Solar Manufacturers Battle

A few weeks ago, I highlighted three important factors investors need to understand about solar companies. They were cost per watt, efficiency, and bankability. In the past, I've looked at how cost per watt affects a company's competitive position, but today I'd like to take a deeper look into efficiency.

Efficiency plays an important role in analyzing solar investments for a couple of reasons. First, a more efficient panel will allow a developer to spend less on land, installation, and electrical components -- also known as the balance-of-system. But what might be more important, especially when analyzing Chinese competitors, is efficiency, which can tell us whether a company has any sort of technological advantage.

Most Chinese competitors are more or less the same company with slightly different capabilities and cost structures. Unlike U.S.-based First Solar (Nasdaq: FSLR) and SunPower (Nasdaq: SPWRA), customers don't differentiate them much. I've compiled a list of some of the larger Chinese manufacturers and their highest efficiency monocrystalline modules and multicrystalline modules to show how they stack up.

Among these companies, Trina Solar can make the most efficient monocrystalline module, while JinkoSolar has a slight edge for multicrystalline modules. But overall, these companies' modules don't vary much in terms of efficiency. And none come close to the 19.6% efficiency module that SunPower makes.

Keep that in mind when analyzing solar stocks. As costs fall, efficiency is becoming more important and could be the most important differentiator for manufacturers going forward.

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