Transcription
Annual Report 2016
Changing the Way Our World is PoweredWith more than 30 years of proven experience,SunPower is a global leader in solar innovation andsustainability. Our unique approach emphasizesthe seamless integration of advanced SunPowertechnologies, delivering The Power of OneTMcomplete solar solutions and lasting customervalue. SunPower delivers outstanding serviceand impressive electricity cost savings forresidential, commercial andpower plant customers.At SunPower, we arepassionately committedto changing the way ourworld is powered. And aswe continue shaping thefuture of Smart Energy, weare guided by our legacyof innovation, optimism,perseverance and integrity.Headquartered in Silicon Valley,SunPower has about 7,000 dedicated,customer-focused employees in Africa, Asia,Australia, Europe, North America and SouthAmerica. Since 2011, we’ve been majority-ownedby Total, the fourth largest* publicly-listed energycompany in the world.For more information, visit sunpower.com.*Based on market capitalization in U.S. dollars at December 31, 2016.
Dear Shareholders,We just went through another monumental year for solar with residential, commercial and power plantcustomers around the globe favoring economic, clean and reliable solar. For those of you following us, youprobably know the trends we experienced in 2016: Solar in the U.S. had its biggest year to date, nearly doubling its annual record with 14,626 megawatts(MWs) installed, according to GTM Research and the Solar Energy Industries Association (SEIA); Close to 260,000 people were employed in the U.S. solar industry, twice as many as those in thecountry’s coal industry; and Solar and wind are now the same price or cheaper than new fossil fuel capacity in more than 30countries according to the World Economic Forum.We are witnessing a worldwide shift to renewable energy. The long-term growth prospects are compelling,and as a solar industry veteran, I expect solar energy to become the largest contributor to incrementalelectricity generation globally.Despite the dramatic shift to solar energy, the industry is currently going through another transitionperiod as it faced a number of challenges last year. Historically, energy policy has been a key driverfor us, with policy having a significant impact on the sector. For example, cost reductions drove solargeneration towards parity with traditional generation in many markets. As a result, a number ofgovernments either reduced solar incentives, or in some cases, eliminated them, which pressured systempricing. We also saw demand disruption in the U.S. during the last half of the year due to the unexpectedextension of the federal solar Investment Tax Credit in late 2015. Changes to the Feed-in-Tariff structure inChina caused a global oversupply environment, which further depressed pricing. Challenges aside, weexpect that the solar industry’s track record of technical innovation and cost reduction will drivelong-term demand dynamics.We know from other industries that companies win in transition. Our answer this past year was tostrategically position ourselves, to innovate relentlessly and focus on our customers – all whilereducing our breakeven point. Already at the start of 2017, we’re continuing in a direction to provethe benefits of our differentiated, industry-leading technology with the ability to deploy it across adiversified portfolio of markets, channels and applications. This will allow us to profitably capitalize on theworld’s increasing demand for solar power.Leading the Market in EfficiencyAt our core, we are a technology company with more than 750 industry patents. For decades, we’ve been aworld leader in conversion efficiency, or converting sunlight into energy. Utilizing our advantage in cell andpanel technology, we’re helping to usher in a new era of solar generation. Our long-term investments inResearch and Development (R&D) are paying off as our R&D and Operations teams continue to beat theirown bar for cell and panel efficiency. Last year, we extended our world record for solar cell efficiency to25.2 percent. History shows that we know how to immediately transition new technology to themanufacturing environment – as we did when we recently achieved average cell efficiency of 25 percent atour next generation Fab 4 manufacturing facility. One of the reasons customers prefer SunPower is
