Over the past few years, First Solar, Inc. (NASDAQ:FSLR) has seen slowing demand for utility-scale solar projects. That was a big reason the panel manufacturer began expanding aggressively in international markets. But the booming U.S. residential solar market could be another growth opportunity for the Tempe-based company, which has recently shifted its focus to the residential market.

First Solar

First Solar to capitalize on TetraSun’s high-efficiency panels

According to GTM Research, U.S. residential solar installations outpaced commercial installations in the first quarter of this year. Total residential installations are expected to surpass 1GW in 2014. Moreover, the residential solar market is growing at 38% annual rate, says GTM Research. Livio Filice of Seeking Alpha says that First Solar is well-positioned to capitalize on the rapidly growing U.S. residential solar market.

First Solar’s Cadmium Telluride (CdTe) thin-film technology may not be very efficient. Thin-film panels also have relatively higher prices than crystalline modules. Due to their low efficiency, thin-film modules require more space, making them unsuitable for residential and industrial rooftop markets. But its strategic acquisition of TetraSun, which can give it a technological edge over rivals. TetraSun has developed high-efficiency polycrystalline silicon PV modules that have a conversion efficiency of more than 21%.

Residential market to make up a big portion of First Solar’s future revenues

The residential solar leasing business has seen explosive growth because customers don’t have to bear any upfront cost, eliminating a big barrier to installation. Customers pay for the electricity produced by these panels over a specific period, sometimes more than a decade. And it’s cheaper than utility power. Solar leasing business is estimated to grow from $1.2 billion in 2012 to $5.7 billion by 2016.

Armed with TetraSun’s high-efficiency modules, First Solar can deliver low-cost, reliable, and high-efficiency panels to the residential market. The company is estimated to ramp up its production of high-efficiency crystalline modules to 100MW. Entering the residential solar market will allow First Solar to stabilize its business, and avoid uncertainty in future revenues.

If the same trend continues, the residential market will make up a major portion of the company’s revenue mix in the next few years, says Filice.

First Solar shares fell 1.77% to $66.52 in pre-market trading Tuesday.