shaped economic policies

First Solar: Opportunity Like Tesla | Valued Like Coal (Pt 5: Key Players)

Renewable Energy

(Image Sources: Google Images)


shaped economic policies

(Image Sources: Google Images)

At the forefront of it all is Jeremy Rifkin. His book, The 3rd Industrial Revolution,has influenced world leaders and shaped economic policies. Chinese Premier Li Keqiang believed in it so strongly that he incorporated it into the country’s 13th 5-year plan. When Angela Merkel became chancellor of Germany in 2005, she asked Rifkin how to grow the economy. His ideas would lay the blueprint for Germany’s plan to transition off of a fossil fuel powered economy. He’s advised three presidents of the powerful European Commission. In Kazakhstan, he inspired the theme of the 2017 World EXPO. In 1989, TIME Magazine called him “the most hated man in science.”

At a time when the general consensus of economists is that slow and stagnant economic growth is the new norm, Rifkin is a growth evangelist. He believes that we will see a convergence of rapid technology advances in communication, energy, and mobility that will lead to a 3rd Industrial Revolution. This includes driverless and electric cars, open data networks, internet of things, analytics, 5G, and solar energy. Rifkin argues the urgency of transitioning from an economy that is fossil fuel powered to one that is solar, battery, and electric due to the imminent dangers of global warming. Rifkin notes that because the relationship is exponential, minute changes in temperature can cause large changes in the Earth’s water cycles, which would drastically alter climates and ecosystems.

But the 3rd Industrial Revolution is far from a sequel to An Inconvenient Truth. Central to his ideas is aggregate efficiency, the ratio of the potential work versus the actual useful work embedded into a good or service. Rifkin notes that economists have struggled to explain growth and productivity. Surprisingly little of productivity can be explained by technology. Some have pointed out that the only clear link in economic growth is education. This is a fair point. Rifkin argues that it is instead aggregate efficiency. According to him, economics are governed by the same principles as physics, that all energy in the universe is constant. That no new energy is created, it only changes form in one direction. Rifkin’s core idea is that we extract materials (a form of energy in physics terms) and convert them through our “value chains” into goods and services. At every step we embed energy into the conversion, but some of this is lost in the process—the aggregate efficiency.

Excerpt from the National Bureau of Economic Research, 1998

Rifkin links aggregate efficiency and economic growth:

We started the 2nd Industrial Revolution in 1905 in the USA with 3% aggregate efficiency. At every conversion of nature’s resources through the value chain, we lost about 97%—it didn’t get into the product or service. By 1990, the US got up to about 14% aggregate efficiency. That was our ceiling —nothing’s changed since then. And I reported to the Chancellor that Germany got up to about 18.5% aggregate efficiency. That was their ceiling. Nothing’s changed. Anybody wanna guess which country led the world in aggregate efficiency? China? Japan? Japan! 20% aggregate efficiency, 1990s, reached its ceiling.

What I’m saying to the Chancellor is this: You can have market reforms, labor reforms, monetary reforms. You can create incentives for killer new products. You can try to create a million Steve Jobs. It won’t make a damn bit of difference. If your businesses are still plugged in to a 2nd Industrial Revolution infrastructure you can’t get above the ceiling of 20% aggregate efficiency anywhere in the world.

So, in that first day with the Chancellor we discussed a 3rd Industrial Revolution: a new convergence of communication, energy and transportation to manage power and move Germany. At the end of the day, in a private session, the Chancellor said, “Mr. Rifkin, we will have this 3rd Industrial Revolution here in Germany.”

– Jeremy Rifkin, The Third Industrial Revolution: A Radical New Sharing Economy, 2018


(Image Sources: Google Images)

Germany is the poster child for the sweeping changes in communication, mobility, and energy that are on the horizon. About 1.5M renewable energy installments, many of them small scale, have been made in the last 25 years, powering 27% of Germany’s electricity grid. The grid already features large battery systems to stabilize the grid.

Germany plans to produce 65% of it’s power from renewable energy by 2030 and 80% by 2050. This includes reducing total energy consumption by 50%, which is possible with electric vehicles. To make this possible, Germany is forecasted to spend €23.6B in “smart grid” infrastructure between 2016 and 2026.

Heavy subsidies have boosted Germany’s advancement in these new technologies, including over 1,000 energy co-ops. Combining wind, solar, and batteries one village in rural Germany reportedly produces 5x as much energy as it needs. Changes in Germany’s energy infrastructure happened so quickly that one of Germany’s “Big 4” utilities companies, E.ON, split the company into two pieces, a renewable energy focused business and a fossil fuel business.

While German PV manufacturers have faced waves of bankruptcies, Germany automakers boast the worlds best electric car technology. As previously discussed, Germany plans to ban sales of internal combustion vehicles in 2030. As a result, Mercedes plans to launch all-electric versions of each model by 2022. Audi plans 10 electric cars by 2025. Volkswagen hopes to build 3M electric cars annually by 2025.

In 2017, solar accounted for about 7% of Germany’s power. On the morning of January 1st, 2018, Germany made history when it was briefly powered by 100% renewable energy, due to a combination of low demand and strong winds.


shaped economic policies

(Image Sources: Google Images)

The rest of Europe has followed in Germany’s lead. The European Union has enacted a number of important policy initiatives to push for renewable energy. In 2009, the EU enacted a binding directive that created mandatory levels of renewable energy use with the overall level of a 20% minimum by 2020. The EU is close to this goal. In 2010, the EU enacted another directive mandating that all buildings be “nearly zero-energy” by 2020, all public buildings must be “NZEB’s” by the end of 2018. NZEB’s are buildings that are highly efficient and get most of what they need from renewables.

As previously discussed, several European countries have announced partial or total bans on gasoline and diesel vehicles. Diesel vehicles will be outright banned in Paris and Rome by 2025. Electric car sales have already taken off. In March 2018, 37% of new car sales in Norway were electric or hybrid cars (over 2/3s of this were Tesla’s and Nissan Leaf’s). The country has over 7,600 charging points.

Europe is deeply committed to climate change initiatives. The Paris Climate Agreement illustrates the increasing concerns about the climate. Upon signing the agreement, President Obama said “someday we may see this as the moment that we finally decided to save our planet.” Included in the agreement is the goal of $100B in annual contributions to a Green Climate Fund by 2020. The US had pledged $3B/year, but exited the agreement under President Trump’s directive. The EU has set the goal of increasing renewables to 27% by 2030. This translates to an additional 210,000TWh a year. Under this plan, some countries will have varying renewable energy mixes. Sweden will rely on renewables for 49% of its electricity consumption, a target that it has already met and exceeded at 53.8%.


(Image Sources: Google Images)

China is making huge investments to dominate what it views as a budding industrial revolution. China’s solar cell production capacity was over 60GW. This is higher than the cumulative amount installed capacity in the US. A policy change earlier in 2018 put the brakes on China’s solar program. This had a jarring effect on the solar industry, including solar stocks, but despite the fears of a slowdown China is still on track to add over 40GW of new capacity in 2018 according to analysis provided by Bloomberg BNEF.

Of the largest solar manufacturers, most of them are Chinese. This is partly due to predatory practices of China. China has been accused of dumping solar panels at low prices in foreign countries to wipe out competitors. Between 2010 and 2015 over 60 manufacturers went bankrupt. Verango and SunEdison went bankrupt in 2016. Sungevitiy, Suniva, ET Solar, and SolarWorld went bankrupt in 2017. Only a handful of these 70+ bankruptcies were Chinese firms. How is this possible? Lots of government funding. In Q3 2010, China approved a $739B “new energy plan” to “stimulate the development of selected energy industries” over 10 years. This is just one example among many.

Chinese panel dumping has been investigated extensively. The US began issuing anti-dumping and anti-subsidy tariffs in 2014, recently increasing them to 65% (anti-dumping) and 38% (countervailing) in 2015. President Trump tacked on an additional 35% import duty in 2017. The European Union imposed anti-dumping duties that averaged 47.6% in 2013, then later negotiated a quota system. In 2015 the EU found Chinese manufacturers guilty of cheating the system by making shipments appear that they were sent from Malaysia and Taiwan, and extended import duties to those countries. In 2017 the system was replaced with a “variable duty minimum import price.” Chinese manufacturers were investigated and/or penalized for panel dumping by Australia, Canada, and Turkey as well.

Perhaps even more outrageous than China’s plan to dominate what it views as the energy industry of tomorrow, is how China plans to supply it with the necessary raw materials. As previously discussed, rare metals with highly limited supplies, such as cobalt are needed to supply the battery production that is required to make these ambitions a reality. They are plentiful on the ocean floor, and China has made significant investments to figure out how to get them. Deep sea mining was named a strategic interest in the country’s economic plan. China plans to construct an underwater AI base. China has built a large on-shore headquarters to support its deep sea initiatives and is currently testing deep sea mining equipment.

shaped economic policies(Image Source: Chinese state run media, Google)

China has made incredible progress in the electric vehicle field as well. Motorcycles have already been banned in most large Chinese cities. In Shenzen, the city’s entire 16,359 bus fleet has been converted to all-electric.

shaped economic policies

China is issuing a credit and quota system for low/no emission vehicles in 2019. The government is targeting 7M electric vehicles by 2025. In 2016, electric vehicle sales grew 70%. Sales were up 85% YoY in March 2018. China is currently working on a ban for gasoline vehicles.

shaped economic policies

China is making huge advancements in batteries as well. China has 130GWh in battery plant capacity in its pipeline, compared to about 42GWh for the rest of the world combined (according to data provided by Bloomberg). 8 of the 10 largest battery factories are currently located in China. According the Wall Street Journal, China dominates the cobalt supply chain.

As this new industrial race heats up, the lengths China is willing to go to are clear. Companies who use capital markets to defraud foreign investors are given minimal, if any, punishment. Many US listed Chinese companies have filed financial statements that were simply false, while their domestic reporting showed the real numbers. China has sent thousands of spies to US universities. The problem is so widespread that FBI director Christopher Wray testified that almost every FBI field office in the country is dealing with it. China has also regularly engaged in corporate and industrial espionage targeting trade secrets and technology of US companies. The Chinese central bank operates two different currencies (the Renminbi and the Yuan) and strict capital controls that only allow their exchange rates to trade in a tight narrow band. This ensures that goods (and thus labor) will be cheaper on a purchasing power basis, though the discrepancy between the exchange rate and equilibrium value has decreased over time.


If we are indeed on the eve of a 3rd industrial revolution, these ocean floor minerals will be essential. Abundance of such could drastically lower the cost of energy storage. Deep sea mining has been described as a “gold rush.” But who has the right to mine these minerals? Where does this right come from and who decides?

shaped economic policies

(Image Sources: Google Images)

If you guessed a secretive assembly that meets behind closed doors in Jamaica, you guessed correctly. The International Seabed Authority (ISA) was formed by the UN in 1994. The right to decide where and by who minerals are explored and mined for outside maritime jurisdictions solely belongs to the ISA. Companies located in member states (some state-backed) may apply for exploration or mining rights, that are granted in contracts. About 28 contracts have been issued, of which cover 520,000 square miles.

These 30-year contracts are confidential, as is much of what happens in the incredibly opaque ISA. So opaque that in 2017 the ISA protected contractors who failed to comply with the environmental reporting requirements of their contracts by keeping their identities secret. One body of the ISA recommended that delegates (whose identities themselves are not easily accessible) approve a contract that would allow Poland to explore and potentially mine 3,900 square miles of hydrothermal vents that fall within what the UN’s Convention on Biodiversity has identified as an “ecologically or biologically significant marine area.”

What is clear in the ISA is China’s interest in deep sea mining. China is the only country to hold contracts in all 3 types of deep sea mining. China has one of the largest delegations and was one of the first countries to establish a permanent mission to the ISA in Kingston, Jamaica. Its deep sea operations are state owned or state backed. China has gone from the 12th to one of the “top 5 contributors.” China has publicly stated that it wants to begin mining in 2030, but the ISA plans to allow mining to begin in 2020. As one internal document put it:

Fifteen years ago, China was one of the last of the so-called pioneer investors in deep seabed mining.

How times have changed.

China has received the exclusive right to explore for minerals near US territories, including cobalt rich crusts between the Mariana and Marshall Islands.

(Image Sources: ISA)

Though Canadian based Nautilus Minerals (backed by Tariq Al Barwani of Oman) will probably be the first company to commercially mine for minerals, Japan is intent on being a major player as well. In 2017, state-backed JOGMEC successfully tested mining equipment that mined an amount of zinc estimated to be equivalent to Japan’s annual consumption at a depth of 1,600 meters (0.99 miles).

(Image Source: Yahoo Japan)

Deep sea telluride deposits could become a major boost for First Solar, as they are 50,000x more concentrated in deep sea deposits than in land ores. The US cannot apply for deep sea exploration or mining contracts as it is not a member of the ISA.


(Image Sources: First Solar)

The US spent decades pioneering the solar technology making today’s breakout of PV power possible. PV cells were invented and pioneered at Bell Labs. They were put to use by NASA to power spacecraft. Simply put, American innovation created the PV industry. The domestic PV industry has been robust. It swelled nearly 350% between 2012 and 2016. So how are the US manufacturers doing?

Well it turns out that with the exception of First Solar (which is differentiated with a low-cost technology), they are pretty much all bankrupt. Over the same period that the PV installation market grew 350%, 30 US manufacturers closed their doors. Meanwhile, imports from China increase 732% to $7B.

The potential for solar in the US is great. Coal power plants generate about 30% of electricity, but they are aging. About 75% of coal power plants are at least 30 years old, with an average lifespan of 40 years. Many are being replaced or retrofitted with natural gas, but as we know solar is poised to displace CCNG as the cheapest form of energy. Factor in political objectives and the potential becomes even clearer.

With only one remaining large scale solar manufacturer in solvency, the choice is clear. If we want to buy panels made in America by an American company, First Solar is the only option. Any research efforts that focus on improving c-Si instead of CdTe or any one of the emerging technologies, benefits Chinese companies that are funded and subsidized by China’s government. So far this hasn’t been an issue; Chinese companies have enjoyed access to US subsidies, tax-payer funded incentives, even found their panels used in US military bases. But things are changing. If government funded research ever leads to a breakthrough and a PV start-up emerges based on a new technology, First Solar would be well positioned to make an acquisition.

shaped economic policies


(Image Sources: Google Images)

The National Renewable Energy Resource Laboratory (NREL) is a government owned facility funded by the DoE. The DoE will spend $69.7M on solar research in 2018, about $55M of this will support research at the NREL. The NREL has been key in achieving DoE’s SunShot initiative, which sought to decrease the cost of solar. This was the Obama Administration’s showpiece for solar innovation. Its goals were met and exceeded. In 2016, the SunShot initiative was updated with the new goal of “cutting the cost of solar electricity by an additional 50% between 2020 and 2030.” This would make PV+storage the cheapest from of energy if battery costs continue to decline.

First Solar’s history is closely tied to the NREL. First Solar’s CdTe thin film technology was developed in the 1990s by a group of scientists working in partnership with the NREL. The NREL continued to provide technical assistance as First Solar began and ramped up production. Today, the NREL provides testing and research services in partnership with First Solar, that includes both scientific, market, and integration aspects of solar.

Because First Solar is the only remaining major PV manufacturer that is a US company (SunPower is a minor player and is owned by Total S.A.), any research efforts designed to achieve SunShot’s 2030 goals will almost entirely benefit Chinese companies unless they are related to CdTe. Furthermore, if Washington wakes up one day and realizes that America is being left in the dust of an industrial revolution, federal funding for initiatives in new energy would almost certainly benefit First Solar, either directly or indirectly.

We are behind. It’s the early innovation cycle of 5G.

We are behind China.

This is not something we can allow.

–T-Mobile CEO John Legere on T Mobile & Sprint Merger

In 2014 we hit a new peak of $114 or $115 a barrel. Purchasing power slowed down again. This is a convulsion of growth-shutdown, growth-shutdown. And the only reason oil went down in the last few years to $30 a barrel is now the fossil fuel industry is fighting among themselves in the sunset. OPEC said, “We’re gonna keep the oil spigot open.” “We’re gonna flood the world with oil.” “And that’s gonna take the price down the $30 a barrel and wipe out our new competitors, the more exotic fossil fuels: shale gas in the US, tar sands in Canada.”

Guess what? They wiped them out —only took a year and a half. Bankruptcies across the USA in the shale gas industry. And now tar sands in Canada. The pipeline’s not happening. And do you hear anybody talking about energy independent right now? It’s over! And, as soon as the bankruptcies complete themselves, the oil prices are now starting to go back up. But now we have failed states where there’s oil production. We have failed States. So this is a volatile, convulsive sunset over the next 40 to 50 years —an unstable world.

– Jeremy Rifkin


(Image Sources: Google Images)

In 2015 California built the worlds largest solar farm at 579MW. In 2018, India is near completing a 2,000MW (2GW) installation capable of powering 700,000 households. The potential for First Solar in India is huge. Though 2018 may prove to be a turning point, India has had historically rocky relations with China, the largest PV panel producer. India not only has a high solar resource, but First Solar’s panels have a tremendous advantage in the hot and humid climate. This is not just hypothetical; First Solar has clearly demonstrated this in the field:

(Image Source: First Solar)

Though the historical data is limited, demand for electricity is booming. India’s economy is growing above 7%. Total installed capacity grew 10.3% in 2017. Yet only 83% of the population had access to electricity. India is reliant on coal (77%) but focused on renewables. India’s 2018 Electricity Plan announced that the country will not need additional coal power until 2027. India has set the ambitious goal of providing 100% coverage by March 2019.

India will easily achieve its plan to have 100GW of solar capacity by 2022, almost 30x what it had in 2017 (1% of total production). To meet this goal, India has approved 14 installations that will each be larger than the 579MW installation in California, formerly the world record. India plans to completely power an island with 50,000 inhabitants with solar by 2019.

Currently, over 80% of India’s solar modules come from China, Taiwan, and Malaysia. But First Solar was quick to jump on the opportunity in India. In 2012, India completed a study on the safety of CdTe. By early 2016, First Solar had shipped 1GW worth of solar panels. By 2017, it was 1.8GW cumulatively. First Solar has “strong module presence” in India, and in 2017 India and Turkey accounted for 9% sales in 2017 (this is how it is broken out in the 10K), but this has a strong potential for growth if India intends to reach its goal of 100GW by 2022. This does not include an additional 5 projects that First Solar was constructing or had constructed and were sold in 2017.


(Image Sources: Google Images)

Australia is another key market for First Solar. First Solar’s CdTe technology has the same benefits in India that it has in Australia. With electricity costs “skyrocketing”, 28 solar farms are currently under construction in Australia. In February 2018, reports circulated that Australia’s solar capacity could double this year.

In 2017, Tesla constructed a back-up system in New South Whales that is the world’s largest battery. South Australia relies heavily on solar and wind, is in “an energy crisis” that led to a blackout that affected 1.7M people in 2016. Tesla’s 129MWh battery installation was completed in less than 100 days. The project has been highly successful. It charges itself for free using excess power from the grid; at one point it was paid $790/MWh to take excess capacity—making $1M in just a few days. It has saved millions of dollars in market charges by smoothing out supply and demand, in a single day. When a coal power plant crashed, it responded in milliseconds. All of this happened in the first few weeks of operation. Tesla has already been contracted to build a second battery.

First Solar recently completed construction of a 124MW plant, the largest in Australia. It will be used to power a zinc refinery operation. First Solar expects to both grow its contract pipeline and increase module sales to 3rd parties in 2018. Australia’s national security agency, ASIO, recently listed China as an “extreme threat.” Australia has named Russia and china greater threats to national security than ISIS; an Australian newspaper referred to it as “a watershed moment”. The Australian government has tightened foreign investment in Australia as a result. These developments could help boost First Solar’s market share.

(Image Source: First Solar)


(Image Sources: Google Images)

In October 2017, Saudi Arabia stunned the PV industry when it announced it had received unsubsidized bids below $0.02/KWh for 300MW of a 9.5GW project. When it announced plans for a 200GW project in 2018, it stunned the world.

The project will be 100x larger than the current record holder in India. Once fully completed in 2030, it will be 50% of what solar cumulatively generated globally in 2017. Its capacity will be 4x what Saudi Arabia has today, and exceeds current projections for Saudi Arabian consumption in 2030 by about 25%. It will be funded by Saudi Arabia’s $100B Vision Fund, in partnership with Japan’s SoftBank. If First Solar was handed this contract today, it would take the company 30 years running at 100% capacity given its current plans for 6.6GW in manufacturing capacity. It will cost an estimated $200B, and will eventually rely on local production of batteries. It will have “an unprecedented network of batteries.”

Cheerleading this project is Saudi Arabia’s famed (and now perhaps, infamous) deputy prime minister and crown prince, Mohammad Bin Salman. At just 32 years old, he has been tasked with moving the Saudi Arabian economy past the age of oil. The project was reported to have been shelved, but this was later dismissed.

Given First Solar’s position as the only major US manufacturer, the US diplomatic and economic ties to Saudi Arabia, and the advantage of First Solar’s technology in Saudi Arabia’s desert climate, First Solar is well positioned to supply panels for the Saudi project. This could also help the Saudis court favor in the US in spite of the recent controversy over the killing of journalist Jamal Khashoggi.

First Solar established a presence in the middle east in 2013, opening an office in Dubai, and helped construct a solar powered water extraction and distribution system in Saudi Arabia (.648MW).

(Image Source: First Solar)

Disclosure: I am/we are long FLSR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Related Posts

Average Rating
0 out of 5 stars. 0 votes.
My Rating: