This recent post explored the unusual mating call of a solar panel manufacturer, SunPower Corporation (SPWR:  Nasdaq).  The Company is looking for a partner to bankroll the upgrade of a manufacturing facility in Hillsboro, Oregon acquired in October 2018, in a tie up with one of its rivals, SolarWorld America.  SunPower now has one less competitor and more room to flex its production muscles.  However, capital is still important.

The Company suffered a net loss of $811.1 million or $5.76 per share on $1.73 billion in total sales.  Profit margins were negative straight down. Investors could accept the loss without too much worry if the pace of cash flow was encouraging.  Unfortunately, in 2018 operations required $543.4 million in cash resources to make it through the year.

There are limits as to how long SunPower can keep up that pace.  The Company ended December 2018 with $305.4 million in cash on the balance sheet and $1.5 billion in total debt.  Stated otherwise SunPower has limited flexibility!

Management tried to strike a note of optimism several weeks ago when the reporting year-end 2018 financial results and providing guidance for the year 2019.  Improvements are expected in the coming quarters.  Of course, management is hedging the prediction with the usual hedge that growth will be weighted to the second half of 2019.  Guidance includes the expectation to ship up to 150 megawatts of the P-Series solar modules from the Hillsboro facility.

Changes in the company’s leasing program could be pivotal in improving reported sales and expenses.  The residential leasing portfolio has been sold and the business leasing structure has been adjusted.  Investors will have to wait until the end of March 2019, to get enough details to make an assessment of the potential in the new plan.  The company is staging a ‘capital markets day’ with investors and analysts on March 27^th.

Even this superficial review of SunPower’s financial performance suggests investors should move cautiously. Management had pledged to trim operating expenses as well as reduce leverage using proceeds from the residential leasing portfolio.  Both actions could improve profit results going forward. That means improved cash flows that could deliver returns for a new investor.

Unfortunately, cost of silicon is an even more pressing issue for the Company and management has little control over that. Silicon has been in short supply for at least the last two years and that has led to price increases.  The U.S. anti-dumping case resulted in higher import tariffs of silicon metal, effectively doubling raw material prices.  SunPower could have a to have a tough time with margins even with cost cuts at the operating level.

SunPower is looking for a new mate in its Hillsboro, Oregon facility.  There is much afoot for the Company  –  new, more competitive products based on the P-Series solar module and changes on the business leasing business model.  That has to be appealing to any number of financial or strategic investors.  It will take some careful due diligence before cutting a check!

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 3/1/19 as “SunPower Promises for 2019.” 

The post Sunpower Optimistic, But Needs Cash appeared first on Alternative Energy Stocks.

The last post discussed the proposition of solar panel manufacturer SunPower Corporation (SPWR:  Nasdaq).  The company is looking for a partner to help build out and operate SunPower’s production facility in Hillsboro, Oregon.  SunPower plans to manufacturer its innovative P-Series panels in Hillsboro to fulfill U.S. orders.

The Hillsboro plant was acquired in early 2018, from SolarWorld AG after the Trump administration slapped 30% tariffs on solar panels imported to the U.S.  Domestic production, even at higher local costs, could make sense when compared to such prohibitive import tariffs.

SunPower is widely regarded as the go-to source for the highest quality solar cells available with efficiency ratings as high as 22.2%.  The company’s products also have the reputation of being the most expensive brand on the market.  The P-Series has been regarded as a breakthrough product not just for its technology, but for its potential to capture market share among price-conscious customers.

Notably, SunPower was not the only solar panel manufacturer that gave the appearance of responding to the Trump Administration tariffs with investment in U.S. manufacturing capacity.  In March 2018, JinkoSolar (NYSE:JKS) invested an initial $50 million in a Florida factory that is ultimately expected to cost $410 million and have capacity to produce one million panels or 400 megawatts of solar modules per year.  Trump may have taken credit for the move, but in fact JinkoSolar had been working on the plans for months before Trump’s tariffs were put in place.

Production is expected to begin yet in 2019 at Jinko’s new plant.

NextEra Energy Resources (NEE:  NYSE), the parent of Florida Power & Light, has pledge to purchase over seven million solar panels over the next four years from JinkoSolar.

LG Electronics (KSE:066570) followed directly on JinkoSolar’s heels in June 2018 with a $28 million investment in a factory located in Huntsville, Alabama.  Production is expected to begin in early 2019, and ramp to 500 megawatts of solar modules per year.  It is noteworthy that LG has also adopted a technique for hiding circuitry and solders, moving the clutter to the back of the panel from the front to create efficiency.  The technique is featured in LG’s Neo R Black product.

Construction started in late 2018, on Hanwha Q Cells new manufacturing site in Whitfield County, Georgia to produce PERC-cells. Hanwha’s version of the solar cell technology could give SunPower some strong competition.  There have been reports of efficiency in the high teen’s in the Hanhwa product.  Like SunPower’s P-Series, Hanhwa’s cells increase efficiency with an added layer in the back that reflects unabsorbed light back to the solar cell for a second absorption attempt.

