SunPower Corp. (NASDAQ:SPWR) has transitioned away from a business model focused on some of the world's largest solar power plants to one that focuses most of its resources on residential and commercial solar projects. These small projects are where SunPower can best leverage its high-efficiency solar panels, which generate more electricity per square foot than those of its competitors.
Power plants are an application where the high efficiency of the best panels doesn't offset their higher cost. That's why SunPower is betting on its P-Series panels and the Oasis power plant design. In theory, the combination could turn around SunPower's business in the next few years.
What is the P-Series?
P-Series panels use traditional, commodity solar cells, but are assembled in an unusual way to make a slightly more efficient, more durable solar panel. As SunPower explains:
SunPower Performance Series (SunPower P-Series) panels differ from Conventional Panels in a variety of ways. First, we laser cut each SunPower P-Series cell into six strips and layer them in a shingled configuration to create a 'hypercell'. This shingled hypercell allows us to fit more active cell area into each panel, boosting power and efficiency. Second, the P-Series cells are connected with a conductive adhesive borrowed from the aerospace industry to offer multiple and redundant paths for electricity flow.
The company claims this yields a panel that will produce 17% more energy over its first 25 years of operation than a conventional solar panel. That's how SunPower intends to position the product as a premium product.
Oasis and Helix make P-Series valuable
It's not enough today to make a solar panel and simply drop it into the market; solar companies like SunPower need to make complete solar solutions. That's why it developed the Oasis power plant, which includes everything from design services to racking and monitoring. This provides more value to project developers than just selling solar panels, which in turn increases revenues and the company's margin per watt.
The Helix turnkey solution for commercial installations -- including rooftop, carport, and ground mount -- offers a similar setup, and can also use P-Series panels. Having a commercial solution also gives the company a way to increase the potential market for P-Series solar panels and provides more scale.
This could be the scale SunPower needs
One of the things that has hurt SunPower financially the last few years was the company's lack of scale. First Solar, Canadian Solar, JinkoSolar, and others are making (or planning to produce) 4 GW or more of solar panels annually. SunPower's guidance is for 1.4 GW of solar panels deployed in 2017, at most.
P-Series production in Mexico and China could put 2017 production to shame. Mexico already has 400 MW of P-Series capacity, and a joint venture in China should be producing more than 1 GW of P-Series panels in 2018, rising to as much as 5 GW annually in the next five years. Those expansions could bring the kind of capacity SunPower needs to regain profitability.
U.S. manufacturing on the horizon?
The real wildcard for P-Series will actually come from the U.S. government. If the Trump Administration imposes tariffs on imported solar cells and panels, it could raise the cost of solar installations across the board. But SunPower's management has said it can build new P-Series manufacturing capacity in as little as six months at a low cost of about $0.05 per watt of capacity. If that's accurate, the company could rapidly build out U.S. capacity that would utilize imported solar cells, which would mean a cost increase of only about $0.05 per watt from per watt versus costs today.
It's not clear if SunPower has plans to expand P-Series manufacturing in the U.S. right now, but if tariffs are implemented, it may make sense to build more product here rather than in Mexico or Southeast Asia, where most of the company's manufacturing is done today. The flexibility of the P-Series could be just what SunPower needs in 2018, making it a product worth watching for the company long term.