Scottsdale, Ariz.-based solar cell maker enjoys growing international demand

The Blade, Toledo, Ohio --Oct. 10

Oct. 10--After nearly two decades of research and development, millions in investment, and lackluster sales, the future of First Solar LLC suddenly looks so bright that its executives may have to wear shades.

First Solar, of Scottsdale, Ariz., which began its business life as Toledo-based Solar Cells Inc. and still produces its solar energy panels at a 75,000-square-foot plant in Perrysburg Township, is suddenly selling every panel it can make, and more.

By next year, the company, which has never been profitable in its 16 years of business, could end up in the black.

"It's been a long road and I don't think anybody's counting their chickens yet, but there's some pretty good tangibles for us," said Michael Ahearn, First Solar's president.

The firm breaks even financially making 150,000 to 200,000 solar panels a year, but it plans to make 300,000 next year. That would mean the first annual profit for the owners and investors, who experts estimate have sunk $80 million to $100 million into the company over the last five years.

"Our sales are such that we are having to push customers into next year," said Paula Vaughnn, a spokesman.

The company, whose sole production facility is in suburban Toledo, made about 30,000 panels last year and the same number the year before, the equivalent of 1.5 megawatts of power, the common measurement in the industry.

This year, it has produced more than 70,000 panels and expects to have made 100,000, about enough for 6 megawatts of power, by year's end.

Thanks to a $20 million investment last year, which included a $5 million loan from the state of Ohio, the company is upgrading its production process to make panels more efficiently and quickly.

A new assembly line, to be in full operation by year's end, will enable the plant to manufacture over 300,000 panels, or 20 to 25 megawatts of power, in 2005. The factory has 180 employees.

The new equipment requires less maintenance, so there's more production, the spokesman said.

First Solar uses thin-film technology, which involves thin coatings over a special glass panel. The coatings use fewer materials and are simpler to make and apply than some competitors' technologies. All of First Solar's panels are about 4 feet long by 2 feet wide and weigh about 25 pounds.

Solar power hasn't taken off in the United States because of its cost. It costs about 36 cents per kilowatt hour for homeowners and 20 to 26 cents for commercial and industrial customers, one industry expert said.

By comparison, the average price of electricity per kilowatt hour supplied by traditional utilities is about 8 cents.

First Solar, which is the No. 2 global sales leader in the technology, according to industry experts, can credit its current mushrooming success more to a recent demand for solar energy in Germany than to its so-called cheaper and better technology.

The German government almost a year ago enacted a law that creates huge incentives for individuals and businesses to invest in solar energy captured by panels.

That has generated a rush to obtain solar panels from everywhere and has created a potentially lucrative market for producers such as First Solar. The incentives run for 20 years.

Property owners there can sell power generated from solar back to the utilities for 49 cents a kilowatt hour, compared with the 15 cents it costs to purchase the power from the utilities, said Subhendu Guha, president of United Solar Ovionic, Inc., of Auburn Hills, Mich. The firm is the global sales leader in thin film technology and top competitor of First Solar.

"People are leasing roofs there for 20 years," he said. "I have investors who have spare land and they're finding that selling it for [solar panels] there is more profitable than building houses on it."

The prime market led First Solar to establish a sales office in Germany a year ago, Mr. Ahearn said, and those sales now account for half of the U.S. company's sales.

Spain and Italy recently passed laws similar to Germany's, and the company expects sales to grow further.

John Thornton, an engineer specializing in photovoltaics -- generating electricity from sunlight -- at the National Renewable Energy Laboratory in Golden, Colo., said the demand in Germany and elsewhere is benefitting U.S. companies.

"Nobody even quibbles about the price of [solar panels] in Germany," he said. Many U.S. companies that once struggled to sell their inventory annually now have a six-month backlog, he added.

Adding to the worldwide demand is Japan, which has offered incentives for years as the dominant country using the panels. Plus, incentives are being offered by western American states, particularly California.

One of First Solar's customers three years ago was the Sacramento Municipal Utility District, which bought about 110 kilowatts worth of power. The district in turn plans to market the power source to commercial customers as soon as it completes tests.

Spokesman Chris Capra said, "What we were impressed by with them is we can put them on commercial roofs without putting holes in the roof."

Paul Maycock, a solar energy consultant who heads PV Energy Systems, Inc., in Warrenton, Va., said the big market is Germany, and with the fickle weather of central Europe, First Solar's panels are a good bargain.

"In partly cloudy weather, such as you have in Europe, on an annual basis their panels test out at 7 or 8 percent more efficient" than competitor panels, he said.

That's a good selling point because Germans will buy almost 300 megawatts of solar power this year, he said.

"I think they [Solar Cells] can be very profitable in the market," Mr. Maycock said. "It looks at if finally they're really going to cash in."

Besides the profits, the demand by Germany is the boost the industry has long sought. Higher production levels of panels can lead to manufacturing breakthroughs, reduced costs, and improvements in economies of scale, experts said.

"The demand," Mr. Ahearn said, "allows you to accelerate your learning curve. The more volume you produce, the more your costs come down."

United Solar, which uses different chemicals than First Solar to make its 18-foot-long solar rolls rather than panels, shipped about 2.4 megawatts worth of equipment in the first three months of 2004 and hopes to hit about 8 megawatts by year's end.

The company projects making 30 megawatts of solar sheeting next year and is looking for a second plant, Mr. Guha said.

Similarly, First Solar is thinking about a second plant and probably will decide whether to proceed in six months, Mr. Ahearn said.

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