The trade dispute between the U.S. and China has fostered some interesting new bedfellows.  In September 2018, three solar panel manufacturers  –  Neo Solar Power, Gintech Energy Corporation and Solartech Energy Corporation  –  merged to form United Renewable Energy (UREC).  From a legal perspective Neo Solar acquired the other two, but the point is the tie-up created a new entity that has sufficient strength to deal with the tariff situation head on.  In the run-up to the deal closing, UREC management alluded to the possibility of a move into the U.S. However, after a US$90 million investment by the Taiwanese government, the new tie-up may keep its collective eye on Taiwan

The tariffs will decline over a four-year period, but in the near-term could have a lasting effect on the competitiveness of imported solar panels, even those granted an exemption like SunPower are affected.  That does not mean U.S.-China trade talks no longer matter.  If the discrepancies are finally worked out and both sides drop prohibitive tariffs, it could mean another significant shift in competitive dynamic.

At a time when the company is poised to capture market share, it is an interesting proposition to invest in SunPower, either as a joint venture partner or as a minority investor.  In the next post we look at SunPower’s financial condition.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 2/26/19 as “Crowded Playground of Solar Panel Makers.” 

The post Crowded Playground of Solar Panel Makers appeared first on Alternative Energy Stocks.

SunPower Corporation (SPWR:  Nasdaq) has sent out an unusual mating call.  Like a bird with a newly built nest, the company is seeking a partner to help build out and operate SunPower’s production facility in Hillsboro, Oregon.  The plant was acquired in late 2018, from SolarWorld Americas after the Trump administration slapped tariffs on solar panels imported to the U.S.  Domestic production, even at higher local costs, could make sense when compared to such prohibitive import tariffs.

Uncomfortable Three-some

Some investors might see the tie-up as an uncomfortable three-some. Indeed, the solar panel tariffs came about when SolarWorld Americas and its compatriot Suniva filed an application for protection under the Trade Act of 1974.  In January 2018, in response to SolarWorld’s appeal the Trump Administration imposed a 30% tariff on all imported solar cells over 2.5 gigawatts.

SunPower was a quick and vocal critic of the maneuver for protection and the imposition of tariffs.  The company applied immediately for exemption from the tariffs.  SunPower argued that its back contact solar cells are significantly different from conventional silicon-based cells and therefore do not unfairly compete with U.S. producers.  In September 2018, just one month before SunPower and SolarWorld tied the knot, SunPower was granted exemption for several of its solar products that were being produced in Mexico and the Philippines.

Unfortunately, SolarWorld Americas was on the brink of bankruptcy and therefore not in a strong negotiating position with SunPower no matter how much shade SunPower might have cast on SolarWorld.  Now the fates of the two are now bound together.

Volume Production of Competitive New Product

The deal paves the way for SunPower to begin volume production of its innovative P-Series solar panel in Hillsboro.  The P-Series features parallel circuitry that minimizes losses when the panel is in partial shade or gets soiled.  The module sports a unique ‘shingled’ design with overlapping silicon cell strips connected with a conductive adhesive.  The design improves efficiency by tucking the electrical contacts under the overlapping part of the cell.  The shingled design eliminates spaces between cells and makes room for a higher number of cells in each panel.  Nearly all of the front side of the solar panel is covered by cells and solar exposure is maximized.

The technology used in the P-Series was developed by U.S.-based Cogenra, which SunPower acquired in August 2015.  The plan had been to acquire the intellectual property and then produce it in low-cost regions.  SunPower began zealously protecting its new asset, accusing rooftop solar panel developer SolarCity in 2016 for theft of the ‘shingling’ technique.  The suite was dropped a year later.

SunPower claims its P-Series reaches 19% efficiency.  This is below the level of its most efficient panel, the X-Series, which offers 22.2% efficiency. However, the P-Series is being sold at a considerably lower price per watt. Before the brouhaha over trade protection and tariffs, SunPower had estimated its price for the P-Series would be near $0.75 per watt.  This compares favorably with prices near $1.00 per watt for SunPower’s X-Series.  The P-Series could be especially appealing for customers that need a smaller solar system built with high-efficiency, low-cost panels.

SunPower’s appeal for exemption from U.S. solar panel tariffs also claimed that it would be necessary to divert capital from investment in production capacity and jobs to pay the tariffs, an outcome that would be deleterious to U.S. interests.  The company has already put its own capital on the line, paying $26 million for SolarWorld Americas and pledging another $4.1 million as a contingency for future performance.  Reportedly, SunPower wasted no time in gearing up for P-Series production in Hillsboro by looting its Mexicali facility for tools and equipment.

Capital Investment

SolarWorld America originally bought the Hillsboro complex from Japan’s Komatsu Group.  Komatsu originally spent $400 million to build the 480,000 square foot facility in the early 1990s to produce wafers for its semiconductor products.  As the market fell out from under the semiconductor business, Kotatsu was forced to idle production.  In 2008, SolarWorld Americas bought the empty plant and completed renovations to make solar crystal, wafers and cells.  At the time it was the largest solar cell manufacturing facility in North America.

