SunPower’s Multi-Crystalline Play Should Ease Capacity Issues, Expand Addressable Market

by Trefis Team
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SunPower (NASDAQ:SPWR) recently launched a line of mass market multi-crystalline panels dubbed the Performance Series (P-Series), marking a departure of sorts from the company’s high-efficiency mono-crystalline strategy. The new panels will have efficiencies of 17% to 19%, which would be about 15% higher than conventional multi-crystalline panels, although it would be well below its top of the line panels such as the X-Series (22%+ efficiencies). [1] However, we believe that moving down-market with the P-Series is a smart move for two broad reasons. Firstly, it helps SunPower make deeper inroads into fast-growing emerging markets where its presence may have been limited in the past due to the lack of affordable panels in its portfolio. Secondly, the new panels could help to expand manufacturing capacity in a cost-efficient manner, since they utilize mass market crystalline solar cells rather than the firm’s proprietary and capital-intensive n-type mono cells. [2]

We have a $29 price estimate for SunPower, which is about 20% ahead of the current market price.

See our complete analysis for SunPower

Expanding Presence In Emerging Markets 

The new panels could be crucial in driving the next wave of growth for SunPower. Demand in the United States – SunPower’s largest market – is poised to slow down following the decline in the U.S. Federal Investment Tax Credit, slated for the end of 2016. Growth in Europe could also remain tepid, capping the potential for SunPower’s high-end panels. On the other hand, markets such as Asia, the Middle East and Latin America are projected to be key drivers of global solar growth. For instance, India is targeting 100 GW in installed solar capacity by 2022, up from about 4 GW currently, while China’s capacity could hit 150 GW by 2020. Keeping upfront installation costs low is a key factor in catering to emerging markets, considering the low electricity prices and relatively high cost of capital for renewable projects. SunPower should be able to find a sweet spot in emerging markets with the new line of panels, which should offer superior performance compared to mass-market poly panels at reasonable price points. These panels are slightly larger than conventional panels, with a rated power output of 350 watts, allowing them to also be targeted at commercial customers in developed markets who have fewer constraints on roof space.

solar_market_size

 Reducing Costs, Ramping Up Production Quickly

P-Series panels will utilize a new cell interconnect technology developed by Cogenra Solar – which SunPower acquired earlier this year. The technology allows for lower losses and performance degradation compared to traditional polycrystalline panels. However, these panels will utilize conventional crystalline silicon solar cells, which SunPower could source from the competitive market. There is ample solar cell production capacity available globally (about 60 GW), which should ensure that cell costs remain low. With the improved efficiency that these panels offer, SunPower notes that it should be able to manufacture panels that compete on price with many Chinese solar manufacturers, who produce modules at under $0.50 per watt.  Although the panels would require proprietary panel processes and equipment, capital costs associated with manufacturing should be low as SunPower may not need to build out costly cell fabrications units. SunPower projects $0.10 per watt of capacity in terms of capital costs – a fraction of building out a traditional manufacturing plant. Additionally, the production ramp for product should be quick, with SunPower targeting 2 GW of P-Series capacity by 2020. For perspective, the company currently has just about 1.3 GW in capacity across all its panel product lines.

SPWR_Production

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Notes:
  1. SunPower 2015 Analyst Day Presentation, SunPower November 2015 []
  2. Sunpower introduces new PV module design, offers 2016 guidance, PV Magazine, November 2015 []
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