Green Tech

Southern California Edison has signed a deal under which First Solar will build two solar power generation stations with the potential to provide electricity to 170,000 homes, the utility giant said Tuesday.

The contract, which is subject to the approval of the California Public Utilities Commission, has solar module maker First Solar completing two solar stations by 2015 that together would create 550-megawatt generation capacity.

Financial details of the deal were not disclosed, but once up-and-running the plants would be capable of producing about 1.2 billion kilowatt-hours of energy annually, according to Southern California Edison.

Specifically, a 250-megawatt solar power installation is planned for Desert Center in Riverside County, while a 300-megawatt installation is planned for an unspecified location in San Bernardino County. Both stations will consist of thin-film photovoltaic solar modules.

The deal is one of a number that have been announced in keeping with California's goal to have 20 percent of its energy supplied by renewable resources by 2010--and, if extending legislation is passed, 33 percent by 2020. In February, Southern California Edison announced a contract for seven solar generation plants with BrightSource Energy that if completed could power 845,000 homes.

"First Solar is an excellent partner in helping us achieve our goals. This agreement is good for our customers, for the industry, and for the environment," Stuart Hemphill, Southern California Edison senior vice president, said in a statement.

This latest deal is also more evidence in favor of analysts' predictions that First Solar will be among the solar tech companies that make it through the recession.

In March, First Solar acquired the rights to OptiSolar's incomplete projects and land rights, after its competitor had trouble raising enough capital to complete its projects in development. That deal was estimated to be worth $400 million and predicted to bring First Solar $70 million in revenue for 2009, according to the First Solar CEO Michael Ahern.

Solar panel maker First Solar said on Monday that it has acquired the rights to develop utility-scale solar projects that rival OptiSolar has been unable to complete.

The deal, valued at $400 million, is a sign of how the seized-up financial markets are derailing large renewable energy projects and forcing solar companies to change their business strategies. Because of the tough economic conditions, analysts expect there to be consolidation among solar providers this year and next.

OptiSolar laid off half of its staff late last year and idled its Sacramento, Calif., factory because it was unable to raise additional capital. Developing utility-scale projects requires raising tens or hundreds of millions of dollars in financing, but the credit crisis has made borrowing far more difficult than a year ago.

Through the transaction, First Solar gains the rights to develop a 550-megawatt project to deliver solar-derived electricity for Pacific Gas & Electric, scheduled to begin construction in 2010.

It also acquired a pipeline of 1,300 megawatts' worth of projects with other utilities in the western U.S. and enough land rights to generate 19 gigawatts of utilty-scale solar projects. Significantly, these projects are already partially developed, allowing First Solar to short-cut a multi-year project-approval process.

The transaction is a big boost for First Solar's utility business. It comes on the heels of the company announcing that it has broken the long-pursued industry mark of producing solar panels at under $1 per watt. The company manufactures thin-film solar cells from cadmium telluride.

The OptiSolar projects will likely yield $70 million in revenue for First Solar in 2009, company CEO Michael Ahern said during a conference call on Monday.

Lazard Capital Markets analyst Sanjay Shrestha called the deal "a watershed event for the industry as it effectively takes solar industry into the mainstream" and noted that it more than doubles First Solar's project pipeline.

Like OptiSolar, other solar technology companies are making changes to their business models in reaction to the economy.

eSolar and Ausra are two concentrating solar companies which had originally planned to build and operate their own utility-scale solar power plants. Both, though, have adjusted their business models to focus instead on selling equipment--the gear that generates electricity--to utilities or power generation project developers.

SolarCity on Wednesday said that high-flier First Solar will invest $25 million in the company and supply it with panels over the next five years.

The supply arrangement will allow SolarCity to offer its solar panel leasing program in more states, in the U.S. East Coast, CEO Lyndon Rive said on Wednesday.

The start-up company is one of a handful of firms tackling the high up-front cost of purchasing solar electric panels by offering a financing option. Instead of paying $25,000 to $35,000 to buy panels, the homeowner or small business pays a monthly fee for 20 years. SolarCity owns and maintains the panels.