There is still work to be done in Hillsboro to prepare for volume production.  Thanks to SolarWorld Americas, the facility is ready to slice the solar cells into strips and arrange them in sections and, the steps to apply and etch the back surface ‘passivation’ layer for the rear contact have been put in place.   However, the unique shingled design required a different configuration to solder the overlapping cells.  At the beginning of February 2019, SunPower reported it had 200 workers on board and would need to add staff as production ramps.  The company is expected to begin fulfilling orders for the P-Series from U.S. customers beginning in March 2019.

Here is where investors need to pay close attention.  Early estimates suggested the P-Series could be produced for a capital cost near $0.20 to $.25 per watt, an impressive accomplishment for SunPower given that its other solar panels had a capital cost near $0.65 per watt.  That means that a $100 million investment could deliver more than 450 megawatts production capacity.  SunPower has also hinted that operating costs would be as much as 40% lower than its conventional solar panels.

If these numbers have held true, the cost structure of SunPower’s new U.S. production facility makes for an interesting investment proposition, either as a joint venture partner or as a minority investor.  In the next post we look at SunPower’s competitive position.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 2/22/19 as “Sunpower’s Mating Call.” 

The post Sunpower’s Mating Call appeared first on Alternative Energy Stocks.

by Paula Mints

In 2018, the US market for PV deployment is estimated at ~12-GWp. As the US does not have sufficient domestic cell manufacturing capacity to meet its demand, most of the 12-GWp will be met by imports of cells or, modules. Following the implementation of cell/module tariffs there were, as expected, new capacity announcements in the US, primarily for module assembly. If all the current announcements came true it would add an additional 4.2-GWp of module assembly and 1.7-GWp of cell manufacturing (thin film and crystalline) capacity to the US. First Solar (FSLR) is responsible for 1.3-GWp of the new module assembly and cell capacity announcements.

Including current US capacity, even if all the module assembly and cell manufacturing capacity announcements came to pass the US would still not have enough cell and module capacity to fulfill its demand. Module assembly is faster to establish but primarily requires imported cells. With tariffs on cell imports above 2.5-GWp, someone, somewhere along the value chain is going to eat margin that is, either the importer will absorb the tariff, or the domestic buyer will absorb the tariff, or the end user will pay a higher price for the PV installation.

In a price-taking industry such as the solar industry, the end user rarely chooses to absorb the higher price. Solar industry participants have little to no control over the price function as they are actors in a highly competitive industry where end users have no conception of manufacturing costs and there is an entrenched and well-funded competitor – conventional energy. Climate change crisis aside (and it should not be put aside), the conventional energy infrastructure is in place and it is very difficult to replace it with the renewable energy technologies. Habits will need to change, education will need to take place, new infrastructure developed and nascent technologies (such as storage) need to mature.

And frankly, adding module assembly capacity alone without additional cell capacity will not cut it.

The US needs new cell capacity and given the cost of new manufacturing capacity, manufacturers will need to consider whether the markets in the US, Canada, Mexico and countries in Central and South America will be worth the effort. The US offers a large market, but it faces a decreasing ITC, a lack of Federal government support, and then there are the tariffs. The US has yet to feel the full effect of the Trump Administration’s tariff, um, strategy. On a positive note, individual states are stepping up with programs for community solar and residential solar with storage while retaining an interest in utility-scale solar deployment.

Individual state plans aside, if the US wants to encourage domestic cell manufacturing it will need to invest, incentivize, exercise caution and have patience. Caution because no one needs another Solyndra, and patience because cell manufacturing is a years-long plan, not an overnight, instant gratification-satisfying success.

Taking the announcements in Table 1 one-by-one:

Jinko Solar (JKS): Announced a multi-gigawatt module deal with NextEra (NEE) as well as a module assembly facility in Jacksonville, Florida. Shifting announcements about capacity followed with rumors stabilizing at an expected 400-MWp and planned commercial output in Q4 2018.
Status: not going to happen in Q4 2018, look ahead to Q4 2019 and potentially 150-MWp.

First Solar (FSLR): Plans to expand its Ohio facility to 1.6-GWp of series six, but, hold on, series six is slow out of the gate and the company’s expected full capacity date of EO 2019 is not entirely reasonable given the history of its series six ramp problems. Status: Likely to be additions, though not the announced volume.

Hanwha Q-Cells Korea (HQCL): Announced 1.6-GWp of new module assembly capacity by Q4 2019. This is a reasonable timeframe to establish some degree of module assembly though 1.6-GWp is a stretch. The company needs to decide whether the investment, as well as the higher cost of manufacturing in the US, is worth the market opportunity. Status: Likely to add a fraction of the announced capacity.

Sunpreme: Out of the blue the company announced 400-MWp of monocrystalline bifacial cell and module capacity in Texas with manufacturing and product availability in 2019. Could be a press release gone awry. Given that the company did not offer detail about whether it had a building in mind or, if the capacity would be greenfield or any detail about equipment let alone detailing a reasonable pilot production scale up schedule the status is: Give me a break.

