First Solar, Inc. (FSLR) To Cut Module Costs By 50% As Gas Prices Surge

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First Solar, Inc. (NASDAQ:FSLR) has underlined that the manufacturing cost for solar modules is going to fall substantially, even though natural gas prices continue to rise. First Solar CEO Jim Hughes said during an analyst event that the company’s module costs will decline dramatically over the next five years.

First Solar’s total installed cost to fall below $1/watt by 2017

First Solar, Inc. (NASDAQ:FSLR) estimates its module costs to decline about 50% from $0.63 per watt in 2013 to $0.35 per watt by 2018. That will reduce the total installed cost (which also includes racking and inverters) from $1.59/watt last year to less than $1/watt by 2017. That’s significant because solar prices are declining as natural gas prices are heading in the opposite direction. United States has long been known as a country of cheap gas. But rapid depletion of wells and rising challenge of more complicated reserves are pushing up the price, says Renew Economy.

According to EnergyWire, wholesale prices in the U.S. north-east grid surged a whopping 55% last year. It was mainly due to a 76% increase in natural gas prices to $6.97/MMBTU, well above the pre-financial crisis levels. The large scale solar growth market has been slowing as most of the utilities now have enough farms to meet regulatory green energy requirements. That prompted First Solar to seek new deals in international markets, and expand into the rooftop business.

First Solar to benefit from rising gas prices

But First Solar, Inc. (NASDAQ:FSLR) expects the large-scale solar market to rebound. Many companies are increasingly turning their interest to solar as gas prices continue to rise. According to Deutsche Bank, most power purchase agreements (PPAs) have been in the range of $50-$70/MWh. First Solar is able to meet those prices, though it’s not making a lot of profits. But if panel development costs fall as drastically as First Solar forecasts, there is plenty of long-term money making opportunity. The Tempe, Arizona-based company is focusing particularly on projects in the 20-50MW range. Utilities say this project size addresses their issues of daytime peaks.

Moreover, such projects have low execution risk. There are several things that will contribute to the company’s module cost reduction. First, the company’s cadmium telluride panels have achieved a conversion efficiency of 17.2%. First Solar, Inc. (NASDAQ:FSLR) aims to increase the conversion efficiency to 19.5% by 2017. The Jim Hughes-led company’s recent partnership with General Electric Company (NYSE:GE) will also general major savings.

First Solar, Inc. (NASDAQ:FSLR) shares fell 3.59% to $69.49 at 12:27 PM EDT.

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