SolarCity offers the program in states where a customer will pay less per month on electricity by leasing the panels, explained Rive. Because First Solar's panels, or modules, are the most cost-effective in the industry, SolarCity can expand to more places.

"Let's say that a customer pays $150 a month on electricity. In some cases, leasing would add $10 to their monthly spending," Rive said. "The difference this module will make is that it brings the cost down just so slightly to make it a positive cash flow to the customer."

By owning the panels themselves, solar installers and leasers like SolarCity can take advantage of the tax credits and other renewable energy incentives.

As part of the deal, First Solar will supply 100 megawatts worth of its panels to SolarCity over the next five years, starting in the first quarter of next year. A typical rooftop solar panel installation is between 2 and 5 kilowatts. SolarCity will continue to install panels from other manufacturers Kyocera, Evergreen Solar, and BP Solar.

For First Solar, the deal will allow entry into the residential market. The company, which manufacturers thin-film solar cells from cadmium telluride, has its panels installed at corporations or solar farms for utility-scale generation.

First Solar's $25 million investment is part of a $30 million series D round, which SolarCity closed on Monday. That financing included participation from previous investors Draper Fisher Jurvetson and Double Bottom Line Investors.

SolarCity currently offers its leasing program, which is chosen by 90 percent of new customers, in California, Oregon, and Arizona.

I spend most of my day meeting and talking to companies in the cleantech sector. And those of you who know me know I have opinions on who is doing it right, and who is doing it wrong. So I thought it was about time to initiate the Cleantech Blog Power 10 Ranking of cleantech companies doing it right. Eligibility for inclusion in the ranking requires meeting a 6 point test. Suggestions for inclusions in future volumes are welcome. The 6 point test:

1. The company is energy or environmental technology related. 2. I like their products. 3. The market needs them. 4. The company is smart about building their business. 5. I'd like to own the company if I could (for the right price, of course!). 6. It is not already one of mine (my apologies to my friends Zenergy Power).

I have included cleantech companies big and small. Volume I surprisingly ended up with a lot more solar companies than I would have guessed, and no biofuels. Perhaps I really am a closet solar fanatic.

1. Sharp Electronics - In solar, still the biggest, and still growing. Enough said.

2. Det Norske Veritas - DNV is a massive 150 year old risk management firm. Their auditors underpin roughly half of the carbon markets. In carbon, audit and verification is everything. I could not leave them off.

3. IBM (NYSE:IBM) - What IBM is doing in smart grid is very exciting. They are part of a large proportion of the smart grid implementations that are in process, and a huge proponent of open standards. Smart grid is to electricity what fiber is to telecom. It underpins everything.

4. Applied Materials (NYSE:AMAT) - The future of photovoltaics lies in scaling thin film manufacturing process. Who better to do this than the dean of semiconductor capital equipment. I broke the story of Applied's entry to solar in the blogosphere in 2006, and if anything underestimated how hard they were pushing. The whisper mill has been whirring that the installations of their plants are not on track. Not only do I have faith they will get there, I think it is critical to the industry that they do.

5. Fuel Tech (NASDAQ:FTEK) - I wrote about them in 2007. The CEO John Norris is a long time friend and an excellent operator. Cleaning up coal is a huge business that needs to be done, and they do it well.

6. Fat Spaniel - Distributed power, solar included, is a ticking time bomb without independent monitoring. Fat Spaniel does it the best.

7. Smart Fuel Cells (XETRA:F3C.DE) - I wrote about them recently. I helped create a fuel cell business in 2002. This is the first fuel cell company in 5 years that has intrigued me. They actually ship product with solid gross margins. That is a start.

8. First Solar (NASDAQ:FSLR) - Lowest cost producer in the photovoltaic business. Guaranteed to make the list until dethroned.

