BP Solar International Inc. is hoping to install 100 megawatts
of large solar projects in the U.S. in 2009 as it focuses attention
on the utility sector, the company's chief executive, Reyad
Fezzani, told Clean Technology Insight.
The solar unit of London-based BP PLC (BP) is bidding for
numerous utility solar projects amid growing competition from such
combinations of developers and panel providers as First Solar Inc.
(FSLR), SunPower Corp. (SPWRA) and Gemini Solar, a joint venture
between MMA Renewable Ventures and Suntech Power Holdings Co.
(STP).
"The downstream market in the U.S. is becoming increasingly
utility-focused. This means larger projects, longer lead times and
increased complexity," said John Hardy, senior research analyst and
vice president at Broadpoint AmTech, a division of Broadpoint
Securities Group Inc. "In three years, I would not be surprised if
the U.S. market reached 3 to 4 gigawatts in annual
installations."
Driven by state mandates, utilities are seeking large solar
installations. A year ago, Fezzani said, a 10-MW power-purchase
agreement was considered large. "Now the average size is 25 to 50
MW. We are bidding for tenders that are orders of magnitude larger,
100 to 150 MW and even one that's 500 MW," he said.
BP Solar can manufacture and sell up to 320 MW of solar panels
this year, compared with 162 MW in sales in 2008 and 115 MW in
2007. Of the total 2009 sales, about 40% will be distributed to
residential customers and 60%, or 192 MW, will serve large
commercial and utility scale-projects, with commercial representing
less than half of that. The U.S. will probably take up half of the
192 MW, Fezzani said.
Hardy places his bets on SunPower and First Solar as the
best-positioned companies to win utility contracts: First Solar
because of its proprietary low-cost and reliable thin-film
manufacturing process, and SunPower due to a combination of its
high-efficiency cells and systems-level tracker technology. But
BP's Fezzani disagrees.
Despite the fact that BP's solar panels aren't the cheapest on
the market, "our reserach indicates that on a
cents-per-kilowatt-hour basis, over the lifetime of our offer, we
are the lowest cost," Fezzani said. That calculation stems from the
long-term performance of BP's panels that see very little
degradation according to recent tests done by the company.
But that's not all that BP is riding on to win utility projects,
Fezzani said. The company is establishing strong project-finance
agreements in order to calm the worry of many utilities that
contractors won't secure the necessary capital in today's difficult
environment to complete projects. BP is also keeping all of its
projects, instead of selling them after completion to third
parties, as in First Solar's business model.
"We've just gone out to tender to the banking institutions for
facilities that underpin our pipeline in the U.S.," said Fezzani.
"We've received a lot of positive interest from existing and new
[to the solar sector] institutions."
BP Solar is hoping that it will work out umbrella financing
arrangements in the U.S., similar to those it has established in
Europe. Banco Santader, for example, agreed to provide up to EUR160
million to BP a few years ago for a number of projects in
development in Spain. The companies established a standardized
process for getting financing for specific projects and thus sped
up the financing process.
"We are now negotiating a financing set up with a large German
insurance company who's going to provide financing for projects in
Italy," Fezzani said. "We'll have the same kind of arrangement
[there]."
There is also a high level of interest in the U.S., he said.
"Almost every day now I get a new set of investors who are
interested in participating in solar projects in utility or smaller
scale, as well as a number of foreign companies and funds who want
to participate in equity investments in the U.S. utility sector,"
said Fezzani.
BP's project pipeline isn't the only one fund-raising now.
SunPower has a 250 MW power-purchase agreement that it signed with
Pacific Gas & Electric Co. last year. That needs financing. "We
are talking to financiers," Bob Okunsiki, senior director at
SunPower, said at a recent Jefferies & Co. conference in
response to a question from Clean Technology Insight. "We'll start
closing financing in smaller chunks with a number of players," he
said.
SunPower is working to halve its panel costs by 2012. In order
to compete better and survive the economic downturn, BP has
announced its own cost-cutting measures. The company wants to
reduce costs at the solar unit by 25% by next year. BP is closing
module and cell processing facilities in Madrid and in the unit
headquarters of Frederick, Md., even as it outsources some
production to third parties, like cell manufacturer JA Solar in
China.
"We are qualifying other suppliers to do assembly for us,"
Fezzani said. "But for the 320 MW [of 2009 production], most of
that will be serviced internally trough existing arrangements."
Although Fezzani said he's looked at acquiring project
pipelines, the OptiSolar pipeline acquired by First Solar for $400
million in stock, was too expensive for BP, he said. "We are not
short of opportunities," he said of the available land and
development rights.
In Europe, the company has been acquiring government licenses,
whereby governments allocate a certain amount of licenses under
capped feed-in tariff rules, and is looking at a 100 MW license
package in southern Europe, Fezzani said.
(Dow Jones Clean Technology Insight covers news about public and
private clean-tech companies.)
-By Yuliya Chernova, Dow Jones Newsletters; 201-938-4281;
Yuliya.chernova @dowjones.com