because our proprietary interdigitated back contact (IBC) cell technology offers the industry’s highest systemperformance with unmatched quality and reliability.To help make sure we’re constantly innovating, we’ve made some strategic investments for the future.During 2016, we built out an impressive state-of-the-art solar cell pilot line at our Silicon Valleyheadquarters. Soon to be completed, this facility will allow us to test new equipment and processes, whileproducing new generation products at pilot scale. It represents the work of some of our greatest minds andresults from hundreds of thousands of hours of innovative R&D. We’re also focusing on R&D in the field atour SunPower R&D Ranch in Davis, Calif. There, we’re testing new technologies that will help drive continuedinnovation in the field for our customers and the industry overall. Last year’s launch of our next generationSunPower Oasis for power plants, which uses drones and robots to optimize energy production, is anexample of what’s to come.Streamlining Manufacturing, Containing CostsWe ramped up and hit our stride at Fab 4 in the Philippines, shipping our world-leading 22 percent efficientX-Series solar panels. We also ramped up our new Performance Series (P-Series) panel manufacturing inMexicali. Taking a long view on capacity, we acquired AUO’s portion of our Malaysia joint venture. This willallow us to more quickly upgrade our technology and maximize cost reductions. It also gives us someflexibility for future expansion as market conditions warrant. Despite these accomplishments, we decided toreduce our capacity of legacy products. We made prudent decisions to consolidate our module assemblycapacity to Mexico, closing and relocating our Philippines modco facilities in order to be closer to our largestmarkets, the U.S. and Latin America.In 2016, we also enhanced our product offerings for a new customer base, commercializing our P-Seriestechnology. A result from our strategic 2015 Cogenra acquisition, our P-Series panels provide slightly higherperformance and much better reliability compared with conventional solar panels, but at a cost that is verycompetitive for those markets that are more price sensitive.A critical component of our growth strategy, we’re initially targeting P-Series panels for use at power plantinstallations in non-Organization for Economic Cooperation and Development (OECD) countries. Thisincludes emerging solar markets where financing costs are typically much higher than in developed solarmarkets. The capital expenditures required to scale this new technology are significantly lower comparedwith that of our IBC products, so we can now flex our panel capacity and downstream footprint to matchindustry conditions with modest investment. We currently have 400 MWs of P-Series panel capacityinstalled in Mexico.We are seeing good early demand for our P-Series product, including a 125-MW supply contract with amajor U.S. Independent Power Producer, a one-MW scale solar power plant for Tucson Electric Power andnumerous Commercial projects, including 607 kWs for Methods Machine Tools’ 60,000 square foot roof inSudbury, Mass. The cost and performance of our P-Series technology is meeting or exceeding ourprojections, and we are enthusiastic about the expanded sales prospects that this new technology willenable, in parallel with our established IBC products.
Defining Innovation with Integrated Technology and SolutionsIn addition to our world leading high-efficiency modules, we lead the industry with complete solar solutions.This past year we added the SunPower Equinox platform, a complete residential equipment solution thatcombines our modules with micro-inverters, a unique mounting system, and a world-class monitoring hub.More than five years ago, we pioneered the standardized systems approach initially in our Power Plantbusiness when we introduced the SunPower Oasis power block. Since then, we've applied the same designphilosophy and planning discipline to our Commercial and Residential businesses with our launches of theSunPower Helix and SunPower Equinox systems. These complete solar solution platforms reduce coststhrough scale and standardization, enable more efficient installation and operation, and provide enhancedcustomer benefit by virtue of seamless interoperability between components. We refer to this as The Powerof OneTM approach. We believe that this type of standardized solution will become increasingly important tofacilitate the continuing mainstream adoption of solar power.There is no better way to share The Power of One approach than to explain our work for Stanford University,where we’re delivering more than 50 percent of the campus’ energy needs using the full breadth ofSunPower capability. One of the world's leading teaching and research universities, and where many of ouremployees were educated, Stanford boasts off-site solar through a 67-MW Oasis power plant in SouthernCalifornia and 6 MWs of solar on buildings across the campus, including a Helix rooftop system, a long-spanparking system, and a SunPower residential system on the historical residence of the Stanford Provost.During the past year, we launched a new solar solutions business to capitalize on the market power of ourcomplete solutions approach. The mandate of this group is to expand SunPower’s market presence inemerging global power plant markets through the sale of complete equipment packages based on our Oasispower block system and P-Series panel technology. We plan to greatly expand this approach in 2017 andare encouraged by early results.Providing Residential Customers with Ultimate Performance and Smart EnergyLaunched in 2016 and unique in the market, the SunPower