Saturday, March 29, 2014

A Look At SunPower's Recent Chinese Supply Deal

SunPower, one of North America’s largest solar companies, said that it would be supplying over 70 megawatts of photovoltaic cell packages to the the Huaxia Concentrated Photovoltaic Power Joint Venture in China. The cells will be used to build the company’s C7 solar concentrators for deployment in two separate projects in the Inner Mongolia region. We think that the deal would allow SunPower SPWR -0.23% to take a small, but significant step into the burgeoning Chinese utility scale solar market, which has so far eluded most large Western solar companies. This deal would also serve as a crucial validation of the large-scale deployment of SunPower’s solar concentrator technologies.

Solar Concentrator Technology

Apart from boosting the conversion efficiencies of a solar cell, the electrical output of a photovoltaic system can be improved by using trackers (which align solar cells to the movement of the sun through the day) and concentrators (which combine mirrors that concentrate sunlight onto solar cells). SunPower’s concentrated solar technology, which employs single-axis tracking technology along with a series of parabolic mirrors, is called the C7 due to its ability to concentrate the sun’s energy by about seven times. Low concentration PV solar systems, such as SunPower’s, are particularly useful in regions without clear skies since they can capture a significant part of diffused light. These systems also work well in regions with a high level of solar irradiation, allowing project owners to derive maximum value from their projects.

SunPower’s deployment in China is also poised to be one of the largest deployments of concentrated photovoltaic technology to date. Some previous efforts by other companies such as Skyline SKY NaN% Solar in the low-concentration photovoltaic’s space have not been very successful, possibly due to high costs. While SunPower has not disclosed the financial terms of its deals , it indicates that the C7 offers among the lowest levelized costs of electricity for utility scale power plants, with costs that are roughly 20% lower compared to competing technologies.

Background of the Joint Venture and Opportunities In China

In December 2012, SunPower signed a joint venture agreement with three Chinese firms to manufacture and deploy the company’s proprietary C7 solar concentrator technology in China. SunPower invested a total of $15 million for a 25% stake in the joint venture, located in the Inner Mongolia region. The JV has already set up a facility to manufacture receivers, which are a component of the tracking systems and a 50 MW production line is already in operation. The solar cells that SunPower will be selling to this joint venture would be used to build the first phase of two projects (20 MW and 100 MW in capacity) located in Inner Mongolia. Both projects are expected to be completed by 2015. While the manufacturing facility will initially cater to the Chinese market, SunPower eventually expects it to become an export hub for the company.

The Chinese solar market has been booming, driven by favorable government policy that is intended at meeting a larger part of the country’s growing energy needs from cleaner sources while also driving demand for the country’s solar panel manufacturers. Last year, China installed a total of about 12 GW of solar capacity and installations for 2014 could approach about 14 GW. Utility scale projects are expected to account for about 6 GW of the total installations this year. While the market is driven primarily by systems prices, SunPower could have a significant advantage over local players given its stronger technological portfolio as well as its experience in designing and building some of the largest utility-scale solar power plants in the world.

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