9. Global Solar - I have been following this company for a long time. CIGS is very hard and has broken (or is currently breaking) hundreds of millions or billions of dollars worth of wannabes. This management team, led by Mike Gering, respects how hard it is. And since they have actually been running a pilot plant shipping product for 3 years, so we need to take note when they say they have cracked the manufacturing scale nut.

10. Schott - Long a major player in crystalline silicon photovoltaics, amorphous silicon photovoltaics and concentrated solar thermal, where they are one of the top manufacturers of solar thermal receivers. That balance is unique, and exciting.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is Chairman of Cleantech.org, and a blogger for CNET's Greentech blog.

First Solar exceeded expectations once again in its most recent quarter and told investors that revenue for 2008 would likely come in at $975 million to $1.05 billion, higher than the $900 million to $950 million range provided earlier.

The company--which specializes in cadmium telluride solar cells--reported revenue of $196.9 million for the first three months of the year, more than double the $66.9 million in revenue garnered in the first quarter of 2007. Net income went to $46.6 million, or 57 cents a share, well above the $5 million for the first quarter of 2007.

Production for the year will also climb to between 420 megawatts and 460 megawatts, higher than the earlier estimates of 400 to 430 megawatts. The increase in production is being facilitated by new factories going up around the world.

The company's stock this morning is trading at $294 a share. The company went public for $20 a share in November 2006. A year ago, we dubbed First Solar the Google of solar because of its rapid, yet steady growth. The term prompted self-described financial experts to whine and ring their hands. The stock was at $200 at the time. Instead, First Solar weathered the stock market downturn and is now 50 percent higher than it was then. Revenue and profits have continued to climb quarterly on year-to-year comparisons. Granted, it's trading at a high price-to-earnings ratio, but the price is what it is.

Cadmium telluride solar cells aren't as efficient as silicon ones, but they are cheaper. The company has been tinkering with the technology and manufacturing techniques for decades. Although it only went public in 2006, the company's founders began working on cadmium telluride solar cells in the mid-'80s. And, unlike CIGS, cadmium telluride solar cells are in the market.

Still, detractors assert that the company could be hurt by limited supplies of raw materials in the future. Additionally, other manufacturers are finally entering the market for cadmium telluride cells. Calyxo, a subsidiary of Germany's Q-Cells, is one of the more notable competitors.

First Solar, the fast-growing maker of a type of solar panel that's a big source of debate among those in the clean-tech world, surprised investors again by reporting revenues and earnings that far exceeded expectations, capping a year of unusually strong growth.

The Phoenix-based company, which uses a material whose cost effectiveness is up for debate, said revenues came to $200.8 million for the fourth quarter of 2007 while net income came to $62.9 million, or 77 cents per share. Analysts had expected revenue of $180 million and earnings per share of 53 cents. For the fourth quarter of 2006, the company reported revenue of $52.7 million and $8 million in net income.

As a result, analysts increased their annual estimates for the company. Morgan Stanley's Dave Edwards, for instance, now expects First Solar to report revenue of $981 million for the year and earnings per share of $2.88, up from revenue of $872 million and earnings per share of $2.30.

For the year, revenue came to $504 million, and net income came to $158.4 million. In 2006, revenue hit $135 million (or $23 million less than profit in 2007) while net income came to $4 million.

The company's stock is trading around $223. A year ago, shares of First Solar were hovering around $33. It went public in late 2006 at $20.

First Solar has both fans and detractors. It is arguably the first thin-film solar panel maker to hit it big. Although it was formally launched in 1999, its technology stretches back to the '80s.

The long gestation period has enabled it to fine-tune its manufacturing processes, a key in the solar world. Rather than work with silicon or copper indium gallium selenide (CIGS), it makes its solar panels from cadmium telluride.

Cadmium telluride solar cells aren't as efficient as silicon ones, but they are cheaper. And, unlike CIGS, cadmium telluride solar cells are in the market. First Solar's management has also landed long-term contracts with suppliers and laid out a road map that will lead to a fairly steady expansion of production capacity.

