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Solar panel efficiency matters more than you might think in the solar industry. Sure, costs are important, and it's costs that most people talk about when comparing solar companies. But if you could get 10%, 20%, or even 100% more power out of a solar panel during its lifetime, wouldn't that be valuable?
Alas, it's not as easy to compare efficiency of solar panels as it is costs, but efficiency has proven to be a big differentiator in the industry. And that's why SunPower's recent announcement that it's made a 24.1% efficient panel, well ahead of the 15%-18% efficiency averages from competitors, is such a big deal.
How higher efficiency lowers costs
To show how a more efficient solar panel can lead to lower costs, even if it's more expensive initially, I've created an example below. It's based on SolarCity's reportedcost structure and an average commodity solar panel cost of $0.50 per watt. I then compare it to a 24% efficient SunPower system with the same non-panel costs (inverter, installers, permits), and double the cost of $1.00 per watt for the panel itself. This shows how panel costs and efficiency interact in a way you might not expect.
Calculations by the author.
You can see that a SunPower system would cost less over time. In fact, it would cost a lot less.
These numbers also don't account for the fact that SunPower solar panels are proven to degrade much more slowly than commodity panels, meaning power generation 10-20 years after the panels are installed could be close to double that from the commodity product. So, the advantages for SunPower in increased efficiency are huge.
The impact on the bottom line
Where this starts to show up on the income statement is in SunPower's residential solar numbers. In the first quarter of 2016, the company generated $151.8 million in residential revenue and had a 22.2% gross margin on those sales. This was on just 71 MW of solar panels; many of these are sold to developers, so SunPower only gets revenue from selling the panels.
Higher efficiency may also be a cause for SunPower saying that it gained market share in the first quarter in residential solar and it expects to gain more throughout the year. SolarCity, on the other hand, has seen growth slow, and is losing market share; this is one reason it's trying to build a high-efficiency solar-panel plant in New York.
Efficiency matters in solar energy, because it leverages every other expense a project has. More efficient panels mean lower labor costs, less wiring, and less land per watt installed. That's why SunPower's new efficiency record is a big deal, and why it'll keep the company one step ahead of competitors.
The article Why SunPower's Efficiency Record Is a Big Deal originally appeared on Fool.com.
Travis Hoium owns shares of SunPower. The Motley Fool owns shares of and recommends SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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