LG Solar (066570.KS): Announced 500-MWp of module assembly capacity at its facility in Alabama for its 60-cell premium residential rooftop product. LG has not announced a date for equipment move-in, and even module assembly requires a period of pilot scale production. The target date for commercial product availability is Q4 2019. LG will face the same market issues and additional costs as other manufacturers. Status: Likely to move ahead with a degree of module assembly in the US at a lower volume than announced.

And, two not on the list:

Tesla (TSLA) Solar Shingles: In its Q3 call, Tesla gave an update on its solar shingle product. In sum, production has been delayed from Q4 2018 to the first half of 2019 due to the “complexity” of the product. Tesla did not give details on expected efficiency, manufacturing cost, price/Wp when available, and what the company means by complexity. Translation … this is a highly complex and expensive product to manufacture likely fated to serve a niche market of people who want to own a Tesla roof. Status: Expect more delays. Final comment, there is a long history of companies announcing solar shingles and tiles as a great innovative idea whose  time is here now … still not here for a variety of very good technical reasons. Tesla solar is using more of its imported Panasonic HIT modules, rebranded as Tesla. This is
outsourcing.

SunPower (SPWR): SunPower took a gamble that its acquisition of SolarWorld’s Oregon facility would help it earn an exemption for its IBC cells and modules. Maybe it worked or, maybe it won the exemption based on its IBC technology alone. Whatever the reason, the company is plunging ahead with its acquisition and will upgrade the Oregon facility’s module assembly for its P-Type modules (imported cells). Status: This one’s a go, albeit an expensive one. Expect a revival of some of the Oregon facility’s monocrystalline capacity and an upgrade to its module assembly.

The Lesson is about Risk and Reward

Manufacturing in the PV industry is akin to an acrobat balancing on a very thin high wire where the acrobat is the manufacturer and the very thin high wire are the margins the industry has accepted overtime. As the industry has effectively commoditized its cell/module product, there are very few high value markets for manufacturers. Competition is a battle for share where the winners are those who can best absorb margin pain.

A decision to establish module assembly or cell manufacturing in a market is not taken lightly. The US is an expensive manufacturing location. Manufacturers serious about establishing a base in the US need to accept that their costs will be higher than in other countries and hope for an expanding market to make it worth the expense and effort.

One example of a US manufacturing failure for a variety of reasons is Suntech. In 2009 China-based and former industry leading manufacturer Suntech chose Arizona for its first 50-MWp module assembly facility. By 2013 it had shuttered the facility.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here. 
This article was written for SPV Reaserch’s monthly newsletter, the Solar Flare, and is republished with permission.

The post US Solar Manufacturing Announcements: The Real And The Hype appeared first on Alternative Energy Stocks.

SunPower gets an exemption for its interdigitated back contact (IBC) solar cells – did it win the battle and lose the war?

by Paula Mints

If SunPower (SPWR) was playing a game of chicken with the Trump Administration to give it an edge towards the goal of getting an exemption, it a) won its gamble and can now focus on manufacturing p-type monocrystalline cells and modules to compliment imports of its n-type IBC cells and modules, b) won its gamble and now must keep its word and invest in resuscitating the long-in-the-tooth SolarWorld US manufacturing facility, or, c) won its gamble for a short-term advantage of an exemption for which it must keep its word and invest heavily in US manufacturing as competitors (notably LG) make the now fortified case for exemptions of their own.

And … what if SunPower could have earned an exemption on the strength of its IBC technology alone? If so, its acquisition of SolarWorld is an expensive and unnecessary hedge.

Comment: This may be a case of winning the battle and losing the war or winning the battle and the war and being stuck with the cost of rebuilding. Manufacturing is expensive in the US and the Trump Administration’s trade war has made it more so. A strong dollar has not made US exports more affordable.

A recap of the pros and cons of the SolarWorld acquisition:

The Good

Pro: Following the acquisition, SunPower, at least for the time being, becomes the only c-Si manufacturer in the US and as the only c-Si manufacturer in the US, SunPower becomes the decider concerning tariffs, at least for a while.

Pro: The SolarWorld US acquisition may have tipped the scales in SunPower’s favor to earn an exemption, saving it millions of dollars in tariffs on imports of its IBC cells and modules.

The Bad

Con: SolarWorld’s monocrystalline and SunPower’s monocrystalline directions are not completely aligned and are not particularly complimentary.

Con: Manufacturing in the US is expensive and the current price drop showed that even with tariffs in place imports are cheaper than cells/modules manufactured in the US.

Con: After the acquisition, SunPower would be the sole crystalline cell manufacturer in the US, a temporary situation at best and this does not even consider First Solar’s (FSLR) announced intention to add 1.2-GWp of CdTe capacity or the plans of Jinko Solar (JKS) (c-Si) and others.

Con: All markets are vulnerable, a slowdown in the US and/or Latin America solar deployment would make the SolarWorld acquisition look like a very bad buy.

Con: Price competition from imports is not going away and SunPower might find itself a plaintiff in a future tariff dispute of its own instigation and thus wearing the mantle of industry villain.