Detractors, though, assert that the company could be hurt by limited supplies of raw materials in the future and increased competition. Additionally, most of the company's sales have been in Germany, which provides sizable subsidies. The stock is also trading at a high multiple of earnings. (When we dubbed the company the Google of solar, armchair experts poo-poohed it.) But despite the predictions, the company has continued to outsell even the optimistic projections.

Morgan Stanley put a price target of $275 in 2012 on the stock, while pointing out bear and bull scenarios that could take it to $125 or $400, respectively.

The big questions for the future are whether the competitors can match First Solar in manufacturing and how well it can do in expanding overseas.

First Solar, which makes cadmium-telluride solar cells, is having one of those years that corporate managers and investors dream about.

Revenues more than tripled in the third quarter to $159 million from a year ago while profits rose to $46 million, or about ten times what they were the year before. Plant expansion is occurring rapidly and the company's stock has gone from $20 to over $200 in a year. The stock price seems vastly inflated when you look at traditional price-earnings ratios, but it's not the first time people have bet big on a growth stock. It's the Google of solar on that score.

So the question is, how come they don't have any major competitors making cadmium-telluride solar cells? VCs have poured over $340 million into five start-ups that hope to make copper-indium-gallium-selenide (CIGS) solar cells in the last few years and CIGS solar cells aren't even on the market. Cadmium-telluride works and there are customers.

Researchers at Lawrence Berkeley and the National Renewable Energy Labs are working on cadmium-telluride cells. Germany's Q-Cells is building production of a line of cadmium-telluride cells through its Calyxo subsidiary, but it won't go online until next year. The first plant Calyxo plant will only have a 25 megawatt capacity. First Solar already has 210 megawatts worth of capacity and will more than double that figure with new factories in the next few years.

I asked some people and here's what they said:

1. Experience. First Solar was founded in 1999, but the history of the company goes back decades, according to Dan Myers of Crosslink Capital. Founder Harold McMaster made his first fortune in the late 1940s with Permaglass and later went onto Glasstech. McMaster was one of the world's experts on tempered glass.

In the 80s, McMaster got interested in solar technology and experimented with different ways to put photovoltaic materials on glass. He worked first with silicon and then cadmium-telluride with a company called Solar Cells. Solar Cells had a rough number of years financially but was finally reincarnated as First Solar in 1999.

2. Patient Investors. John Walton, of the Walton family fortune, was an early investor and stuck by the company through the very difficult early years. Interestingly, Myers noted that none of the big solar success stories have been emerged from the usual Silicon Valley path of being fostered along and funded by VCs, which usually want a return after five years or so. Instead, these companies have taken years to incubate.

3. The secret manufacturing sauce. The company has developed a process with its own machinery that can churn out high volumes of cells. What's more, the company can replicate those factories to rapidly expand capacity.

In a sense, the entire thin film solar industry is a competition around who can build a better machine. The CIGS solar cell companies will all have similar products. The difference between them lay in how they produce those cells: Miasole is sputtering the active materials onto substrates, while Nanosolar is printing them. Many companies are also making their own machinery. (A lot of the success of SunPower, which makes crystalline silicon solar cells, is also based around an efficient copy exactly methodology.)

With that in mind, it's probably a better analogy to say First Solar is trying to be the Intel of solar, rather than the Google.

4. Secrecy. The company doesn't let you see those fancy machines either, says Myers. He visited the company and was barred, like other visitors, from getting an up close look at the production line.

5. Poison. Cadmium can be toxic, which sort of scares some people away. The company has tinkered with its process to cut down on workplace toxins and has recycling programs with manufacturers.

No doubt, First Solar will get some competitors, but that is the situation today.

It's official. First Solar is the Google of solar companies.

The Phoenix, Ariz.-based maker of cadmium telluride solar cells and panels has soared past the $200 a share mark. It was up to $230 today and is currently trading at about $219.

