First Solar Inc. (FSLR:US), the largest U.S. solar-panel maker, is boosting its efforts to install systems at industrial sites and warehouses as utilities demand smaller solar farms.
Pursuing smaller projects and customer-sited systems may increase sales as much as 36 percent over the next three years, Chief Executive Officer Jim Hughes said at an analyst event in New York yesterday.
The company got 65 percent of its 2013 sales (FSLR:US) from selling large solar farms to utilities, a market that’s slowing in the U.S. as power companies meet state requirements and don’t need to buy more solar energy. Hughes is seeking deals in other regions including Saudi Arabia, India and South America, and also expects higher demand in the U.S. from commercial and industrial rooftops.
“We’re more confident than ever that we can compete for rooftops,” Hughes said in an interview after the event. “Quite possibly it will be our biggest growth segment, but we’re starting from a small base.”
The company, based in Tempe, Arizona, forecast earnings will increase to $4.50 to $6 a share in 2015 from $2.20 to $2.60 this year.
That boosted the shares 21 percent yesterday, the biggest gain in the Standard & Poor’s 500 index and the highest since September 2011. The shares increased 1.6 percent to $70.48 at the close in New York. The company has more than doubled in the past year.
First Solar is competing for 15 commercial projects totaling 45 megawatts, and is “shortlisted” for 15 megawatts of those, according to Chief Operating Officer Georges Antoun.
“It’s about 45 percent of the market so we have to pay attention to it,” Antoun said at the analyst meeting. “We can get back into it and become a major player.”
First Solar expects to use its thin-film cadmium-telluride panels for those projects.
The company also expects to begin making polysilicon panels by the end of this year through the TetraSun unit it purchased in April. A pilot factory in Malaysia will have about 100 megawatts of annual capacity, according to a presentation yesterday. The output is already sold through the first quarter of next year.
To win new orders, First Solar plans to boost panel efficiency and reduce development costs. Improvements will cut the installed system cost, including panels, racking systems and inverters, to below $1 a watt in 2017 from $1.59 last year.
The reductions will come mostly from more efficient panels and higher output. First Solar said yesterday it reached a record 17 percent efficiency for its cadmium-telluride panels at a research center and plans to move the technology into factories over the next three years. Its commercial products converted 13.4 percent of the energy in sunlight into electricity in the fourth quarter.
First Solar plans to boost module production to 1.9 gigawatts this year from 1.6 gigawatts last year. By opening new production lines and restarting old ones, the company will be able to produce as much as 4.3 gigawatts of modules in 2018.
First Solar is developing 3.7 gigawatts of U.S. projects, which are all due to be complete in the next three years, according to its 2013 annual report. Utilities in California, Arizona and other large solar markets are already meeting state mandates for buying solar power, slowing demand for new First Solar projects.
Installations at large-scale solar farms in the U.S. will grow at a compound annual rate of 8 percent from 2013 to 2016, according to a January report from Goldman Sachs Group Inc. The booming rooftop market will swell by 45 percent over the same period.
To boost its utility project pipeline, Hughes is pursuing deals in the Middle East, India, Australia and South America. The company identified 10.66 gigawatts of potential bookings at the end of 2013, including 5.9 gigawatts outside the U.S.
Hughes is also targeting sales of panels to mine operators in remote areas and other industries that currently rely on diesel generators. By adding panels nearby, companies will save on fuel costs. At one location, First Solar installed 10 megawatts of solar panels to accompany 15.3 megawatts generated by a diesel-fueled generator.
“That will save them 85 million liters of fuel over the next 25 years,” Antoun said. “We still need to prove it’s reliable.”
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