenting facts, reflected in this case?" We, the taxpayers, whose money First Solar is using now days, must know!