Remarkably, First Solar had an initial public offering in the middle of November 2006. The stock went out at $20 a share, so effectively, it has gone up in value by 11 times in a little less than a year. Google went out at $85 a few years ago and is now above $700. The numbers are bigger, but the multiple isn't.

First Solar's stock is being driven by rapid growth in revenue and profit. In the third quarter, revenue came to $159 million, more than triple the $40.8 million for the same period the year before. Revenue for the second quarter came to $77.2 million, so revenue essentially doubled in three months.

Net income for the third quarter came to $46.0 million or $0.58 per share, compared to $4.3 million or $0.06 per share the year before.

Analysts expected revenues of $120 million and earnings per share of 19 cents this quarter. The financial results were announced yesterday. There is some speculation fever built into the stock price. The price-to-earnings ratio currently hovers around 287, fairly high, even by 1998 Internet bubble standards. But the company is making money.

Unlike silicon solar-cell makers or the armies of CIGS (copper indium gallium selenide) manufacturers, First Solar extracts electricity from thin films of cadmium telluride (a semiconductor made from cadmium and tellurium) on glass.

Although they are not as efficient as silicon cells, cadmium tellurium cells are comparatively cheap to make and are fairly robust. They operate in a wide temperature range and in a variety of light conditions, including dawn and dusk. In other words, cadmium telluride is the Honda Civic of solar-panel material.

The company isn't facing a material shortage, like silicon manufacturers, and it is producing product, unlike the vast majority of CIGS companies.

First Solar said this week that it has signed a deal to supply investment firm Babcock & Brown with solar modules in a deal that will bring it $1 billion in revenue between 2008 and 2009. Overall, First Solar has contracts to install more than 3 gigawatts of power through 2012.

To meet demand for the project, the company's board has approved a fourth manufacturing plant in Malaysia. Two are under construction, and the company announced a third manufacturing plant in April. Each plant will have four manufacturing lines. When up and running, each plant will be capable of turning out 120 megawatts worth of solar panels a year, or 480 megawatts in total.

That will more than double the company's existing capacity. Right now, the company has plants in Germany and the United States that cumulatively can crank out 210 megawatts worth of panels.

The Walton family of the Wal-Mart fame funded the company from the beginning and still owns a large chunk of the stock.

First Solar, those cadmium telluride oddballs, is on the move again.

The company said this week that it has signed a deal to supply Babcock & Brown with solar modules in a deal that will bring it a $1 billion in revenue between 2008 and 2009. Overall, First has contracts to install over 3 gigawatts of power through 2012.

To meet demand for the project, the company's board has approved a fourth manufacturing plant in Malaysia. Two are under construction, and the company announced a third manufacturing plant in April. Each plant will have four manufacturing lines. When up and running, each plant will be capable of turning out 120 megawatts worth of solar panels a year, or 480 megawatts in total.

That will more than double the company's existing capacity. Right now, the company has plants in Germany and the U.S. that cumulatively can crank out 210 megawatts worth of panels.

On Wednesday, First Solar will announce earnings for its third quarter.

Unlike silicon solar cell makers or the armies of CIGS manufacturers, First Solar extracts electricity from thin films of cadmium telluride (a semiconductor made from cadmium and tellurium) on glass. Although not as efficient as silicon cells, cadmium tellurium cells are comparatively cheap to make and fairly robust. They operate in a wide temperature range and in a variety of light conditions, including dawn and dusk. In other words, it's the Honda Civic of solar technologies.

The company isn't facing a material shortage, like silicon manufacturers, and it is producing product, unlike the vast majority of CIGS companies.

The fact that glass, which is heavy, was a crucial part of the equation made some people skeptical early on, but the company has been growing dramatically. In the second quarter, First Solar reported $77.2 million in revenue, up from $27.9 million for the same period the year before. Net income came to $44.4 million, compared with a loss of $2.5 million for the same quarter the year before.

It went public about a year ago at $20. It now sells for $169 a share. Financial analysts love this company.

The Walton family of the Wal-Mart fame funded the company from the beginning and still owns a large chunk of the stock.