I had a chat with Kaufman Brothers analyst Jeffrey Bencik this morning about what seems a meaningful endorsement of solar energy with General Electric’s (GE) announcement yesterday it had achieved record efficiency in a type of solar panel component, made of “thin films” based on cadmium telluride materials, and that GE plans to build what it bills as the U.S.’s biggest solar-panel manufacturing facility, capable of 400-megawatts of production, employing 400 people and resulting in enough power generation to power 80,000 homes a year.
Bencik, who used to cover GE formally, and now covers First Solar (FSLR), among others, tells me that the initiative, “marks a significant shift” for GE in its attitude toward solar. GE was sour on the business not so long ago, but has now understood that solar, as Bencik puts it, is the only energy source not rising in cost, including wind energy.
“Five years ago, six years ago when I asked [GE CEO Jeffrey Immelt] about solar, he poo-poo’ed it at the time, said it was way too far away from cost competitiveness,” Bencik recalls.
Bencik muses that Immelt has seen the writing on the wall as far as cost: “The cost of solar has been cut in half in the last two years, while the cost of every other means of electricity generation has continued to increase because they are all steel turbine-based, and steel costs have been going up.”
“They can see the finish line,” he says of GE with regard to cost, “They can see this is a real business.”
For the solar business, it’s a big vote of confidence, says Bencik, even though it will take several years for the GE initiative to bear fruit. No site has been picked for the plant, and it will take a year or more for construction, then more time to ramp the facility, put out product, etc.
But, this will be the first solar energy company “with the ear of the president,” notes Bencik, referring to President Obama’s having appointed Immelt to his “Competitiveness Council” on industry. “With GE going into solar in a big way, it’s in their interest to have increased incentives for solar,” he observes, alluding to the possible impact on U.S. policy.
And the announcement may make solar real for some investors, he argues, though it will probably help to have GE announce a second facility at some point, to prove that the company is not going to just dabble and then walk away.
“If they follow this up with an additional one, then I think a lot of people will get off the fence,” says Bencik. “A second facility would remove all doubt” among investors.
For First Solar and others, there are more immediate benefits. Their customer base may increase as some prospects see GE coming in and decide the technology’s been blessed. First Solar, in particular, benefits forma the fact that GE has chosen thin-film. GE’s years away from threatening First Solar, and first solar has capacity of 2.5 gigawatts already, dwarfing what GE has planned.
But with a vocal lobby having warned against the health risks of cadmium telluride, First Solar may have gained a big ally in the public health debate.
Bencik maintains a Hold rating on First Solar shares, having downgraded it when it hit $165. He now thinks that, “there’s actually starting to be meaningful upside” for the shares at a recent price of $147.75.
Article courtesy of Tech Trader Daily