November 2016 statement from Chuck P ( His predictions )
“This breakthrough comes at a perfect time,” says Chuck Provini, Natcore’s president and CEO. “Solar stocks are tumbling following Donald Trump’s election because of the perception that government support of the industry through subsidies and tax credits might be rolled back or eliminated. But while this perception may be negative for the solar manufacturing industry as a whole, it’s actually a very positive development for a solar R&D company like Natcore. Technology will be the key driver in the years ahead.
“With subsidies in place, solar manufacturers were under relatively little pressure to innovate, because the subsidies helped keep solar costs at a parity with energy from more traditional energy sources. But Natcore’s focus has always been to provide generational improvements in solar cell performance – significant increases in efficiencies and significant reduction in production costs.
“Our position, if these incentives were to disappear, could not be more advantageous, since cell manufacturers will be forced to consider our technology and to adopt it once available.”Fighting market forces in solar energy
June 2018 Motley Fool article
First Solar is in a strong position today because it's thin-film solar panel technology is exempt from the 30% import tariff President Trump imposed this year on most solar panels manufactured outside the U.S. That's led to strong gross margins on bookings, projected at over 20% by management, and fueled investors' hopes for earnings growth long-term. But solar manufacturing plants don't have a history of generating big profits, and each expansion First Solar embarks on faces the prospect of diminishing returns.
One thing to consider is that the U.S. market may be oversupplied with tariff-free panels by the time the Ohio plant is fully operational in 2020. That alone will be a challenge
, but today, I want to discuss how the natural decline in solar panel pricing could make the economics of the new plant difficult to justify.
Management has forecast the Ohio facility will cost $400 million to build, and will be operational at the end of 2019 with 1,200 megawatts (MW) of capacity. In the fourth quarter of 2017, when the 20%+ gross margin projection was made, GTM Research estimates that solar panel prices were about $0.48 per watt in the U.S., which could bring annual gross margin from the plant's production to $115.2 million. But a lot has happened since then and that margin may not last for long.
China cut its solar subsidies, which Roth Capital estimates will leave the world oversupplied of solar panels by 34 gigawatts (GW) by the end of this year. To see what happens when the world is oversupplied with solar panels all we have to do is look back to the first quarter of 2017 when GTM Research says panel prices were $0.38 per watt.
If First Solar's gross margins are 20% with prices at $0.48 per watt panel, they would be about 0% with a $0.38 per watt panel if costs remain flat . Even if margins fell into the single digits, returns could be so low it would make it hard to generate a positive return on the $400 million spent to expand production.
To give an idea of how quickly falling prices could impact First Solar, the company has 10,600 MW of contracted backlog, but the new plant is all incremental growth to supply and the company still has about 12,000 megawatts (MW) of panels to sell before protective U.S. tariffs expire in early 2022. If the overall solar market pushes prices lower, First Solar's expansion could be poorly timed to come online just as it's facing margin pressure.
Competition is coming for First Solar
The reason I'm worried about adding capacity like this is that the comfortable, high-margin position First Solar enjoys today may not last.[/u The solar tariffs are set to shrink every year until they expire in February 2022, so it's possible pricing pressure on the company will be more intense in the final three years of the outlook provided above. Manufacturers like JinkoSolar and SunPower are also expanding their U.S. solar panel production, which will diminish First Solar's quasi-monopoly on tariff-free supply. China cut its solar subsidies, which Roth Capital estimates will leave the world oversupplied of solar panels by 34 gigawatts (GW) by the end of this year.
Natcore has the perfect Best of Breed product
Buy Long
