SunPower Corporation (NASDAQ:SPWR) has been one of the most vocal companies against solar tariffs announced earlier this year, largely because its premium-priced solar panels will be hit with a larger tariff than those of its competitors. Late last week, it filed a petition to get an exclusion from the tariffs for its back-contact solar cells and panels, which were developed in the U.S. and aren't made by overseas competitors.
In the petition, the company revealed that if it gets an exemption, it may build a new solar manufacturing plant to build P-Series panels, which assemble commodity solar cells in a shingled assembly, in the U.S. SunPower would join First Solar's (NASDAQ:FSLR) existing U.S. plants and JinkoSolar's (NYSE:JKS) shrinking U.S. plans as a major domestic manufacturer. It could also give the company a leg up in domestic utility-scale solar power plants.
SunPower's potential U.S. expansion
In SunPower's request for an exclusion from tariffs, management said the tariff savings may be spent on manufacturing in the U.S.:
In particular, an exclusion for both our Copper-Plated IBC Cells and Copper-Plated Modules would free SunPower to devote substantial resources that otherwise would be dedicated to satisfying its additional customs duty liability to investments in next-generation research and development in the United States, as well as the establishment of U.S. manufacturing facilities dedicated to SunPower's P-Series modules, for which an exclusion is not being requested.
Domestic manufacturing of P-Series panels isn't a hypothetical, either. In an interview with PV Magazine, CEO Tom Werner even said they have "narrowed down sites to two." SunPower can build P-Series capacity in as little as six months, meaning the company could contract U.S. power plant sales now and deliver panels to developers as soon as this year.
This is a notable change from recent history when SunPower moved manufacturing to Mexico. The Mexicali plant currently in operations assembles the company's solar cells into panels and there's P-Series manufacturing there as well.
If SunPower built P-Series capacity in the U.S., it could import cells tariff-free as part of the 2.5 GW cell import exemption. In fact, there's very little U.S. module assembly capacity, so SunPower could conceivably build 1 GW of capacity, or more, and get all of its cells tariff-free.
The impact on First Solar
First Solar is widely viewed as the one winner from solar tariffs, but SunPower could join those ranks. If it can exploit tariff-free cell imports and build P-Series modules in the U.S., it could have a $0.10-per watt-advantage over competitors. Depending on the capacity that's built, there could be a windfall that measures into the hundreds of millions of dollars.
SunPower would also be able to open up a market where it's struggled the last few years. Self-development proved too costly and now SunPower is selling complete solutions from panels to racking and inverters to developers. Its offering is based on the P-Series module, which is more efficient than competitors and offers efficiency of up to 19.6% (compared to First Solar's at 17%). In the U.S. this should be an attractive product, but the last year has been marred by the threat of solar tariffs.
For First Solar, the entrance of a big competitor like SunPower wouldn't be welcome news for the solar manufacturer. It's been able to have the U.S. market nearly all to itself the last year, capitalizing on its tariff-free supply. But it's selling a solar panel that's not as efficient as competitors' and was coming under pricing pressure before tariffs gave the company a boost. Watch for SunPower to be a big competitor if it ends up building a plant in the U.S.
SunPower could make a play for the whole U.S. market
If SunPower can get an exclusion from tariffs on their high-efficiency solar cells and panels it could free up the money to make a meaningful investment in U.S. solar manufacturing of P-Series panels. That could have a huge impact on the company's bottom line and growth in the next few years, helping bring the company back to profitability. We'll know more about both the exclusion and manufacturing plans in the next two to three months, so stay tuned for more from SunPower.