SunPower Corporation (NASDAQ:SPWR) is always pushing the envelope when it comes to solar efficiency, and that focus may finally be starting to prove valuable to the company and its investors.
After years of fighting against rapidly falling prices for commodity solar modules from China, buyers are starting to value higher efficiency and better-quality modules. And SunPower is ready to extend its lead in that section of the market.
SunPower's latest high-tech investment
As SunPower has been divesting from its older technology, which was manufactured into E-Series solar modules, it's been investing in new technology that's already leading the industry. SunPower is producing 25% efficient solar cells at scale (making modules that are 22% to 23% efficient) at its Fab 4 plant and is working on its next factory design.
On Monday, the company announced that $25 million has been invested in, and 100 people are working at, a Silicon Valley research facility that is already producing next-generation solar cells. SunPower is producing everything from polysilicon to wafers to cells and then modules at the facility, and will "ultimately ramp to producing cells and panels used in both residential and commercial applications."
The big change for SunPower is a larger-size cell, which will mean fewer cells and connections in a module; this will help lower overall cost. The facility is also using "several high-volume production-sized manufacturing tools and automation," which could make scaling to a next-generation facility easier. And management has said it will announce a new facility later this year.
Utility solar is a different path entirely
The path SunPower is taking in high-efficiency modules is different than what it's doing in utility-scale solar. On those projects efficiency isn't quite as valuable because space isn't the top constraint, the cost is. So, instead of vertically integrating manufacturing, it's buying, on the open market, commodity cells that are on the high-efficiency end of the spectrum, and assembling them into modules. It's China joint venture is supposed to begin producing 19%-efficient P-Series modules this year, which would be among the most efficient modules in the world. Production could be over 5 GW within five years.
This differs from the higher-cost, higher-efficiency modules being made for commercial and residential customers. Those customers are willing to pay a premium to pack a few more watts of electricity generation onto their roofs. Many value being able to say they have the best solar technology.
Could the stage be set for the Section 201 trade case?
The timing of this announcement shouldn't go unnoticed. CEO Tom Werner will be in Washington, D.C., on Tuesday to argue against the tariffs or pricing scheme that could be implemented because of Suniva's Section 201 trade case. SunPower is signaling to investors that it's willing, and able, to build every piece of its solar modules in the U.S. if necessary, and is ready to ramp up production quickly.
It may already be eyeing production locations here for its next-generation plant, which would make sense because the U.S. is its primary rooftop-solar market. And if punitive tariffs are put in place, that could lead to a big opening for SunPower to sell high-margin modules into a virtually captive market. Monday's announcement was a clear indication SunPower is hedging its bets, and that's a good thing for investors, especially when part of that hedge means the company will be taking an even bigger lead over competitors in solar-cell efficiency.