During its analyst day event held last week, First Solar (NASDAQ:FSLR) presented an updated road map for its Cadmium Telluride (Cd-Te) thin film panels, indicating that conversion efficiencies, which have typically been one of the company's weak spots, could improve significantly going forward. If the company is able to execute on its targets, we believe that it could emerge as one of the technology leaders in the industry, in addition to being one of the lowest cost producers.
Why Conversion Efficiencies Matter
Some of the key attributes that solar panel manufacturers compete on include price, conversions efficiency, temperature coefficients and aesthetics. Conversion efficiency is typically the most touted and advertised feature. All else being equal, a higher efficiency panel converts more sunlight into electricity and has a smaller size (surface area) for every watt of rated power output. Besides this, higher efficiency panels help to reduce the balance of systems cost (structural components, electrical equipment and labor costs) for a solar installation, which is a function of panel size.
First Solar's panels currently offer average conversion efficiencies of around 13.4%. In comparison, polycrystalline panels, which are typically manufactured by Chinese companies, offer efficiencies of around 15% to 16%, while high-end monocrystalline panels sometimes have efficiencies of over 20%. First Solar's road map indicates that its module efficiencies could improve to around 14.9% this year while rising to around 19.5% by 2017, as compared to its previous road map which targeted a 17.2% efficiency in the same time frame.  The company expects the efficiency of its modules to equal those of polycrystalline modules by the end of 2015.
Possibility Of A Long Term Edge If The Company Executes On Its Plans
Additionally, the company's modules could have a long-term edge over silicon-based modules. First Solar has been continuously pushing the envelope for the lab-based efficiency of its solar cells. First Solar's research cells have achieved a conversion efficiency of around 20.4% and the company expects to improve this number to around 23% in the mid-term, while approaching 25% in the longer term. In contrast, lab-based efficiencies of monocrystalline and polycrystalline cells have remained at around 20% and 25% over the last few years, and this number is believed to be approaching the theoretical upper limit. On the other hand, Cd-Te thin film cells have theoretical efficiencies that can touch 30%,  meaning that First Solar could eventually produce some of the most efficient panels in the industry.
Besides efficiencies, First Solar's panels also have other advantages. Cd-Te panels tend to perform well under a variety of lighting conditions and also have an edge in hot and humid climates due to their better temperature coefficient, which helps their output hold up better when compared to silicon-based panels which experience some performance degradation as temperatures soar. First Solar is already the world's lowest cost solar cell manufacturer, with its core manufacturing costs standing at around $0.54 per watt. The company has guided that it could reduce its core manufacturing costs to less than $0.40 by the end of 2018.
Disclosure: No positions.