Lesson: From the movie White Men Can’t Jump (1992) written by Ron Shelton: “Sometimes when you win, you really lose, and sometimes when you lose, you really win, and sometimes when you win or lose, you actually tie, and sometimes when you tie, you actually win or lose.”

In other words, even if internally SunPower is asking itself – did we really have to buy that deeply-in-need-of-investment company? Really? – SunPower will never admit it. So … as Ron Shelton continued, “Winning or losing is all one organic mechanism, from which one extracts what one needs.” 

In other words, it’s all spin baby.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here. 
This article was written for SPV Reaserch’s monthly newsletter, the Solar Flare, and is republished with permission.

The post Sunpower’s Tariff Exemption: When You Win, You Lose appeared first on Alternative Energy Stocks.

On July 25th,  Prescience Point Capital Management recently released a report accusing Enphase energy Inc. (ENPH) of earnings manipulation. Prescience is an investment manager with a reputation for strong short-side analysis. I was intrigued, and decided to investigate Prescience’s claims for two reasons:

• I am generally concerned about overall market conditions, so adding a short position to my portfolio is attractive in the current market environment.
• As an analyst who specializes in clean energy stocks, I have suspected that Enphase would not survive much longer because I believe that its core technology is no longer the best solution for most applications.  As a poorly capitalized, unprofitable company, Enphase lacks the financial resources to regain a competitive edge.

After considering the evidence in the report, and using one of my own favorite tools to detect possible earnings manipulation, I decided to join Prescience Point in shorting the stock.

The Solar Inverter Landscape

Solar photovoltaic systems produce direct current (DC) electricity, and inverters are required to convert DC power to the alternating current (AC) power which is used by the electric grid.

There are four basic types of inverters, with different strengths and weaknesses for different types of solar installations.

1. Central inverters
2. String inverters
3. Microinverters
4. String inverters with DC optimizers

Central inverters are used in very large utility and commercial scale solar farms. They do not compete with Enphase’s microinverters, and so I will not discuss them in detail here.

String inverters were the industry standard for small and medium-scale solar installations until recently.  String inverters achieve high conversion efficiency by relying on high voltage DC current, which is achieved by wiring several solar panels in series.  A group of solar panels wired this way is called a string.

The downside of strings of solar panels is a weakest link problem.  The power output from each of the panels is effectively limited by the power output of the lowest power panel in the string.  Variations in output between panels arise from mismatched panels (panel manufacturing is not completely consistent), soiling of the panels by dirt or bird droppings, and by partial shading.  Even a tiny patch of shade on a single panel can greatly reduce the output from the entire string.

Advantages of Microinverters

The microinverter instantly solved the weakest link problem for solar strings by eliminating the string. In addition, new fire codes being adopted by states since 2012 have given microinverters a leg up on their larger cousins for rooftop installations. These codes require that a solar system can be shut down from near the panels on the roof. String inverters are incapable of this feat, because they do not have any electronic controls on the roof, while cutting power to a microinverter turns off the current all the way back to the panel.

It can also lower the cost of installation, since installers only need to know how to handle wiring for AC current at typical household voltages.

Some solar panel manufacturers, notably SunPower (SPWR) took the next logical step in installation cost reduction by bundling a microinverter with a solar panel in a single package they called an “AC module.” Sunpower’s AC modules come with a 30 year guarantee on the complete system. This premium product (Sunpower’s panels are also higher efficiency than any of their competitors’) appeals to many homeowners, especially ones trying to get as much electricity as possible out of limited roof space.

SunPower’s AC module strategy was dealt a serious blow by President Trump’s solar tariffs, because by combining the microinverter and the DC solar panel into a single product, they inadvertently made both subject to the tariff. Unable to obtain an exemption, SunPower sold its microinverter business to Enphase in June.

Enphase’s stated motivation was to acquire a captive customer and consolidate its hold on the microinverter market, although Prescience Point calculates that Enphase significantly overpaid for a five year supplier agreement at inflated prices in an effort to artificially boost its profit margins. The company admits that it did not gain significant intellectual property in the deal.

Even if Enphase did not overpay, I believe that consolidating its control on the microinverter market is a risky strategy because, without significant technological advances, microinverters are an inferior product for most applications.

Microinverter Drawbacks

Microinverters come with several drawbacks.

• The large number of microinverters needed to replace a single string inverter adds to cost.
• The 120 or 240 volt AC current that microinverters produce requires larger and more expensive wiring than the several-hundred volt DC current typically used by strong inverters to connect the panels to the inverter.
• Inverters are typically less durable than solar panels. Placing microinverters on the roof under the solar panels places them under additional stress than a string inverter which can typically be placed in an area subject to fewer temperature extremes. Although a single mincroinverter failure will not take down an entire solar installation, the larger number of microinverters means that such failures are more common, and the placement of the microinverters under the solar panels adds to replacement costs, especially on rooftop installations.

Given these drawbacks, microinverters have only been competitive for small residential systems, especially ones that have to cope with significant shading. For larger systems, the economics of scale generally win out.

