First Solar, Inc.’s FSLR Luz del Norte power plant recently secured approval from Chile’s independent system operator (ISO), Coordinador Eléctrico Nacional, for delivering ancillary grid services on a commercial basis. Notably, the Luz del Norte project is the largest photovoltaic (PV) solar power plant in Latin America, powered by more than 1.7 million First Solar advanced thin film PV modules.

With the latest sanction, this 141 megawatt plant becomes the world’s first known utility-scale solar facility licensed to deliver grid services.

Significance of Luz del Norte

Until now, grid operators around the world had to rely exclusively on thermoelectric or hydroelectric power plants to respond to changes in load by balancing generation. Therefore, conventional power plants are being used to provide ancillary services for frequency and voltage regulation, while operating solar plants. This has been hampering the overall target of offering totally carbon-free energy.

Consequently, utility companies and ISOs around the world have been grappling with the challenge of decarbonizing their grids. Luz del Norte offers a combination of clean electricity and no-carbon grid services. We believe Luz del Norte will enable Chile in integrating higher levels of renewable energy in its grid.

First Solar’s Prospects in Chile

Chile’s energy transition is well underway, with strong penetration of wind and solar power. Notably, per GlobalData, non-hydro renewable capacity in Chile increased at a compound annual growth rate of 31.5% from 2000 to 2018 and is expected to reach 27.5GW by 2030 at a CAGR of 16%.

This comes in line with the nation’s aim to phase out coal-fired power plants by 2040 and to be carbon neutral by 2050. Considering this and the proven expertise of First Solar-designed power plant’s ability to provide grid services, we expect to witness more project wins by First Solar in this country.

Global Solar Boom: First Solar & Others

While Chile remains a lucrative market for solar players’ expansion, the global solar market as a whole has been rallying over the past decade. Per a report by Fortune Business Insights, global solar power market size is projected to reach 4766.8 MW in 2026 from 2019, exhibiting a CAGR of 30.7%.

To reap the benefits from this expanding global solar market, First Solar and other solar players are making every possible effort, which is expected to boost profits.

First Solar ended 2019 with net bookings of 6.1 gigawatts and current contracted backlog of 12.4 gigawatts. Given the growing demand for solar modules, First Solar expects to increase its nameplate Series 6 manufacturing capacity to 6 GW by 2020 and 8 GW by year-end 2021.

In 2019, JinkoSolar JKS reported record high solar module shipment of 14.3 GW. For 2020, it projects total solar module shipments of 18-20 GW, indicating an improvement of 35% year over year.

At the end of first-quarter 2020, Canadian Solar’s CSIQ utility-scale solar power plants in operation totaled 956 MWp, with an estimated resale value of $830 million. The company ended the first quarter with total project pipeline of 12 GWp. This reflects solid prospects for this stock through monetization of global solar project assets.

During 2019, ReneSola SOL connected about 60 MW of projects. It expects project pipeline in core markets to reach 1 GW by the end of 2020.

Price Performance & Zacks Rank

In a year’s time, shares of First Solar have gained 19% compared with the industry’s gain of 83.2%.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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