News from a few months ago that General Electric Company (NYSE: GE) decided to delay its plans to open a massive thin-film solar manufacturing facility. I was dismayed upon hearing that. When I first read about thin-film panels, I thought it had far-reaching applications. I was a bit delusional in how far-reaching, i.e. thin-film house siding, but still a cheaper alternative to standard panels. My delusions dealt with flexible thin-films, which was the focus of the article I read. GE’s factory is for rigid thin-film panels, which is still the most common type of thin-film panel.
It is a shame that I cannot find any public companies with flexible solar panels, because I think the potential for that technology is greater than rigid thin-film solar panels. You can cover more non-flat surfaces with flexible panels. From what I have seen the panel works just fine while curved. I want a thin-film awning or umbrella, though I might be dipping into absurdity again.
Rigid thin-films were first brought to market on a mass scale by that solar stalwart First Solar, Inc. (Nasdaq: FSLR). It actually has a big head start in lowering manufacturing costs and improving efficiency. As the GE article mentions, it was efficiency that made GE pull out. This is why I was dismayed that I could not find a public flexible panel maker, since it would offer a benefit other than efficiency. I am assuming First Solar does not have flexible panels, because I can find no overt mention on Google or First Solar’s product page.
First Solar has fallen on hard times. The end of solar subsidies have hit the stock hard and its 1-year return is -50%. With its negative earnings concerns abound, there are signs of hope. Winning these projects is key to for First Solar. It needs to survive while the market improves, the oversupply disappears, and it improves its products. It has the know-how and experience to squeeze out improvements faster than GE. First Solar can go farther faster.
The main benefit of thin-films was that they were cheaper to make. However, as those of you that follow regular solar stocks know, the price for traditional silicon solar panels has fallen. These are the normal thick ones we see on people’s houses. Now that they are cheap, thin-film has less appeal. Thin-film panels are inefficient compared to standard ones. With the one advantage of thin-films gone, GE decided to work on efficiency before creating a massive manufacturing complex.
GE decided to go back to the labs to improve efficiency. The good thing is that it believes it can improve efficiency. The lofty targets in that article are as good as standard solar panels. I still want to see the roll-out of the graphene enhanced solar cells, but I think we are a few years away. GE’s position was that it could not effectively compete without the panels being more efficient and I imagine cheaper.
Do I think that these solar panels will have an effect on a giant like GE? Yes, I think it can though it won’t as first. If real breakthroughs in efficiency and cost can be made and if they go for flexible panels, then solar should become a good part of the revenue stream for GE.
Another issue is whether having a titan like GE entering the thin-film market will crush First Solar. I think that First Solar could benefit by having GE step into the market. It signals that thin-film is not just the fringe of an already fringe technology. Maybe it is not fair to call solar a fringe technology, but it relied so heavily on subsidies that I do not know what else to call it.
I do not think I am expecting too much of GE entering into the thin-film solar market. Having a company as storied as GE at least validates the space. There are still plenty of people who do not know that there is such a thing as thin-film solar panels. At least having another big player in the market will increase the technology’s profile.
In a few companies that my friends or I have worked at we ran into the scenario where businesses needed the company’s product, but they did not know they did. Thin-film is not arcane or obscure, but it is not widely known among the general public. As investors, we want the public to catch on to how great the product is right after we take a position.
It is important to explain that thin-film panels work better in harsh climates and low light situations. Both First Solar and GE’s product pages mention that thin-film panels out perform traditional ones in harsh climates and low light. If morning and late afternoon count as low-light, then even less efficient thin-film will produce more overall energy throughout the day. Does the desert count as a harsh climate that lowers the efficiency of standard panels? The deal that First Solar closed with the United Arab Emirates would suggest they convinced the desert nation that thin-films suit them best.
Only when solar power is seen as a common and useful upgrade for the home will solar really start to make money. It needs to be one of those addons that housing developers offer. Do you want granite counters and solar panels?
Conclusion
You might want to wait before jumping into First Solar,which is the star of this article despite all the talk about GE. Wait for conditions to improve, and wait long enough for you to do the extensive amount of research required. The solar market is not recovering overnight, so there is time to research.
As for GE there are so many other reasons to invest and not invest in GE. Thin-films form part of an investment thesis for GE, but only part. I just like solar into the next 2 decades, and if GE can start now then it can position itself for a nice new revenue stream. At least wait to see if it meets it efficiency goals and completes the manufacturing facility. Since I was focusing on something that is not even rolled-out for GE there was not much in the way of numbers to talk about. I will say that EPS growth has been negative for a few quarters, and if the market punishes it for earnings continuing to shrink it might be worth grabbing a position in the 3% yielding stock.
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