The most recent innovation in the space is string inverters with DC optimizers. These combine the economics and efficiency of having a string inverter in a protected location, with the control and power balancing of microinverters by pairing each panel with a much smaller piece of electronics, a DC optimizer with each panel. These DC optimizers both compensate for differential power production between panels (solving the “weakest link” problem), and allows power to be shut down all the way back to the panel, allowing them to comply with the new fire codes.

While not quite as flexible as microinverters in terms of compensating for variations in output from different panels, string inverters with DC optimizers are nearly as good as microinverters in typical installations, but are competitive with traditional string inverters from a price standpoint.

The string inverters with DC optimizers are sold by SolarEdge (SDGE). By maintaining a high, fixed DC voltage from the panels to the inverter, SolarEdge’s solution has a slight advantage over traditional string inverters (and a large advantage over microinverters) in terms of wire sizing. It also maintains most of the maintenance advantages of traditional string inverters by locating the most sensitive electronic parts at the inverter.

These advantages have allowed SolarEdge to grow its market share by 182% from 2014 to 2017, while Enphase’s market share declined 17.5% over the same period. In order to reverse this trend, Enphase would have to improve its technology and cost structure in order to remove SolarEdge’s price advantage. While Enphase is working towards this goal, it is not well capitalized or profitable. SolarEdge is both of these things, and is also investing in improving its technology. It seems unlikely that Enphase can win this innovation race with fewer resources when it is already behind.

Meanwhile, other profitable and well capitalized inverter and electronics manufactures are working on solutions to comply with fire codes and address partial shading.

Earnings Manipulation

As a contestant is what seems to me to be an unwinnable race, it would hardly be surprising if Enphase’s management were tempted to cook the books in order to boost the share price and raise some much needed funds. This is precisely what Prescience Point’s report alleges. I found that the report makes a compelling case, which I will not summarize here. Instead, I suggest that you read it yourself.

In addition to reading the report, I decided to do my own test. I like to use the Beneish M-Score, a statistical model which combines a number of financial ratios to detect financial situations which would tempt a business to fudge its accounts, as well as tell-tale signs of actual cheating. Before the first quarter this year, Enphase’s M-Score was normal, but with the Q1 numbers a number of the component ratios moved in the wrong direction, and the M-score began signaling a high probability that Q1 earnings may have been manipulated.

In particular, the ratios that contributed to the unfavorable M-Score were the Gross Margin Index and Sales Growth Index, both of which were showing a high incentive to manipulate, while the Asset Quality Index was indicating likely excessive capitalization of expenses.

An unfavorable M-Score is nothing like proof of earnings manipulation, it just means that cautious investors should be going over the books with a fine-toothed comb. Which is exactly what Prescience did.

Conclusion

I was already looking for stocks to short as a hedge in what I believe is an increasingly dangerous stock market environment. I was also already skeptical of Enphase’s long term business prospects. Prescience’s report, and the unfavorable M-Score combined to make the decision to short Enphase a particularly easy one.

It turns out that the stock is hard to borrow, so rather than shorting directly, I sold Enphase $7.50 December calls the day the report came out (July 25^th.) I only wish I’d sold more.

Disclosure: Short ENPH calls.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results. This article contains the current opinions of the author and such opinions are subject to change without notice. This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

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by Paula Mints

In June, Suniva crawled out of its badly managed grave courtesy of a request to the U.S. Bankruptcy court made by its partner-in-tariff-petition, SQN Capital Management, which had sought relief for itself and Suniva’s other creditors. A public auction will be held sometime between June and August for, what was described as, some of Suniva’s manufacturing equipment. Meanwhile, back on planet hope-springs-eternal, investment is being sought to restart manufacturing with whatever equipment remains. Lucky SQN now owns Suniva’s monocrystalline cell manufacturing capability, its module assembly capability and its licenses.

Comment: Concerning the upcoming auction … if you’ve got a dollar and are tired of Vegas odds, go for it. Seriously though, the company’s US module assembly was already outdated (most of its modules were assembled in China and even there, focused on 60 cell modules) and its cell manufacturing uncompetitive – because – the cost structure in the US is higher than that of China (and other Asian countries). Concerning 60 cell modules, manufacturers such as LG, still offer these modules as premium products for the rooftop residential market.

Labor costs are higher – much, much higher than in Vietnam (<$3.00 per hour), China (<$6.00 per hour), Thailand (<$3.00 per hour), India (<$3.00 per hour). In the US the minimum wage is $7.25 per hour and is higher in some states.

Though other countries may have overtime laws the base pay is lower and so, again, does not compare to the US. The cost of inputs is lower in other countries. The manufacturing concern may be well-supported by local and central governments in other countries. The manufacturing concern may not pay taxes, or, may pay significantly lower taxes in other countries and land for the facility may have been free or close to free (no rent) in other countries.

And … lest we forget, there is the cost of the Trump Administration’s tariffs on, basically, everything and against, basically everyone. These tariffs have led to retaliation from, basically everyone, on basically everything. The added cost of inputs (steel, aluminum, et al) is already trickling through the US economy (and, that of, basically, economies everywhere).

