The solar industry had another busy week with a number of announcements and earnings reports from some of the largest companies in the business. It was so eventful, in fact, that I can't cover everything in this week's roundup, but I can hit the items investors most need be aware of.
As the solar industry evolves into a more mature market and players define where they think they'll have a competitive advantage, it's time for investors to start looking at where companies fit into the market and whether they'll have a profitable future. With that context in mind, here are the notable news items from the solar industry this week.
SunPower signs a P-Series supply deal
SunPower (SPWR) has been laying out its plans for the future, and a central piece of its strategy is based on combining the P-Series solar panel (which uses commodity cells to create a slightly higher efficiency "commodity-plus" panel) with the Oasis power plant design. The company is essentially transitioning from the utility-scale project-building business to supplying pre-engineered solutions to developers, like utilities. The strategy makes sense, but we had yet to see much indication that it was taking hold in the market... until this week.
SunPower signed a 125 MW supply agreement with NextEra Energy (NEE -0.03%) to provide its P-Series modules to the developer between June and October of this year. There wasn't any disclosure about whether the deal included the Oasis tracking system or any design services, but even if it's just a panel supply agreement, it would be a positive sign.
If deals like this continue to come through in 2017 and SunPower is able to supply panels and other services to developers on short lead times, it would be an immensely positive development. One deal isn't a confirmation that the P-Series/Oasis strategy is a success, but it's a step in the right direction for SunPower shareholders.
Google takes Sunroof nationwide
Alphabet's (GOOG -1.54%) (GOOGL -1.51%) Google subsidiary started the Project Sunroof initiative in 2015 to try to give customers and installers an easy view of the solar potential of homes around the country. Initially, the project covered just a few cities, but the idea was to eventually roll it out nationwide. This week, that happened.
Project Sunroof now allows people across the country to quickly view an outline of their home's solar potential, and get an idea of what a solar system might cost them. Installers can be plugged into the search to make sales easier, and I would expect some will even use it as a tool to target sales opportunities. This is one big example of how solar is becoming a little easier for customers to understand and see as accessible, particularly outside of traditional solar hubs such as California and Massachusetts.
Trina Solar goes private
In a deal that has been in the works for months, Trina Solar was finally taken private this week. The $11.60-per-share offer made by a group led by the CEO looked to be on shakier ground late last year as solar panel prices plunged and demand in the solar market declined, particularly in China.
I questioned whether or not the deal would go through given the questionable history of Chinese buyout offers and the decline in the market overall. But Trina Solar is now private, and the fact that the deal went through may mean management sees a brighter future than many investors currently do.
Takeaways from earnings season
Earnings season is about over for the solar industry, and after JA Solar (NASDAQ: JASO) and Vivint Solar (VSLR) reported this week, there were a few major takeaways from the end of 2016 and early 2017.
- Chinese solar panel manufacturers are down, but not out. Gross margins in the fourth quarter were in the low to mid teens at most manufacturers, and while profitability generally dropped, they were able to cut costs and remain near breakeven levels.
- National residential solar companies are generally in decline and having a tough time transitioning to a market where loan and cash sales are the dominant financing option. Sunrun is the one company that has doubled down on leasing, and it's currently going well for the company. But with SolarCity and Vivint Solar seeing installations decline, there's a lot of uncertainty about what the residential solar industry will look like in the future.
- Technology improvements are coming, and those who stand pat will eventually get run over. Whether it's First Solar upgrading from Series 4 to Series 6 solar panels, SunPower discontinuing most of its mid-level E-Series production in favor of its high-efficiency X-Series, or the advance of mono-PERC, efficiency matters more than ever in the solar industry.
That's all for this week in solar. Check back to Fool.com next week for more about the biggest events in the solar industry.