Equinox system is our complete residentialsystem solution. Key elements include SunPower's industry-leading, high-efficiency 22 percent efficient XSeries panels, and proprietary microinverters that are factory integrated with every panel, eliminating fieldassembly and allowing each panel to operate at peak performance. Our low-profile, all-black, pre-assembledInvisiMount mounting system seamlessly hides the racking system beneath the panels, and our proprietarygateway and EnergyLink monitoring platform track energy production and consumption in real time.Also, customers now have the ability to manage their consumption patterns to maximize systemperformance, with access to data through an intuitive user interface on multiple device platforms. This iswhat we call Smart Energy.Combining our integrated SunPower Equinox solution with our best-in-class dealer partner network, we sawindustry-leading Net Promoter Scores. With customer-centricity at the heart of what we do, we focusedintensely on delivering an excellent end-to-end solution and customer experience. We saw solid demand,
particularly in the U.S. where solar power is competitive with retail electricity in many states, and stable,profitable growth in Europe and Japan.Broadening our reach, we signed an exclusive arrangement with AT&T to co-market our high-efficiency solarsolutions to their customers. These solutions feature SunPower's plug-and-play SunPower Equinox system,which includes 24 x 7 high-reliability connectivity enabled by AT&T's Internet of Things technology. We alsoexpanded our partnership with Con Edison in New York to include energy storage as we look to furtherempower our customers to control and manage their energy footprint.SunPower is also investing in a digital strategy to revolutionize the way residential customers access oursolar solutions. As solar mainstreams, the way customers use solar energy will evolve, and we will be aleader driving this change.Giving Commercial Customers Faster Installations and Impressive ReturnsWe were proud to receive acknowledgements this past year for our Helix system, which set a record andwon an award. Introduced in 2015, the world’s first fully-integrated commercial solar solution was designedfor businesses and public agencies to make the complex simple. We showed that simple also meantefficient, when our team set a record on installing our Helix product at a rate 2.5 times faster thanconventional systems – as validated by an independent third-party.Already, after its first year, the Helix system was named a winner in The Architect’s Newspaper’s 2016 Best ofProducts Awards. It won in the category of HVAC and Smart Building Systems where a jury of designprofessionals and editors selected the Helix system because of its innovation, aesthetics, performance andvalue.We expect our Helix platform to help us continue to grow share in the commercial market driven byexcellent customer acceptance of this solution. We competed and booked projects for the public and privatesectors, including for well-known brands. For retailer Macy’s, we installed our Helix product line, rooftop,carport and ground-based systems, enabling flexibility to design around their preferences and site specifics.Other projects secured included 8 MWs for Toyota, 11 MWs for the County of Santa Clara, 9.5 MWs for theCalifornia Department of Water Resources, 10 MWs for the U.S. Army, 28 MWs for Vandenberg Air ForceBase, 4 MWs for Cal State Fullerton and our 102-MW Henrietta project. Additionally, we secured a 15-MWcontract in Japan.Refocusing the Power Plants Segment and Reinventing with Drones, Robots and ROIDuring the past year, we scaled back our power plants approach and realigned our development businessto focus on core markets. It was an example of how we dealt with solar industry headwinds. We faced anumber of external factors, including shifts in demand signings, an increase in investor Internal Rate ofReturn hurdle rates, as well as an increasingly competitive global Power Purchase Agreement priceenvironment.Despite these headwinds, our team delivered SunPower Oasis 3.0 late last year for utility scale solar. Itsignificantly lowers cost, while improving overall system performance. We believe this solution will help us
sustain our competitive leadership in our key markets. Oasis 3.0 is the core offering in our new solarsolutions global equipment business.The SunPower Oasis power plant allows customers to generate more value from a broader selection ofpotential sites. From project development through operations and maintenance (O&M), Oasis optimizesreturn on investment with features that include the SunPower Oasis GEO system. This groundbreakingsystem optimizes site design and improves site assessment and design speed by 90 percent versusconventional methods. It automates project design using drones and proprietary software and is designedfor use with both SunPower’s high efficiency E-Series panels as well as SunPower’s P-Series panels.We continue to innovate in O&M, with our proprietary robotic