First Solar Deal Kicks Off Utilities Race

TEMPE, Ariz. (TheStreet) -- In a deal anticipated by the market on Monday, First Solar(FSLR Quote) sold the first and largest solar energy project in California to power supplier NRG Energy(NRG Quote).

While the deal was expected -- First Solar stock was trading virtually flat towards the end of the day -- the acquisition highlights the rising profile of utility-focused deals for the solar industry. It was the first photovoltaic (PV) project purchase for NRG, which plans to supply the 21MW of energy produced to Southern California Edison's distribution grid. NRG closed trading up 0.76% on Monday.

"This market is really in its infancy. It can help solve the problem of peaking power and these plants are relatively low-cost to maintain," said Ben Pang, analyst at Caris Company.

The U.S. and China are expected to both be the next growth markets for large-scale solar. First Solar was one of the first solar players to develop a strategy for this market -focused on a portfolio of projects it could sell off to power suppliers -- but it is far from alone in targeting the large-scale utility project arena, which is slated to become a much larger component of margin, though a less profitable one than module sales. First Solar already has one project in China.

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Two Chinese companies, Yingli Green Energy(YGE Quote) and Suntech Power(STP Quote), are seen as key competitors in the space, as well as SunPower(SPWRA Quote), though it first has to restore confidence in its business from the current accounting crisis .

"The increased interest on the part of utilities in bringing on PV solar capacity will be a key driver, and solar players need to make sure they are developing a channel strategy to address this market," said Jim Hines, research director at Gartner.