If you're a manufacturer of solar products looking to capitalize on Ontario, Canada's generous solar feed-in tariiff, 60 percent of your materials have to be produced locally.
If Sun Edison wants to develop solar projects in Ontario and get their parent firm, MEMC's, silicon involved, they have to make modules in the province.
To that end, MEMC (WFR) just announced that it will start producing MEMC-branded solar panels through Flextronics (FLEX) in Ontario to serve the local market, starting in the second quarter of 2011. Local content requirements are rising from 50 percent to 60 percent in 2011.
"This initiative not only satisfies the domestic content requirement for SunEdison, but also signals a significant long-term investment in the Ontario solar market," said Carlos Domenech, President of SunEdison.
MEMC's vertical integration strategy looks like it's coming to fruition. MEMC is one of the larger makers of silicon wafers in the world. Sun Edison, bought by MEMC in 2009, develops solar projects. MEMC's recent acquisition of Solaicx helps in crystal growth manufacturing processes. And now the firm has a module partner in Flextronics.
Vertical integration in solar seems to be working very well for firms like SunPower and First Solar that build cells and modules as well as develop projects and solar power plants. Both of those firms have the lead in U.S. utility project development. See Shayle Kann's recent report for an insightful analysis of the U.S. utility market.
Getting back to Ontario's generous feed-in tariff: the rates range from 40 cents per kilowatt-hour to 80 cents per kilowatt-hour depending on the size and type of installation. This PDF provides more details on the Ontario FiT.
The stock price of the $2.7 billion market cap MEMC was down .25 percent to $11.92.