First Solar faces new challenges

First Solar 2011 Outlook assesses DOE loan guarantees, European feed-in tariffs, thin-film competition, and utility-scale projects, as NRG Energy, GE, and SunPower with Total SA financing shape North American pipeline timing and demand.

First Solar has been one of the biggest players in solar, but it has some challenges on the horizon.

It’s not insurmountable for a company that is projecting to make between $3.7 billion and $3.9 billion for 2011, but the solar market can change fast, even as First Solar outshines rivals in recent results.

On a conference call with analysts following the release of its first quarter earnings, First Solar officials said the challenges aren’t unique.

One big hurdle the company has to deal with is financing from the U.S. Department of Energy’s loan guarantee program. Funds from the program as going into a deal that would have First Solar selling its Agua Caliente power plant to NRG Energy Inc. NRG has been pegged to get $967 million from the DOE program, but the deal is still pending.

It’s similar to what happened with Abengoa Solar on its Solana Generating Station. The company received notice of the loan guarantee in July 2010 but didn’t finalize the deal until December.

“The process on the DOE side has taken just a little longer than expected,” said Larry Polizzotto, the company’s vice president of investor relations. “That could end up getting done by the end of the second quarter, but it might go into the third quarter.”

First Solar has three other projects in the DOE pipeline, with plants near U.S. loan decisions also moving forward, Polizzotto said.

Other issues involved the uncertainty over feed-in tariff programs in Europe. Several European countries, including Spain and Germany, have either dropped the tariffs or are planning to do so. The tariffs are a fixed amount that solar energy providers receive from utilities to buy power.

The result has First Solar potentially accelerating its North American pipeline if the demand in Europe isn’t there. The company added 50 megawatts to its plans for this year in North America, and that number could grow further.

Competitive challenges may lie in the future. SunPower Corp. announced that French oil giant Total SA was putting in an estimated $4.2 billion to take a majority stake in the silicon panel manufacturer based in San Jose. That could add muscle to SunPower’s efforts to bring its panels to a larger market.

That comes after a mid-April announcement that General Electric was getting back into the solar market, with panel production in Ohio increasing as well, and using the same type of thin-film panels First Solar has used to develop solar systems.

GE doesn’t have the development pipeline First Solar does, with a recently re-energized plant effort, but it does have capital, and it has been a lender for solar systems in the past.

Rob Gillette, CEO of First Solar, said he expects other large companies to jump into solar as it becomes more cost effective and prices continue to fall, potentially leading to a handful of players dominating the market.

“I think there will be more and more large companies that will jump into the industry, and we need a lot of viable competitors to really drive the technology into the utility sector,” he said.

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