by Matt Margolis
I apologize for the quirky article name but I wanted a tongue twist that everyone would remember. In all seriousness there is an amazing solar rebirth that is underway and one of the solar growth areas fits inside the bulls-eye of Merlin’s target market. Today most of us witnessed our portfolio’s that were filled with momentum stocks such as GTAT and Micron get annihilated. The good news is the type of stock price movements that we saw today are gifts for investors, who had money left on the table and could take advantage of today’s sell off and add to their positions of their favorite companies. There was one large exception to today’s sell off that I wanted to discuss and that company is called SunPower (SPWR), which traded up 6.75% on a day when then other solar names got taken to the woodshed. SunPower reported earnings after the closing bell on Thursday and I wanted to dig into and share some of the comments and presentation material shared by management during the Q1 2014 conference call.
One of the first slides in SunPower’s Q1 2014 earnings presentation included the current state of installed PV efficiencies for the top 10 PV suppliers. As you can see from the chart below the efficiency rates are mostly hovering at 17% with SPWR as the only PV supplier above 20%. Any changes to the PV module design that also improves PV efficiency will certainly open up the wallets of the top 10 PV suppliers.
Slide 6 of SunPower’s presentation (below) is something that gets me very excited about Merlin’s Multiplying Market, which is the roof top market place. Sunpower touts their reliability and efficiency benefits of their rooftop systems. GT’s Merlin Technology PV modules improve efficiency, are more durable and they will weigh substantially less than traditional PV modules due to Merlin’s patented design that can reduce the usage of silver paste by up to 80%!
It clearly shows why customers choose SunPower for their rooftop systems. On a typical space-constrained rooftop, SunPower panels produce over 50% more energy than conventional solar systems in the first year of operation. By year 25, this advantage will grow to 100% due to superior reliability and much lower performance degradation rates. The bottom line is that SunPower customers generate over 75% more energy over the lifetime of their systems. As customers and financiers become more educated about panel degradation rates and system residual value, SunPower’s technology advantages and associated economic benefits become increasingly clear. When incorporated into a yield co, or a lease vehicle, these long-term reliability and performance advantages are directly monetized. Chuck will share more information about our current thinking about yield cos and other monetization options. The primary driver behind this lifetime energy advantage is our higher panel efficiency.
Thomas H. Werner – Chairman, Chief Executive Officer and President You probably have a pretty good sense that there are very few markets where the Power Plant business and the rooftop business are big. It’s really Japan, North America. There’s a couple of emerging markets where they’re both big. And then what you see is one dominates the other. Europe is a rooftop business. Middle East is a Power Plant business. China is largely a Power Plant business.
SunPower is Planning “Significant” Capacity Expansion Within the Next Few Quarters
We plan to produce between 50 and 100 megawatts in 2015 and more than 250 megawatts in 2016. With strong and growing demand for our panels and a stable pricing environment, our expansions team is highly motivated to meet or exceed these targets. Fab 4 will produce our most efficient solar cells to date, enabling panel cost reduction of up to 35%. As I mentioned in the last call, we’re also evaluating locations for our next significant capacity expansion and expect to make a decision on the additional capacity within the next few quarters. (Seeking Alpha)
Magical Merlin Delivering Cost Savings and Efficiency Improvement
GT’s Magnificent Merlin demonstrated a cell efficiency improvement of 0.7%, which doesn’t sound like a lot but it actually amounts to over a 4% PV module efficiency improvement (0.7% improvement divided by 17% base). If you gave me a 4% raise in pay and told me that Merlin could reduce the effort (labor cost) it took to do my job by greater 10% I would be knocking on the door to sign up. Merlin not only delivers an improved efficiency rating it also will contribute greater than a 10% reduction in the total system cost of solar.
SunPower is excited about their rooftop systems and global opportunity today, but what if they added Merlin to their PV system lineup? I can already envision the marketing message for potential customers….
SunPower’s PV systems manufactured coupled with GTAT’s Merlin Modules….
- Dramatically reduces the total system cost by over 10%
- Dramatically reduces the solar system weight
- Dramatically reduces installation time
- Dramatically improves the durability of the solar system
- Dramatically reduces installation time
- Dramatically reduced solar system weight allows for installation on nearly every rooftop
- Dramatically improves our existing market leading PV efficiency %
- Dramatically improved flexible design allows for new places to install solar modules
Drama is the first word in Dramatically. However, unlike a play that is enacted on stage by actors for onlookers to enjoy, Magical Merlin’s mystical powers are real and Magnificent and will end up Multiplying existing and creating new Market Opportunities out of thin air. Just like magic!
Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings