First Solar In Project Talks With Utilities US: April 4, 2008 NEW YORK - First Solar Inc, maker of thin-film photovoltaic solar equipment, is in talks with US utilities to build renewable energy projects, Chairman and Chief Executive Michael Ahearn said Thursday. "We are having multiple discussions, and what we are trying to get to this year is some initial relationships and some pilot projects," Ahearn told Reuters in an interview. First Solar, whose stock jumped more than eight-fold in 2007, has been the darling of the renewable energy sector as it ramped up output, adding a new plant in Germany last year and launching construction of additional production facilities in Malaysia. Its efforts to seek contracts with US utilities could open a new market that so far has been dominated by solar thermal technology, which uses mirrors to focus the sun's rays to heat a liquid that drives a power turbine. Solar thermal systems are expected to drive large-scale power systems more cheaply than photovoltaic modules, such as those built by First Solar, which turn sunlight directly into electricity inside the solar cell. Last week, Edison International's Southern California Edison utility announced it planned to build the largest photovoltaic solar system in the United States, totaling 250 megawatts, or enough to supply 162,000 homes. First Solar, which is currently supplying solar panels for a 40-megawatt system in eastern Germany, is hoping to get a share of that potentially huge demand from utilities. Driving much of that demand are the new rules mandated by several states that utilities produce a growing portion of their electricity from renewable sources in order to reduce their emissions of carbon dioxide, which is blamed for contributing to global warming. "It's a multi-gigawatt-a-year type market, at least for the next five to seven years and (photovoltaics) won't serve all of that, but there's a big opportunity," Ahearn said. Last year, First Solar bought Turner Renewables in a bid to target the utility market and reduce the costs of putting its modules on the power grid to near the $3 per watt that Ahearn said was neccessary to be competitive. The cost of the fully installed German system is near $4 per watt, he said. Ahearn said he saw potential for First Solar to do more acquisitions such as the $34 million Turner buy, but would first concentrate on getting some large projects started, and then addressing the need to increase its staffing. "I think it's an '09 kind of event," he said. AMPLE RAW MATERIALS Ahearn also dismissed concerns the company could face difficulties securing supplies of the rare metal tellurium, a key component of its cells. "Are there issues there that limit the ultimate size of the company? We think the answer to that is no," he said. First Solar holds contracts to sell about 70 percent of its total production capacity, including the production lines under construction. "That leaves us about 30 percent to seed new markets," Ahearn said, which would give the company market information about new demand centres. It is that demand picture that will determine where the company locates future production sites. "I think we'll have a lot of discussions in the next year or two about different sites, but we're going to tie it to market opportunities," he said. "I think it's global, even the Middle East," he said, citing interest from the United Arab Emirates. Ahearn also he believed thin-film solar makers, although they currently make up about 10 percent of the photovoltaic market, have better chance of to reach parity in the coming years with poweer prices on the electricity grid than the silicon-reliant solar makers. Thin-film solar's production costs are generally lower than silicon-based cells, although they are less efficient at turning sunlight into electricity. Still, those economics have resulted in growing interest from many of the largest players in the silicon market, including Germany's Q-Cells, Sharp Solar and Kyocera. "At least on paper the end game (for thin film) is compelling. With crystalline silicon, what's the end game? It looks like you're going to still be subsidy dependent ... but we could be surprised," he said. (Additional reporting by Nichola Groom, editing by Richard Chang, Gary Hill) Story by Matt Daily REUTERS NEWS SERVICE