The solar industry changes quickly and investors need to stay on their toes. Here are the three things to watch for that will affect First Solar's performance in the future.
- Solar bankruptcies: Right now there is carnage around the solar industry. Q-Cells, once the largest manufacturer of solar cells in the world, filed for bankruptcy earlier this year. Evergreen Solar, Solyndra, Energy Conversion Devices, and recently First Solar's copycat Abound Solar filed for bankruptcy, and there are certainly more failures to come. This may seem bad, but investors need to watch for considerable amounts of capacity exiting the market, which could alleviate some of the downward price pressure on the industry. Bankruptcies are bad for the industry's image, but they will reduce the supply that has plagued the market.
- Global policy changes: Each country handles solar policy differently, and investors need to watch closely as countries change policy. Japan recently instituted a very favorable $0.53 feed-in rate for solar that could lead to a $9.6 billion investment in 3.2 GW of capacity in the next year alone, an accommodative policy that will build a market from almost nothing. China, Saudi Arabia, and California also have policies that will encourage growth in the solar industry.
- Competitors' cost and technology: First Solar has to fight competitors not only on the cost front but with technology as well. Investors need to watch the pace of cost reductions for crystalline solar manufacturers versus First Solar, which will indicate if thin-film solar can survive. Efficiency is also important, and First Solar needs to increase module efficiency at a faster rate than competitors just to keep up.