GE Challenges First Solar (GE, FSLR, STP, JASO)

Last April General Electric Co. (NYSE: GE) announced that it would build a thin-film solar plant with a capacity of 400 megawatts of annual production, but it did not specify where the plant would be. The suspense was lifted yesterday, as the conglomerate revealed that the plant would be built in Aurora, Colorado. First production is scheduled for next year, with commercial level production in 2013.

The new GE plant will make cadmium-telluride (CdTe) thin-film panels similar to those now manufactured by First Solar Inc. (NASDAQ: FSLR). And it will make more of the panels than any other US thin-film plant, including First Solar’s 248-megawatt plant in Ohio. First Solar’s total manufacturing capacity of about 2,300 megawatts still far exceeds GE’s or privately funded CdTe thin-film competitor Abound Solar.

When GE first announced its plan in April, there was speculation that First Solar would chase a newer thin-film technology known as CIGS, for copper-indium-gallium-diselenide. Another privately funded company, HelioVolt, was rumored to be a potential acquisition and First Solar had also begun its own CIGS process.

As First Solar has struggled this year, though, any plans it might have had for an acquisition have surely been postponed. And while there is no word on any developments in the CIGS arena, one has to assume that the newer technology is difficult to bring in at a cost-competitive price point with either crystalline silicon panels from China or CdTe panels.

That’s the game in solar PV manufacturing today — cost reduction. Low-cost Chinese solar PV makers like Suntech Power Holdings Co., Ltd. (NYSE: STP) and JA Solar Holdings, Co., Ltd. (NASDAQ: JASO) are fast approaching the magical $1/watt cost. First Solar’s thin-film panels cost about $0.76/watt, but their lower efficiency in converting sunlight to electricity makes the cost the different modules about equal.

The CIGS technology improves on the conversion efficiency of thin-film modules, but perhaps not enough to match up with the rapidly falling crystalline panels out of China.

Technology almost doesn’t matter in solar PV any more. The only thing that matters is cost. GE’s advantages are a captive buyer for its solar panels and much deeper pockets than First Solar or any other competitor for that matter. And if First Solar’s market cap continues to fall, then GE might consider a buyout offer. If that ever happens, then we’ll know that solar PV is a grown-up industry that’s here to stay.

Paul Ausick