Finding an investor willing to buy what is left of Suniva’s equipment after the auction, and who will then restart manufacturing of cells and/or modules, will be (and should be) difficult.

The What Ifs for SunPower of Suniva’s possible reemergence

If whatever entity buys whatever is left of Suniva restarts its cell manufacturing, a major strategic coup for SunPower (SPWR) will be reduced. As the only US cell manufacturer (if the SolarWorld US acquisition is finalized) SunPower would have the control over requesting an extension for the 2012/2014 and current 201 tariffs, and could allow them to sunset, ask for an extension, or pursue another country. If Suniva successfully restarts cell manufacturing SunPower’s control in this regard is somewhat diluted. However, a successful restarting of Suniva’s cell manufacturing is a big if with very little upside to it, is frankly hard to justify, and though it may happen, hard to imagine. Granted, the unimagined happens every day. Perhaps one of the companies that has announced plans for module assembly in the US will consider Suniva a cheap buy worth retooling.

Lesson: This is not a lesson about the struggle of a little company to survive. This is a lesson on how to read announcements for what really matters. The announcement was about an auction. More will be forthcoming after the auction.

Enphase buys SolarBridge with immediate plans to shutter a lesser rival

In June, right on the heels of its SolarWorld acquisition announcement, SunPower announced it had sold its microinverter division (SolarBridge) to microinverter manufacturer Enphase (ENPH). SolarBridge was founded in 2004 in Austin, Texas. In 2013, longtime SunPower Executive Bill Mulligan was named SolarBridge’s CEO. In 2014, SunPower acquired SolarBridge.
Enphase acquired SolarBridge for $25 million and will issue 7.5-million shares of stock. Enphase also gets a supply agreement with SunPower for its microinverter product. Enphase stated it would immediately shut down production of the SolarBridge microinverter technology.

The real competing technology for Enphase remains string inverters with power optimizers.

Lesson: This is another lesson on how to read announcements. Enphase bought a pipeline. SunPower got rid of an underperforming and expensive asset, and secured funds to help with its SolarWorld US acquisition costs. Happens all of the time. You want a new purse … sell the old one on eBay. Kudos all around.
This is also a lesson about expectations. Just like the future, expectations are ephemeral and are a product of our hopes, dreams and in some cases fears. This means that worst case, Enphase paid $25-million and issued stock to get rid of a rival technology. The success of the worst case depends on how big a rival SolarBridge really was for Enphase. If SolarBridge had negligible market traction, then the worst case scenario is pretty expensive, and if the pipeline is less robust than expected, the expense is hard to justify.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here. 
This article was originally published in SPV Reaserch’s monthly newsletter, the Solar Flare, and is republished with permission.

The post Suniva, SunPower, Enphase, SolarBridge and SolarWorld – Six Degrees of Solar Separation appeared first on Alternative Energy Stocks.

by Paula Mints

South Korea’s Hanwha Q Cells (HQCL) jumped on the US solar module capacity building bandwagon by announcing that it planned to add 1.6-GWp of module assembly in the US with the goal of taking advantage of the 2.5-GWp of cells that can be imported without the tariff.

Comment: The US has about 1-GWp of module assembly for which cells must be imported. Jinko is expected to add 600-MWp of module assembly capacity in Florida.

SunPower (SPWR) is expected to add capacity in Oregon if and when (when or if) the SolarWorld US acquisition is approved. Meanwhile new module assembly is being announced on almost a weekly basis (read below about LG’s (066570.KS) US capacity announcement. The untariffed limit for imported cells is 2.5-GWp, and if all announcements come to pass new module assembly capacity will exceed 2.5-GWp. Surely, the manufacturers announcing capacity building can add, or, perhaps all the cells will come from India. More likely however, there will be some scaling back or, walking back, from the planned capacity building.
Lesson: The original Jinko (JKS) announcement was in the gigawatt range and has now dropped to 600-MWp and may only, in the end, be 100-MWp or so. Announcements are not facts. Finally, all those who assume the involvement of NextEra (NEE) means that the announcement is 100% to be believed should remember that the 201 tariffs are temporary, meaning they expire.

In other words, look to the facts around the announcement – always – for clarity.

Lastly, concerning announcements … companies (and celebrities and politicians) make announcements for a variety of reasons:
• To call attention to themselves much the same way a small child leaps up and down shouting ‘I’m here! I’m here,’
• To deflect attention from something else much the way a politician will answer a question with ‘what about them,’
• Or, to actually announce something worthy.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here. 
This article was originally published in SPV Reaserch’s monthly newsletter, the Solar Flare, and is republished with permission.

The post The US Solar Module Capacity Bandwagon appeared first on Alternative Energy Stocks.

Solar farm owner and developer stocks are publicly traded companies who develop or manufacture equipment that converts sunlight into other types of useful energy.  Includes manufacturers and developers of both solar photovoltaic and solar thermal equipment, as well as their supply chain.

This list was last updated on 3/21/2022.

