First Solar: Market, product or government policy behind restructure?

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While First Solar pointed to bringing its worldwide production into line with predicted global demand, some are raising questions as to whether its cadmium telluride (CdTe) module is competitive, and will remain competitive in the future.

Stock analysts Jefferies today issued a note in which it indicated that the module is at fault, in that is does not serve well, the most "sustainable" photovoltaic market of the future. The company writes, "The First Solar product is competitively disadvantaged in the most sustainable and economic solar market – rooftop PV."

Renewable market analyst Gerard Reid, formerly of Jefferies, bluntly concurred with this analysis. "Ground systems are dead," Reid told pv magazine and as such, "I’m not surprised really."

Jefferies points to First Solar’s new module costs as another point of disadvantage to its silicon rivals. It writes that First Solar’s module costs – US$0.60/W to US$0.64/W – are above that of tier-one Chinese vendors. The company also points to a lack of 20-year experience in the field for the modules and to "increased chatter of field failures from 2010 production". Although the stock analyst notes that it has not found evidence of this.

Rapid changes to public policy regarding solar and also changed global economic conditions have both played their role in the First Solar restructure, wrote market analyst Paula Mints. Issuing a statement to pv magazine, Mints said that First Solar has been slow to react to these changes.

"The problems First Solar (among other manufacturers) are facing now could have been mitigated if plans for a low incentive environment had been put in place when the FITs began to migrate from country to country." The charismatic analyst continued: "Incentives for renewables are designed to end. Planning for that might have led to the preparation of future strategies and this preparation would not have necessarily avoided a correction, but it would have left companies better prepared for it."

The Solar Energy Industries Association (SEIA) took aim squarely at evaporating government subsidy programs as being behind First Solar’s restructuring. SEIA’s Rhone Resch issued a statement saying, "Today’s announcement from First Solar demonstrates the impacts that result from inconsistent policy. Policy certainty is critical for all energy markets, and the solar industry is no different."

Using this as the basis, SEIA then made the case for the retaining of the federal tax credit that underpins the market in the U.S. Because of this credit, writes SEIA, "First Solar has chosen to focus its activities in areas that provide a higher level of policy stability and product demand, including the U.S., First Solar’s largest market."

Jefferies additionally mentioned First Solar’s 2.8 gigawatt pipeline, which should deliver US$3.4 billion in profits, excluding operating expenses. First Solar executives were at pains to emphasize this project pipeline in a conference call some hours after the restructuring announcement was made. The stock analysts noted however, "Acting CEO/Chairman Ahearn was not on the conference call, which, in our view, is strange."