GE-First Solar Partnership Highlights a Busy Week on the Solar Energy Front

Plenty of people in the electrical industry are frustrated with the solar market, but some recent developments in the photovoltaics arena prove that that not everyone is ready to write off solar just yet.

GE’s Power & Water division headquartered in Schenectady, N.Y., and First Solar, Tempe, Ariz., announced a technology partnership earlier this week in which First Solar acquired GE’s global cadmium telluride (CdTe) solar intellectual property portfolio, and GE receives 1.75 million shares of First Solar common stock as part of this transaction (worth approximately $81 million at the Aug. 6 closing price). Under the agreement, GE has agreed to retain the shares for at least three years; First Solar’s factories will deploy the CdTe technology; and the two companies will work on future research at the GE Global Research Center outside of Schenectady, where it does much of its renewables R&D.

In an another deal announced this week, Edison International a giant Southern California electric utility, said it has completed the acquisition of SoCore Energy, LLC, a Chicago-based developer of rooftop installations for large retailers, industrials, real estate investment trusts (REITs) and other commercial clients, including Walgreens, IKEA, Kimco Realty, and the Simon Property Group. The company has designed, installed, and operates 80 commercial-scale solar installations in 11 states. In an ongoing project with Walgreens, the company is installing PV panels at more than 200 of the company’s stores.

A press release on the GE-First Solar partnership says the combination of the two companies’ complementary technologies and First Solar’s existing manufacturing capabilities could accelerate the development of CdTe solar module performance for thin-film PV cells and improve efficiency at manufacturing scale. In addition, GE Global Research and First Solar R&D will collaborate on future technology development to further advance CdTe solar technology.

In a related GE announcement, the company had decided not to build out a PV panel manufacturing facility in Aurora, Colo. The plant was expected to employ 350 when complete, according to an article in the Denver Post. GE had planned to invest $300 million in the facility, which would have manufactured solar panels from the company’s PrimeStar business, which it had acquired in 2009. The Denver Post article said 50 workers will lose their jobs because of the decision. Industry observers quoted in the article said the closure was because of plummeting PV panel prices — which have dropped an estimated 50% in just two years — that caused a surplus of solar panels in the U.S. market.

The GE/First Solar agreement is expected to help both companies grow their solar businesses. The press release said GE, which has 34GW of renewable energy installed globally, will purchase and brand First Solar’s modules for future global GE deployments, in addition to its investment in inverters, controls, balance of plant and ownership of utility-scale systems.

Also part of the deal is a commercial relationship between the two companies around solar inverter technology. First Solar will continue to purchase inverters from GE Energy Management for use in its global solar deployments to optimize electrical balance of plant. By combining complementary technologies, the collaboration is expected to lead to an improvement in solar grid integration, more competitive cost structures and a roadmap for combined electrical equipment.

“To lead in today’s solar industry, you must have the most competitive technology at the most competitive cost position,” Anne McEntee, president and CEO of GE’s renewable energy business, said in the press statement. “We’re excited to partner with First Solar to accelerate innovation and bring our complementary technology and R&D to market faster through its manufacturing capabilities.”

GE has promoted the idea of combination power projects using both wind turbines and solar panels, and it’s the top U.S. wind-turbine maker and sells inverters that link solar panels to the grid. The company plans to market First Solar panels under its own name, and now will be able to offer both generating technologies to customers, said McEntee. She also said in a Bloomberg article that the partnership was part of GE’s renewed focus on utility-scale power systems.

Jim Hughes, First Solar’s CEO, said in the release that the deal creates “an exciting synergy.” “The addition of GE’s PV thin-film technology and R&D resources will advance our technology roadmap, while realizing cost reduction in our manufacturing process,” he said.

Much of the news about the solar industry over the past two years has focused on panel dumping and price declines, so the announcement of the GE-First Solar partnership and Edison International’s acquisition of So Core Energy — as well as some recent news from researchers at the Massachusetts Institute of Technology and the University of Wisconsin at Madison that they had made progress in the development of a new generations of PV panels — probably gives solar supporters some reasons to cheer. And when you factor in a recent report published by GTM Research, Boston, and the Solar Energy Industries Association (SEIA), Washington, D.C., that says that the 723 megawatts of solar power installed in Q1 2013 represent the best busiest first quarter ever and the fact that solar stocks are on quite a roll (see chart), it presents an interesting counterpoint to the argument that the solar industry is on life-support.

However, even though the share prices of most publicly held solar stocks are well above stock market industry averages year-to-date and year-to-year, when you look at the most recent earnings data from some publicly held solar companies, the surge in solar stocks does seem to be a bit disconnected from the financial realities of the market.

For instance, First Solar’s net sales were $520 million in the quarter, a decrease of $235 million from the prior quarter and a decrease of $438 million from the second quarter of 2012. The company also reported second quarter net income per fully diluted share of $0.37, compared to $0.66 in the first quarter of 2013 and $1.27 in the second quarter of 2012.

First Solar’s shares took a hit the day before the announcement of the GE partnership, when analysts learned of these declines and of some adjusted future sales expectations by company execs. Prices of its shares  plunged from an adjusted daily close on Aug. 6 of $46.75 to a close of $40.47 after its 2Q financial report hit the wire. The company’s stock price is  down substantially from when shares topped $300 each in May 2008.