Who will survive the solar energy shakeout?

“There’s no doubt in my mind that First Solar offers the industry’s best quality management and the best quality product at the best relative value,” says Matthew Patsky, portfolio manager of Winslow Green Mutual Funds, in Boston.

Formed in 1999, the Tempe, Ariz., solar company burst onto the scene with a type of thin-film technology called cadmium telluride. Although less efficient than traditional silicon-based PV panels, thin-film modules cost substantially less to produce. Last year, First Solar had $1.2 billion of sales and a $348.3 million profit. (That 2008 profit level was more than double the prior year’s earnings.)

“Thin films came into production during the boom period in the industry’s growth, which allowed for higher-risk new technology. But First Solar was the only one to establish itself successfully during that boom,” says Ken Zweibel, director of the George Washington University Solar Institute in Washington, D.C.

While competition has been rising in the thin-film sector, First Solar has continued to sustain its leadership, analysts say. It “is the only company in the world that’s been able to produce solar modules at less than $1 per watt,” says Shyam Mehta, senior solar analyst at GTM Research, a market-research firm based in Cambridge, Mass. “And [it] is on its way to producing solar electricity at rates competitive with electricity from fossil fuels.”

First Solar has reported that in this year’s first quarter, its manufacturing cost had fallen to an industry-leading 93 cents per watt. All the while, it’s been enjoying eye-popping profit margins and is operating at full capacity.

Efficiency, efficiency

If First Solar can boast about cost, SunPower Corp. offers efficiency. Its products have the industry’s highest degree of “conversion efficiency,” meaning how much sunlight they convert into electricity. Incorporated in 1985, the San Jose, Calif., company claims its solar panels are up to 50 percent more efficient than conventional solar panels and 100 to 300 percent more efficient than thin-film modules. That means its installations require “substantially less room on a roof to get the same amount of electricity,” says Julie Blunden, SunPower’s vice president of public policy and corporate communications.

Starting next year, the company plans to offer a “Generation 3” solar cell with a 23.4 percent efficiency, reports GTM Research.

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