SunPower splits in two

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From pv magazine USA.

Eight years ago, the solar industry was focused on manufacturing. Crystalline silicon was under threat from improving thin-film products, including copper-indium-gallium-diselenide (CIGS) which was accelerating through efficiency records.

Following a rapid ramp-out of Chinese capacity, however, that story changed. Low-cost crystalline silicon crushed shouldered aside almost all of its thin-film rivals and the resulting evisceration of margins meant low-cost PERC was the only cell-level technology innovation most companies invested in for years.

With capital – other than that provided by the authorities in Beijing – drying up, innovation went downstream. New third-party solar business models brought residential solar to more homeowners. Residential solar empires were built on the model, including those of SolarCity, Sunrun and Vivint.

That model has since been eclipsed too, by newer, more sophisticated and flexible loans. Even more significantly, behind-the-meter solar plus battery storage is evolving into part of home energy ecosystems – and is increasingly contributing to grid reliability.

It is within that larger context that today’s announcement from SunPower can be understood. The business has followed those trends by evolving from not only a manufacturer into a downstream solar company but also, through its dealer network, into the second-largest residential solar company in the United States by megawatts deployed.

That scale has been accompanied by increasing sophistication and an wider array of products, including the Equinox and Helix integrated platforms for residential and commercial-industrial businesses – which can include battery storage – and even a new tool for visualizing residential installations.

The split

Today SunPower announced it will be spinning off the high-efficiency manufacturing business it was founded on into a new company – Maxeon Solar, named after its interdigitated back contact (IBC) cell product.

Maxeon products have traditionally led the industry as the highest-efficiency products available for most applications other than satellites. That evolution continues with the company working on a new Maxeon 6 after the U.S. launch of its A-Series modules, based on Maxeon 5 cells this year.

Tianjin Zhonghuan Semiconductor (TZS) is pouring $298 million into the new company, a figure SunPower says will enable a scaling of Maxeon 5 – including faster conversion of Maxeon 2 lines to the new iteration – as well as development of Maxeon 6.

TZS is already one of the world’s largest wafer makers, with 40 GW of annual production capacity as one of the two big Chinese monocrystalline wafer makers, along with rival Longi. The Tianjin company’s rapid growth is enabling monocrystalline silicon to eclipse multicrystalline as the main cell technology.

SunPower and TZS have been working together for some time, including as part of a joint venture for a multi-gigawatt Chinese factory to make the former’s shingled P-Series product. Maxeon will retain a 20% stake in that venture.

While continuing to innovate on Maxeon cells, the new company also plans to expand its manufacturing capacity to make the lower-cost P-Series.

That does not mean SunPower will be entirely free of manufacturing or R&D. The company will retain its P-Series module factory in Hillsboro, Oregon and will also keep its Silicon Valley-based R&D operation. Maxeon gets the overseas R&D capabilities and the two companies plan to partner on development of new products.

Under today’s deal, which hinges on regulatory approval, SunPower shareholders will keep their shares and receive a 71% stake in Maxeon Solar, with TZS holding the balance. The new company will also keep a multi-year, exclusive supply agreement with SunPower.

Jeff Waters, who serves as CEO of SunPower Technologies, will take over the same role with Maxeon. The company will be headquartered in Singapore and plans to launch as a publicly traded company on the Nasdaq after completing the split.

The new SunPower

With its manufacturing spun off, the new SunPower is free to focus on what has increasingly occupied its time – its downstream business. SunPower has built a powerful presence through its dealer network, which includes companies which sell and install only its products.

The megawatts sold through the network place SunPower second only to Sunrun in U.S. residential solar. Unlike its rival, SunPower also has a large presence in the nation’s commercial and industrial market.

But that is just the beginning. SunPower estimates it has a 50% market share in the new homes market and contracts with 18 of the top 20 builders in California. “We are ideally positioned to lead the California new homes mandate in 2020,” said SunPower CEO Tom Werner.

And SunPower’s innovation is not limited to its cell and module work. “We are increasingly living in a digital world,” said Werner, emphasizing the company’s software innovations, such as its new Design Studio.

SunPower is one of only two companies known to pv magazine to have won contracts to supply capacity to U.S. grid operators from behind-the-meter solar and that may mark another profitable future business stream.

Werner says SunPower has an “opportunity to capitalize in the growing energy services market”, and says the company plans to offer ancillary services as well as capacity from behind-the-meter resources. That, of course, will be enabled by increasing deployment of solar-plus-storage.

The deal has received the blessing of French oil company Total, SunPower’s main shareholder. “We support this transaction which will bring clarity and focus for both entities on their respective activities,” stated Total chief executive Patrick Pouyanné. The fossil fuel giant will remain a shareholder of both companies.