by Paula Mints
In August, CdTe manufacturer First Solar (FSLR) sold its North America O&M business to NovaSource Power. According to First Solar CEO Mark Widmar, the decision was due to contracting O&M margins and customer demands for more services. The company is also exploring jettisoning its EPC business. First Solar plans to focus on its module manufacturing business.
Comment: Apparently, First Solar finally realized that O&M is low margin and that the EPC business may also not have much margin cushion. Now the company can concentrate on another low margin sector of the solar manufacturing chain, manufacturing.
First Solar has occasionally proven prescient with its strategic moves. It saw the FiT-driven boom in Europe before its competitors and rode the silicon shortage to a leadership position. The company correctly read the tea leaves and exited the market in Europe before it crashed to concentrate on the US market. First Solar was an early pioneer in O&M.
And then there is all of that Walmart (WMT) money that funded First Solar right up to, and after, its IPO.
So, First Solar can be forgiven for ignoring O&M’s dangerous undervaluing and chronic low margins in the field. Or … maybe not. Underfunding O&M is rife in the solar industry. Most assume that O&M costs will decrease in time depressed along with the artificially low price of modules. O&M costs rise over time as systems age. Underfunded O&M is under-done O&M, and this is dangerous for the future of the industry.
Lesson: First Solar’s move is akin to the over-used excuse ‘I’m leaving to spend more time with my family.’ Lesson – read the tea leaves earlier.
Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry. You can find her on Twitter @PaulaMints1 and read her blog here.
This article was written for SPV Reaserch’s monthly newsletter, the Solar Flare, and is republished with permission.