See also the list of Solar Manufacturing Stocks, the list of Residential Solar Stocks, and solar and wind inverter stocks.

7C Solarparken AG (HRPK.DE)
Abengoa SA (ABG.MC, ABGOY, ABGOF)
Acciona, S.A. (ANA.MC, ACXIF)
Adani Green Energy (ADANIGREEN.NSE)
Algonquin Power and Utilities (AQN, AQN.TO)
Atlantica Yield PLC (AY)
Azure Power Global Ltd. (AZRE)
Bluefield Solar Income Fund (BSIF.L)
Boralex (BLX.TO, BRLXF)
Brookfield Renewable Energy Partners (BEP)
Canadian Solar (CSIQ)
Capital Stage AG (CAP.DE)
Clearway Energy, Inc. (CWEN, CWEN-A)
Edisun Power Europe AG (ESUN.SW)
Etrion Corp. (ETX.TO, ETRXF)
Canadian Solar (CSIQ)
First Solar Inc (FSLR)
GCL-Poly Energy Holdings Ltd. (3800.HK)
Iberdrola, S.A. (IBE.MC, IBDSF, IBDRY)
Infigen Energy Limited (IFN.AX, IFGNF)
Infraestructura Energética Nova, S.A.B. de C.V. (IENOVA.MX)
Innergex Renewable Energy Inc. (INE.TO, INGXF)
JinkoSolar Holding Co. (JKS)
Greenbriar Capital Corp. (GRB.V)
Guggenheim Global Solar ETF (TAN)
Neoen S.A (NEOEN.PA)
New Energy Exchange Limited (EBODF)
NextEra Energy Partners, LP (NEP)
NextEra Energy, Inc. (NEE)
Northland Power Inc. (NPI.TO, NPIFF)
Panda Green Energy Group Limited (0686.HK)
Premier Power Renewable Energy (PPRW)
Principal Solar (PSWW)
Renesola Ltd. (SOL)
ReNew Energy Global plc (RNW)
RGS Energy (RGSE)
Scatec Solar ASA (SSO.OL)
Shunfeng International Clean Energy Limited (1165.HK)
Sky Solar Holdings Ltd. (SKYS)
Solar Wind Energy Tower (SWET)
Solaria Energía y Medio Ambiente, S.A. (SLR.MC, SEYMF)
Sunpower (SPWR)
Sunvalley Solar, Inc. (SSOL)
Sunworks, Inc. (SUNW)
Terraform Power, Inc. (TERP)
The Renewables Infrastructure Group (TRIG.L)
US Solar Fund PLC (USF.L)
UGE International (UGE.V)
Vivint Solar (VSLR)
Yingli Green Energy Holding Company (YGEHY)

If you know of any solar farm developer or owner stock that is not listed here and should be, please let us know by leaving a comment. Also for stocks in the list that you think should be removed.

The post List of Solar Farm Owner and Developer Stocks appeared first on Alternative Energy Stocks.

This list was last updated on 6/6/2022.

Solar manufacturing stocks are publicly traded companies who develop or manufacture equipment that converts sunlight into other types of useful energy.  Includes manufacturers and developers of both solar photovoltaic and solar thermal equipment, as well as their supply chain.

See also the list of Solar Farm Owner and Developer Stocks, the list of Residential Solar Stocks, and solar and wind inverter stocks.

5N Plus Inc (VNP.TO, FPLSF)
Amtech Systems Inc (ASYS)
Array Technologies, Inc. (ARRY)
Apollo Solar Energy (ASOE)
Ascent Solar Technologies Inc (ASTI)
Canadian Solar (CSIQ)
DAQO New Energy Corp. (DQ)
First Solar Inc (FSLR)
GCL-Poly Energy Holdings Ltd. (3800.HK)
Guggenheim Global Solar ETF (TAN)
Hanwha Q CELLS Co., Ltd. (HQCL)
Iberdrola, S.A. (IBE.MC, IBDSF, IBDRY)
Infraestructura Energética Nova, S.A.B. de C.V. (IENOVA.MX)
JA Solar Holdings (JASO)
JinkoSolar Holding Co. (JKS)
LDK Solar Co., Ltd. (LDKYQ)
LG Electronics Inc. (066570.KS)
Mechanical Technology (MKTY)
Meyer Burger (MBTN.SW, MYBUF)
REC Silicon ASA (REC.OL)
Scatec Solar ASA (SSO.OL)
Shunfeng International Clean Energy Limited (1165.HK)
SolarWindow (WNDW)
SolarWorld AG (SRWRF)
Spire Corporation (SPIR)
STR Holdings, Inc. (STRI)
Sunpower (SPWR)
Sunvault Energy, Inc. (SVLT)
SwissINSO Holding Inc. (SWHN)
Timminco Ltd (TIMNF)
Yingli Green Energy Holding Company (YGEHY)

If you know of any solar manufacturing or supply chain stock that is not listed here and should be, please let us know by leaving a comment. Also for stocks in the list that you think should be removed.

The post List of Solar Manufacturing Stocks appeared first on Alternative Energy Stocks.