Why SunPower’s P-Series Panels Could Be Crucial To Its Turnaround
SunPower (NASDAQ:SPWR) has been facing headwinds in recent quarters, amid a significant decline in solar panel pricing that has made the company’s bread-and-butter monocrystalline E-Series panels noncompetitive in the marketplace. While the firm has been looking to improve profitability by shutting down E-Series manufacturing capacity (namely the Fab 2 in the Philippines) and skewing production towards its high-end X Series panels, there is a possibility SunPower’s low-cost multi crystalline P-Series panels could also prove to be an important component of the firm’s comeback strategy. (related: SunPower’s Multi-Crystalline Play Should Ease Capacity Issues, Expand Addressable Market) Below, we take a look at a few reasons for this.
We have a $10 price estimate for SunPower, which is about 40% ahead of the current market price.
See our complete analysis for SunPower
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SunPower Can Turn Commodity Cells Into Differentiated Panels
SunPower’s P-Series modules are produced using multi-crystalline solar cells that are available in the mass market, while utilizing a proprietary interconnection technology developed by Cogenra Solar, a company that SunPower acquired back in 2015. Unlike conventional solar panels, in which cells are placed side-by-side and connected with wires, P-Series cells are arranged in the shingle structure similar to roofs, with cells soldered to one another. This allows for lower losses and performance degradation compared to traditional multi crystalline panels. While price declines in mass-market multi-crystalline products have historically proved a disadvantage for SunPower, as it makes its proprietary tech less competitive, the P-Series offering will effectively help the firm hedge its bets, as it utilizes mass market cells and deploys a differentiated connection technology to add value. SunPower could also eventually manufacture a higher-efficiency monocrystalline product using the P-Series technology, taking advantage of the increasing supply of mono cells from Chinese manufacturers. (related: Do PERC Panels Pose A Threat To First Solar And SunPower?)
Lower Capital Costs And Risks
SunPower’s monocrystalline manufacturing facilities are very capital intensive and take years to construct, given the firm’s proprietary technology. For instance, the company noted that its newest Fab 4 facility that manufactures its high-end X-Series panels would cost roughly $185 million to $230 million to build. Considering the plant’s 350 MW capacity, this would translate into a per-watt capital expenditure of as much as $0.65. In comparison, capital costs for the P-series cells stand at below $0.10 per watt, with the lead time for capacity build-out standing at just about six months. Moreover, SunPower’s costly proprietary technologies have been prone to technological obsolesce, resulting in significant investment risks. For instance, the firm’s Fab 1 and Fab 2 facilities, which are now closed or will be closed, had operating lifespans of under 10 years each. The risks relating to the P-Series panels are likely to be considerably less.
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