SunPower at 30: Why It's still the most interesting company in solar

SunPower turns 30 tomorrow. It’s a company whose impending doom has been predicted more times than Apple. And, like Apple, it has both defied expectations and played a huge role in taking its industry from a niche world of hobbyists to the mainstream. In 2014, net income came to $246 million, more than double the year before.

Granted, death did almost come several times. In 2001, Cypress CEO T.J. Rodgers had to write a personal check for $750,000 to keep the company afloat. So how did it—an American company grounded in hardware and manufacturing—survive?  Here are some of the reasons. (Interestingly, virtually all of these reasons apply to its thin film doppelganger First Solar.)

1. It Focuses on Technology. SunPower’s claim to fame is efficiency, consistently producing the most efficient silicon solar modules through its own technologies designed to absorb reflected light or reduce the manufacturing or materials cost of cells. By contrast, if you look over the marketing and manufacturing strategies of most of the other major solar makers, they focus on one thing: cost. Very little effort goes into making something different.

That gave SunPower a sustainable edge. While efficient modules cost more to produce, they more than recoup that expense in lower balance-of-system costs. Simply put, high efficiency modules can produce more power over a 30-year period with the same finite amount of labor and land than less efficient ones and balance of system costs account for 70 percent of solar installations. For years I would argue about the value of efficiency with analysts. “Efficiency isn’t important. Only the LCOE (levelized cost of energy),” several told me. So what’s the best way to lower LCOE? Uhhh, efficiency is probably toward the top of the list, many admitted.

Picture taken on January 23, 2015 of the newly finished PV Salvador solar plant near El Salvador, in the Atacama desert, northern Chile. The photovoltaic plant, built by SunPower, a California-based branch of Total, with a maximum output of 70 Megawatts, is one of the world biggest solar plants. AFP PHOTO/Vladimir Rodas (Photo credit should read VLADIMIR RODAS/AFP/Getty Images)

Efficiency also gave the company a way to project a future roadmap. It’s easier to predict your own abilities than economic shifts in the market. As a result, investors could study it more like a semiconductor company.  (Similarly, First Solar put a similar faith in technology. Its claim to fame was being the first to master cadmium telluride in a mass production environment. The company’s guidance with regard to its own efficiency levels and how that impacted cost/watt and LCOE has typically been the highlight of its earnings calls.)

Technology isn’t a panacea. Suntech, the now humbled colossus, put more emphasis on technology than other Chinese manufacturers. But think of it for a moment. What makes UpSolar, LG, Canadian Solar, or even Yingli different? If you sheepishly thought ‘market share’ or ‘cost leadership’ you can see why the bet on technology was the right one for both SunPower and First Solar. With tech companies at least you know what you’re getting.

2. Vertical Integration. Vertical integration in most technology markets doesn’t work. Laptop and cell phone makers don’t make their own chipsets anymore after all because of the technical challenges an onerous capital involved.

But in some markets it works. SunPower (and again First Solar) became a powerhouse in commercial and utility deployments by combining project development with panel manufacturing. Obviously, you can be a commercial developer without making your own panels, but it doesn’t hurt by reducing costs and improving overall gross markets.

“They have the second best — if not the best — track record in the industry” for project development,” my former colleague Shyam Mehta once told me. With SolarCity’s foray into panels, there will be three somewhat vertically integrated solar firms: First Solar largely focused on commercial/utility projects, SolarCity in residential, and SunPower trying to straddle both markets.

3. A Willingness to Try Something New. At various times, SunPower has experimented out into concentrators, all-in-one solar panels, tracking systems and robots for managing utility-scale plants. Some of these experiments have worked better than others, but the willingness to experiment has helped the company incrementally improve its products without making any bite-the-company investments.

Creating a Yieldco with First Solar and the $2.3 billion deal with French energy giant Total in 2011 also showed the company understands the nuances of finance too. Considering the companies that have failed—Solyndra, Miasole, Suntech, Nanosolar, BP and heck, let’s even add outfits like Sharp that have fallen behind as solar started to take off—it’s a pretty interesting track record.

http://www.forbes.com/sites/michaelkanellos/2015/04/23/sunpower-at-30-why-its-still-the-most-interesting-company-in-solar/2/?ss=energy