panel cleaning technology which uses 75percent less water than manual methods, operates at night and offers other increased efficiencies, as wellas cleaning speed. Additionally, we can provide large scale solar customers with 24/7/365 site monitoringand control through our Remote Operations and Control Center (ROCC) in Austin, Texas, optimizing energyproduction and providing better energy management. By the end of last year, the ROCC was monitoring andcontrolling more than 1.8 gigawatts (GWs) of solar power plants around the world.Currently, we have more than 700 MWs of third-generation Oasis power plants awarded, and we’recurrently constructing plants in the U.S., Mexico and China through our joint venture utilizing our Oasis 3.0design.In Chile, we began construction of a new 100-MW project, which will make Metro of Santiago the first publictransportation system in the world to run mostly on solar. Altogether, our Latin America pipeline exceeds2.5 GWs, and together with our U.S. pipeline, gives SunPower a very strong position in this segmentthroughout the Americas.In Japan, we finished the construction of our 27-MW Nanao project, with full project completion scheduledby the end of the year. We also secured a 47-MWs panel supply agreement for a power plant project that apartner is currently developing. While Japan remains primarily a Distributed Generation market forSunPower, our unique technology allows us to opportunistically address the power plant business there aswell.In China, we continued progress with our three joint ventures and continue to pursue both manufacturingand project development activities there. With more than 320 MWs deployed to date, our joint ventureecosystem is gradually building a solid footprint in the world’s largest solar market. Already this year, we’vetaken steps to expand our relationships in China to leverage the low-cost China supply chain for our PSeries technology.Additional international success includes completing our 86-MW Prieska project in South Africa, as well asbeing awarded 39 MWs for projects on several French islands. These systems include the use of batterystorage to optimize late afternoon energy delivery during periods of highest value.
Leveraging 8point3 Energy PartnersWe also saw strong 2016 performance from 8point3 Energy Partners (8point3), our joint YieldCo with FirstSolar. 8point3 marked its first full year of operations as it acquired more than 400 MWs of projects,increased its annual distribution by 15 percent and successfully raised more than 100 million frominvestors. In 2017, we’ll continue to support the growth of 8point3 as both a buyer of our high-qualityprojects, as well as a strategic investment asset.Benefitting From Our Five-Year Strong Relationship with TotalThere is no doubt that the future will be powered in large part by renewable sources, but we must identifyways in which clean and traditional sources can evolve together. The world’s largest energy companies aretaking steps to diversify their portfolios, but companies that embrace integrated traditional renewablemodels will be the ones that are well positioned in a clean energy economy. Our business model andrelationship with Total are living proof that renewable and traditional energy models can not only co-exist,but thrive alongside one another. We need both in this 21st century energy economy.Since Total’s transformational majority investment in 2011, we have continued to work together to bringabout our joint vision of the future of energy. Total remains very supportive of SunPower as reflected bythe expansion of our strategic cooperation in a number of areas during 2016 – all in line with Total’s publiccommitment to better energy. For example, we signed a four-year, up to 200-MW panel supply agreementto solarize various Total facilities around the world. Additionally, we’re working to expand their global powerplant partnership to include potential Total project ownership opportunities in such markets as Japan, Africaand France.Changing the Way Our World is PoweredAs we go about our daily jobs, it is sometimes important to take a step back and reflect on what we’reaccomplishing and to assess how our work is affecting the planet for future generations. Every day,SunPower is manufacturing roughly one million cells and 10,000 modules. What we produce in one dayavoids 4,000 metric tons of carbon dioxide (CO2) from being emitted into the atmosphere – the equivalentto the CO2 emissions from burning four million pounds of coal. That one day of production also isequivalent to taking over 800 cars off the road for a year.We’re proud of our sustainability efforts across the company and especially at our manufacturing facilitieswhere we’re leading the way. SunPower is the world’s first a
SunPower is a global leader in solar innovation and sustainability. Our unique approach emphasizes the seamless integration of advanced SunPower technologies, delivering The Power of One TM complete solar solutions and lasting customer value. SunPower delivers outsta
