SunPower (NASDAQ:SPWR) recently signed deals to supply solar panels to two solar power plants being built for Eurus Energy in Japan, helping the company gain ground in the booming Japanese utility-scale solar market. SunPower will supply around 69 megawatts (MW) of its solar panels to Japan’s largest solar power plant that is being built for Eurus in Aomori in Northern Japan and will also be supplying around 27 MW of panels to be installed at another plant being built for Eurus in Hokkaido. Both plants are expected to be commissioned by 2015. While the financial terms of the deal were not announced, we believe that it could be quite lucrative for SunPower since both projects will use the company’s “E20” series panels, which is are one of the company’s more high-end offerings.
Utility Solar Boom In Japan
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Although residential installations have typically dominated the Japanese solar market accounting for nearly 4 out of 5 installations in FY2011, the utility scale market has been quickly developing thanks to the introduction of government incentives for large-scale solar plants last year. ((PV Magazine)) Japan now offers the most attractive feed-in-tariff in the world and large-scale solar plants in the country can sell their production under long-term contracts to utility firms at rates of around 36 yen per unit ($0.37), which is well above the market price of electricity in Japan.  These feed-in-tariffs are expected to last for 20 years although they could be subject to revisions. During Q1 2013, shipments to large-scale solar installations in the country grew by over 1300% year-over-year to around 762 MW. 
Dearth of Suitable Land Gives SunPower’s Panels An Edge
Unlike commercial and residential solar installations which can be done on rooftops, utility-scale solar installations are typically ground-mounted and require large swathes of land. This is proving to be a significant issue in Japan. The country’s population density is very high with around 343 people living in each square kilometer (this compares to around 231 in Germany and 141 in China). Additionally, around 73% of the country’s land is either mountainous or forested and the solar boom could quickly occupy much of the suitable land in the country, potentially driving up land costs for new solar projects.  This makes it imperative for developers to choose solar panels that maximize the productivity of their land and we believe that SunPower could benefit from this. SunPower’s highly efficient monocrystalline panels occupy less space per unit of installed capacity, meaning that developers can construct higher capacity power plants on a given area using SunPower’s panels as compared to thin-film and polycrystalline panels.
While this deal will only entail the supply of panels, SunPower had also mentioned during its Q2 2013 conference call that it was seeing opportunities for more power plant related opportunities in Japan, including for turnkey projects. Providing turnkey services could prove to be more attractive for the company over the long run especially from a margin standpoint.
Trefis has a $25 price estimate for SunPower, which is almost in line with the current market price.Notes: