BOSTON/NEW YORK General Electric Co made a big push in solar power, saying it will invest $600 million to build a new factory as it pursues what it thinks could be an up to $3 billion business by 2015.
The largest U.S. conglomerate, which over the last decade has made itself a leader in renewable energy, said it has designed a thin-film solar panel that converts sunlight to electricity more efficiently than rival products today.
The move is likely to ramp up already intense price competition, particularly for First Solar Inc, which uses the same thin-film technology as GE has focused on.
"Over time, there is going to be a lot of pricing pressure and the margins probably will not be what they are today," said John Segrich, portfolio manager of the Gabelli SRI Green Fund. "Solar will be a very big market on a megawatt basis, but it's a question of at what price?"
GE said it is focused on driving prices down.
"The biggest challenge today for the mainstream adoption of solar is cost, and the way you move cost is efficiency," said Victor Abate, vice president of GE's renewable energy unit. "We see ourselves continuing to push that.
GE, also a leading maker of wind- and natural gas-powered electric turbines, aims to open by 2013 a U.S. factory in a yet-to-be-chosen location that will employ 400 and produce enough solar panels each year to meet the needs of 80,000 homes.
The company also landed more than 100 megawatts of orders for solar thin-film products, which Abate said would generate "hundreds" of millions of dollars in revenue.
Under Chief Executive Jeff Immelt, GE has been aggressively building out its renewable energy portfolio, starting with the wind turbine business, which it entered in 2002 and now generates about $6 billion in annual sales.
The company has been exploring solar since 2007 and Immelt told investors in December that he believed it could be a $2 billion to $3 billion business for GE by 2015.
Renewables are just a slice of GE's $37.5 billion energy unit, which also makes coal-burning power plants and nuclear reactors, including the design used at Japan's quake-hit Fukushima power plant that is the site of the world's worst nuclear crisis since Chernobyl.
SOLAR GROWTH COULD STALL
Global demand for solar panels has grown more than 30 percent annually in recent years, topping 15 gigawatts in 2010 largely due to a boom in business in Germany.
But key European markets are trimming subsidies for solar, leading some industry experts to worry that growth could stall just as manufacturers ramp up their capacity.
That could lead to a glut in supplies, pressuring prices and squeezing profit margins for key companies such as First Solar, Germany's SolarWorld AG, China's JA Solar Holding and Suntech Power Holdings.
But the modest size of GE's initial move -- a 400 megawatt plant would meet just 3 percent of current global demand of 15 gigawatts per year -- may limit the effect GE has on its established rivals.
"They're going to have a lot of catch-up to do here ... First Solar's output will be somewhere around 2-1/2 gigawatts by the end of this year," said Adam Krop, solar analyst with Ardour Capital Investments in New York. "In terms of scale, First Solar is still well ahead of them, but obviously GE has very deep pockets."
FOCUS ON THIN FILMS
GE said it bought the remaining stake in PrimeStar solar, in which it first took a stake in 2008.
The Fairfield, Connecticut-based company is targeting large-scale utility solar projects, and plans to highlight its production of equipment to connect solar panels to the grid.
GE shares were down 1.3 percent at $20.28 on the New York Stock Exchange. Shares of First Solar were down 2 percent at $147.57, JA Solar was off 2.6 percent at $6.76 and Suntech was down 1.3 percent at $9.49 on the Nasdaq.
(Reporting by Scott Malone in Boston and Matt Daily in New York, additional reporting by Sakthi Prasad and Krishna N Das in Bangalore; Editing by Maureen Bavdek and Gunna Dickson)