Evergreen Solar Walking on Sunshine

(MoneyWatch)  Evergreen Solar said Thursday it received two long-term contracts worth nearly $1 billion.

The company inked a $750 million deal with Germany-based Ralos Vertriebs, a major European installer of large-scale solar power plants, for panel deliveries starting this year through 2013 and another deal worth about $250 million with an unspecified U.S.-based installer.

Industry watchers applaud the two contracts, for they validate customer acceptance of the solar panel maker's proprietary "string-ribbon" technology and will permit the solar panel producer to expand scale while further reducing its cost of production.

Management believes that its technology is a cost effective process for manufacturing ribbons of crystalline silicon for later cutting into wafers. The fabrication process consumes less than five grams of silicon per watt, about half of the silicon used by conventional sawing wafer production processes.

The solar panels for these two contracts will be manufactured at the company's prototype facility in Devens, Mass. Management expects to begin panel production in July, representing approximately 35 percent of the expected 160MW of annual production capacity at Devens through 2013.

The company believes it can cut costs further, too. Evergreen Solar is looking to gradually reduce silicon consumption to approximately two-and-a-half grams per watt by 2012.

In addition, management is optimistic that improvements with its String Ribbon technology-combined with other advancements in wafer, cell and panel technology-will allow the company to lower its manufacturing costs to approximately $1.50 per watt in factories opening in 2011, upon reaching full capacity

With sales of only $69.8 million in its 2007 fiscal year, Evergreen Solar is not much of a threat to either thin-film leader First Solar (which uses cadmium telluride technology) or multi-crystalline solar provider LDK Solar, which registered sales of $504.0 million and $524.0 million, respectively, in 2007.

Because of the potential for ramping up its production and dramatic cost reduction, however, sun watchers should not routinely dismiss Evergreen Solar as just another player in the future of solar.

Who knows? The company just might make the list of solar power manufacturer capable of achieving the elusive grid parity -- the point at which photovoltaic electricity is equal to or cheaper than grid power -- with fossil fuels.