SunPower builds the world's most efficient crystalline silicon solar cells and is the market-share leader in the California Solar Initiative. The Silicon Valley-spawned firm has a strong operational track record -- and a deep ownership of the solar PV value chain. On its most recent quarterly earnings call, SunPower mentioned that it is supply constrained, that its dealer network is on allocation, and that its full 550 megawatts of production is allocated based on anticipated bookings.
In addition, SunPower's first quarter 2010 showed non-GAAP gross margins of 22.5%; the firm added 1,200 MW of project pipeline with its acquisition of SunRay and announced an additional 40 megawatt agreement with PG&E.
It seems that SunPower is doing well -- they execute on what they say they are going to do, their acquisition strategy is sound, and their technology continues to advance.
But industry analysts tend to be very cautious about SunPower, typically because of high capital costs in the face of an aggressively competitive climate.
Steve O'Rourke of Deutsche Bank Equity Research writes that these factors are "partially offset by uncertain industry and macroeconomic fundamentals, an opaque business model, and an acquisition that needs validation."
Jeff Osborne of T. Weisel is "concerned that management may be overly relying on Italy, a country that is likely to reduce its solar subsidy substantially later this year to take effect in 2011" and claims that "SunPower is in a state of transition from being a components-focused supplier with some systems exposure via PowerLight and a few tuck-in acquisitions to [becoming] a large-scale systems integrator with a 4 GW+ utility scale project pipeline since the SunRay acquisition."
Osborne adds, "Owning the systems channel can find a home for your product, drive greater revenue and gross margin dollars per watt; however, this process presents some risk over the long term over channel conflict, new revenue recognition rules on sale of project when a debt and equity investor is found, as well as introduces the use of 3rd-party modules to a greater degree for a perceived technology leader."
According to Auriga's Mark Bachman, "We see SunPower as losing ground to Asian module manufacturers, and especially so in the U.S. We note that management has changed its stance with regard to the California market; the new message is that SunPower has maintained its #1 market share position while it has abandoned its prior claim that the company is actually winning share."
So, SunPower, confronted by these threatening market forces is taking steps to stay competitive and viable. We covered their third party module strategy here and their Flextronics manufacturing strategy here. Their most recent announcement is the introduction of the Oasis solar power block -- a modular system that scales from 1 megawatt distributed installations to large central station power plants. Suntech, China's PV giant, also has an integrated solar system.
I spoke with Matt Campbell, SunPower's director of utility products, about their modular product.
Each 1 megawatt AC “power block” integrates SunPower T0 Trackers with 400-watt SunPower solar panels, pre-manufactured system cabling, an inverter and a power plant operating system. The power block kits are shipped pre-assembled to the job site for rapid field installation. The intent is to streamline the development and construction process as well as cut costs.
SunPower uses their T0 tracker, which is about 7 feet tall at its highest point (communities have requested that the trackers stay low-profile and relatively hidden). The tracker uses the usual SunPower architecture of controlling many rows via a single motor -- four motors per megawatt AC.
The utility-optimized panels are bigger than standard residential panels -- they consist of 128 5-inch cells in about a two-square-meter size, which is as large as one person can reasonably handle.
Campbell mentioned that this falls under the "Ikea model" of kitting the product and the "Henry Ford model" of restricting the number of model permutations to, well, one. He estimates this provides an improvement in balance of system cost of 25 percent through: 1) Savings in materials on steel structure, copper, electrical conduits and table trays, 2) Field labor, and 3) Procurement advantage through standardization.
The first utility power plants built with the Oasis power plant technology will begin construction at the end of the year.