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First Solar Won the Race; The Environment Lost

In 2011, I wrote about the CdTe Horse Race in which the three U.S. companies making cadmium telluride (CdTe) photovoltaic (PV) modules, First Solar (FSLR), Abound Solar and General Electric (GE Solar, stock ticker GE) jostled for position. Abound and GE were challenging the reigning champion First Solar to build the largest PV manufacturing facility in the world.

The official results of that race are in, and First Solar has beaten the competition by many lengths. Within about a year of each other both Abound and GE Solar announced they had stopped any hopes of solar panel manufacturing. On July 2 2012 Abound Solar announced they were closing (See The End of Abound Solar, What Have We Learned?).  On the August 6th, 2013 First Solar earnings call they announced the purchase of all the GE Solar intellectual property, along with a relationship to purchase GE inverters thus ending the Primestar/GE Solar story in manufacturing their own product. Our trifecta ticket wasn’t in the money because we had the win right with First Solar, but reversed the second place and third show order. GE Solar came in second place because they obtained 1.75 million shares of First Solar stock. On the day of the announcement FSLR was trading around $47 or $82.25 million for GE to exit (today’s FSLR stock quote, you do the math on what it means to GE).

Those who invested in Abound ended up with nothing, in fact the Department of Energy (DOE) is financially liable for Abound PV modules that are not fit for sale and reportably have poured concrete onto them at a cost of $2.2 million (see here and here). The story will not end there, concrete encapsulated cadmium isn’t environmental stewardship. Anyone owning Abound Solar modules is now responsible for both warranty and end-of-life disposal/recycling costs.

First Solar’s February 2013 earnings call described their $1.39/watt system installed costs, which is a low cost milestone for the PV industry. GE Solar must have realized they cannot compete with this experience and pricing; in a way GE got off their own horse and got on First Solar’s during the race for dominance. GE is now one of the top ten shareholders of First Solar. 

April Analyst Day

At the time of that February earnings call, First Solar wasn’t answering analysts’ questions, deferring to a April analyst day for answers. My perspective at that time was negative, having seen delay tactics resulting in bankruptcy, but my concerns were wrong. The analyst day was well received and the stock shot up from where it was around $26 at the end of February to over $39 after the analyst meeting.  First Solar announced the purchase of high efficiency crystalline silicon PV company Tetrasun at that analyst meeting, now blurring the lines between it and the other high efficiency crystalline silicon module manufacturer SunPower (SPWR).   First Solar also predicted its module cost would fall to $0.40/watt by 2017. Cost of production would be between $0.34/watt and $0.37/watt , plus $0.04/watt cost of sales. $0.04/watt is also what they eliminated with their end-of-life recycling program, now that responsibility is on the system owner. 

No Environmental Stewardship

First Solar’s eliminating the prefunding for end-of-life recycling did not get much attention after the February earnings call, but it should have.  Recycling and environmental stewardship was once a cultural touchstone for First Solar during Bruce Sohn’s tenure as President, from 2007 to 2011. Asbestos manufacturing can be used as a guidepost for First Solar in that owning the recycling might be the best long term approach to reduced liability from manufacturing.

From the transcript of the February 2013 earnings call:

Note, regarding our module end-of-life program, beginning in the fourth quarter of 2012, we made prospective changes to our solar module collection and recycling program outside of the EU. For new contracted sales, customers as part of their overall power plant decommissioning obligation will now be responsible for ensuring modules that are either recycled or responsibly disposed at the end of their life. 

As noted with the Abound experience,  the decommissioning and recycling costs will likely far exceed what First Solar was previously prefunding.  CdTe can be an expensive material to throw away.  It cost the DOE at the very least $0.20/watt to encapsulate the modules in concrete (as many as 140,000 modules and $2.2 million cost). The right and not very difficult approach is for these thin film PV materials to be recycled and reused to produce new higher efficiency modules; a cradle to cradle philosophy (see Clean & Green). Maybe General Electric can do the right thing with their unused modules now that GE Solar is finished.

Photo 1: Crates full of broken unusable Abound Solar modules during their October 2012 auction. Photo by author. 

End-of-Life Costs for PV

An example of the cost for decommissioning PV systems was recently revealed by a public bid at the Sacramento Municipal Utility District in Sacramento California (SMUD). Financial experts should take note that the 1.6 MW of retiring PV systems cost $1 million to decommission or $0.61/watt. Albeit this included all ground work and removal of materials to make the land like nature intended. This kind of activity and bid is something that hasn’t been seen previously for the PV industry because systems are just now coming into retirement. PV is much less expensive than a nuclear power plant to decommission which SMUD also has experience in decommissioning. Interestingly the decommissioned Rancho Seco nuclear power plant is the exact same place the decommissioned PV systems were located.

There is currently very little knowledge base or experience in the salvage, decommissioning and recycling of PV systems. The SMUD cost experience can become less expensive if the industry can develop mechanism for decommissioning and recycling for both crystalline silicon and thin film PV technologies. We have several data points: First Solar will no longer prefund $0.04/watt; SMUD spent $0.61/watt for full site rehabilitation including recycling, and DOE’s reported disposal of Abound Solar modules with concrete cost at least $0.20/watt.

The lesson from these experiences is to be conscious of cost reductions from module and system installers that have now become the responsibility of governments and the system/landowners.

Conclusion

First Solar continues to be a dominant player in the PV industry, winning the thin film solar factory race against Abound Solar and GE Solar, and it has now teamed with the latter on intellectual property and inverter sales. First Solar dominates the industry with low costs for installed systems, and now joins the race for dominance in the crystalline silicon space with the purchase of Tetrasun.

Environmental stewardship will need to be addressed, if not by the manufacturer then by the communities installing these systems. There is a new race, the race to avoid paying for end-of-life costs. The loser of that race is becoming clear: the public, because we don't even know we're in the race. If only the race were for dominance in environmental responsibility.

Disclosure: No positions.

This article was originally published on AltEnergy Stocks and was republished with permission.

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