SunPower Corporation (NASDAQ: SPWR) sells the most efficient, most expensive module of any of those made by the world’s top ten manufacturers, yet it leads in U.S. residential installs and ranks among the leading utility-scale developers.

“We win,” said Regions President Howard Wenger, because “although the technology costs more, it produces more power.”

Customers, Wenger said, “are not buying a panel. They’re buying electricity, and it matters to them what the cost of that electricity is.”

SunPower’s cell, Wenger said, “is our core advantage.” Most solar cells’ metallization lines, he explained, block the sun. SunPower founder Dick Swanson restructured cell architecture, putting the metallization on the cell’s back side, opening up the entire silicon surface.

“Other manufacturers’ cells,” Wenger said, “are on average 16 percent efficient. We’re 24 percent efficient. That means you need 50 percent less roof area for the same power output, 50 percent less steel, 50 percent less labor. On a per-unit basis, this is more expensive, but on an energy basis, it is not.”

Unlike other high efficiency panel makers like Suniva and Sanyo, SunPower’s go-to-market strategies have been successful enough to keep it among the world's top ten manufacturers. And, Wenger said, its new warranty has “completely changed the game.”

SunPower “plowed through 3 million module-years of data, just like an insurance company,” Wenger said. “We learned our product is not only a great performer, it’s more reliable.”

The result is SunPower’s offer of “a 25-year performance warranty and a 25-year product warranty,” Wenger said. “For 25 years, if anything goes wrong with that panel that is a defect of our product of any kind, we will replace it at our cost. The industry standard for that piece is five to ten years.”

The warranty also guarantees 9 percent plus more energy over the life of the product than the industry standard, Wenger said, based on a calculated 0.4 percent per year degradation rate.

This marketing move has SunPower’s competitors re-examining their own capabilities, according to market watchers. But, Wenger said, SunPower is not taking on risk. “We are doing this because we can.”

Technology differentiation is the first of the three reasons for SunPower’s U.S. leading residential-commercial market share, Wenger said. “More power per roof translates to lower costs. And it is more reliable.”

The reason second is “2,000 dealer-partners,” Wenger said. “Other companies are trying to sell directly. That’s hard to scale. Our model is closer to a DirecTV model or like air conditioning companies: Train local dealers owned by other individuals.”

Third, Wenger said, “is financing. The third-party ownership [TPO] model is working out really well for us. The customer can -- no cost, day one -- get a solar system.” SunPower is second to Sunrun in the exploding TPO sector. “But we have only been doing third-party ownership a year,” Wenger said. “Give us some time.”

Financing, he added, “is the way of the future. Exactly how the financing is structured is a work in progress, like when GMAC came up with the first auto loan to mainstream car owners. It upset the middle part of the adoption curve. In solar, we’re in the early days. And I don’t think there is one financing structure that is the magic formula,” he added, “or a lot of IP.”

In utility-scale development, Wenger said, there are four pillars, the power purchase agreement, the permitting, the interconnection agreement and the financing.

“What’s different about SunPower from the other panel manufacturers is that all they want to do is sell panels,” Wenger said. With its vertical integration and its ability to secure financing, he explained, SunPower “will build the project with our technology and be responsible for the construction. And then we will sell it. But we will operate the project for as long as the owner wants us to.”

The result, Wenger said, “is a better, more financeable, investment-grade project.” SunPower has built over 600 megawatts of utility-scale projects, has 250 megawatts under construction, and is scheduled to break ground, early next year, on the 650-megawatt Antelope Valley Solar Project in California’s Mojave Desert.

“We love smaller scale and we love big scale,” Wenger said of the trend toward under-100-megawatt projects. “Utility scale is a lot lower levelized cost of energy than distributed generation. The flip side is you need land. There are tradeoffs, but each can make sense, depending on the place.”

Being owned by French multinational Total (EPA: FP), the eleventh largest company in the world, has greatly strengthened SunPower, Wenger said. “First, they are helping us on the marketing and sales fronts. They are in places we are not -- Africa, the Middle East, Asia-Pacific. They are strong where we are not.”

Second, he said, Total added $25 million to SunPower’s $40 million annual R&D budget.

And third, “There is the halo effect.” Total’s balance sheet and credit rating “lowered our cost of capital. They put in place a billion-dollar credit facility for SunPower at a very reasonable rate.” And Total is, Wenger added, “systematically consolidating their other investments in solar to SunPower. We are becoming their singular platform for solar power worldwide.”

Total’s support, Wenger said, is vital. “If you step back, it is basically Asia versus SunPower and maybe one or two other companies. It’s basically massive commoditization, no differentiation, and huge volumes versus innovation, which is what we’re all about.”

Tags: africa, antelope valley solar project, asia-pacific, balance sheet, california, cell architecture, commoditization, consolidating, cost of capital, credit facility, credit rating, dealer-partners, degradation rate, dick swanson, differentiation