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US Rooftop Solar Boom Will Help SunPower

By: Trefis
Posted: 12/14/2012 10:24:00 AM
Referenced Stocks: FSLR;SPWR;TSL

According to a report by the Solar Energy Industries Association (SEIA), a solar industry trade group, photovoltaics installations in the United States grew by 44% in Q3 compared to last year driven by strong sales of rooftop systems as falling prices and attractive financing options are making solar power more accessible for customers. We believe that the strong momentum in the US rooftop solar space will be beneficial to SunPower ( SPWR ), one of the world's largest monocrystalline solar panel manufacturers.

Strong Rooftop Market Growth Will Benefit SunPower

The residential market witnessed a quarterly record high of 118 MW of solar panels being installed, growing 12% sequentially while commercial installations came in at 257 MW, displaying 24% sequential growth. However, prices continued to decline with average prices for residential system falling by about 5% sequentially to $5.21/watt while non-residential systems witnessed a decline of about 4% to $4.18/watt.

Although the residential solar market remains relatively small in comparison to the overall solar market, it is important for solar manufacturers since it exhibits the most consistent growth and provides more stable revenues compared to the utility and commercial segment which are driven by larger contracts. The residential space is also an important market for higher end solar products.

Residential and commercial installations account for more than half of SunPower's Trefis price. Residential and commercial installations are primarily done on rooftops, calling for panels that are compact, aesthetically pleasing and high in conversion efficiency. (Also See: A Comparison of Solar Technologies And What They Mean For Companies ) SunPower has typically enjoyed an advantage in the US rooftop space thanks to its high efficiency monocrystalline panels, some of which offer efficiencies of above 20%. These panels also offer higher durability and a longer life compared to competing thin film and monocrystalline panels.

Leasing Programs Show Promise

Leasing is expected to remain a strong growth driver in the residential solar market as it allows customers to enjoy the benefits of solar power with little or no initial outlays besides not having to bother about operation and maintenance issues. According to the SEIA report, third party leases accounted for more than half of solar installations in the states of Arizona, Colorado, California, and Massachusetts in Q3.  SunPower began its leasing program in 2011 and is already the market leader in this space with over 60,000 residential leases as of Q3. The firm has a wide dealer network in the US and also has the capacity to finance leases, having entered into an agreement with Credit Suisse and Citigroup to fund about $325 million towards its leasing program.

We have a $5.23 price estimate for SunPower , which is in-line with the firm's current market price.

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