What makes a solar star? Well, endorsement by California Governor Arnold Schwarzenegger (R) and a $146-million IPO in 2005 certainly don’t hurt.

SunPower, which followed its public market debut with a $198-million secondary offering, is in the alternative energy limelight thanks to its highly efficient solar cell design. Unlike other cells, SunPower’s hide the metal contacts that collect sunlight in the bottom of the cell to avoid reflecting the energy away. As a result, the cells convert more of the sunlight into electrics and sport a uniformly black appearance, giving them an aesthetic advantage.

Solar trade publication Photon International named SunPower’s cells the world’s most efficient, with 21 percent of sunlight getting converted into energy per cell. That compares with an industry average of about 15 percent.

SunPower is more than just hype. In the second quarter of 2006, its profit grew to $5.4 million from $300,000 in the first quarter. Meanwhile, second-quarter revenue grew 30 percent from the first quarter, reaching $54.7 million.

Partly owned by Cypress Semiconductor, SunPower is applying cost-cutting technologies used by the semiconductor industry in the production of its solar cells. CEO Thomas Werner says he expects to reach “price parity,” meaning a price per watt comparable to that of fossil fuels, in five to 10 years.

Q: How did you manage to get a plug from Arnold Schwarzenegger just before your IPO in November 2005?

A: It really was almost random from our perspective. We didn’t script it. Julie [Blunden, SunPower’s vice president of external affairs] has been working with Sacramento quite a bit, so it was just via a long-term relationship with the governor’s office. Julie is in Sacramento probably 20 percent of her time.

Q: Some in the industry say SunPower has secure supplies of silicon, a significant advantage given the polysilicon shortage. But others say you still don’t have enough. What is your silicon situation?

A: Both are correct. If we could have more silicon, we could probably produce more—but not much more. While you could say we are silicon-constrained, we are still a relatively up-and-coming company and I think we have done a credible job aligning with suppliers. We’ve qualified over a dozen suppliers, and while I can’t give you the list, I can tell you it would look very similar to where the big guys buy.

Q: As a relatively small, ‘up and coming’ company, are you at a disadvantage when negotiating for silicon?

A: The bigger players had an advantage because they were negotiating sooner, plus they had incumbency status. They could say, ‘We’ve been good customers,’ if they were. But I suspect that’s why we’re getting some silicon, because some weren’t good customers.

Q: You said being an American company has helped you get attention. But the U.S. isn’t the top market for solar. Are you at a disadvantage in tapping into the biggest markets like Germany and Japan?

A: The Japanese market is a little difficult. Japanese suppliers clearly dominate their home market. But Germany and the E.U. as a whole are very open markets. Also, Korea and most other countries.

We do have an incumbency advantage in California, a first-mover advantage, so I think it balances out. California is a significant market and will be a top-three market eventually. [It’s about the fifth-largest market now.]

Contact the writer:JKho@RedHerring.com

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