Silicon Valley solar manufacturer SunPower said Thursday it is buying its second solar integrator, Italy's Solar Solutions.
The acquisition, which is set to close early next year, is expected to help SunPower (NSDQ: SPWR) get a stronger foothold in a solar market poised for rapid growth.
Although the financial details surrounding the purchase were kept hushed, SunPower will add to the company a 14-person division of Combigas, a petroleum-products trading firm.
Since its inception in 2002, Solar Solutions has integrated and distributed solar-power systems using a network of dealers throughout Italy.
The announcement comes after SunPower bought PowerLight, which at the time was North America's largest commercial solar integrator, for $265 million in November of 2006.
But with Solar Solutions, SunPower is specifically looking to gain leverage into Italy's solar market.
"We believe Italy is one of the most promising markets going forward," said Peter Aschenbrenner, SunPower's vice president for corporate strategy.
Aschenbrenner points to such drivers as an Italian solar policy framework that got re-jiggered earlier this year, high electricity rates that in turn make solar an affordable alternative and the country's abundant sunlight.
Prometheus Institute, a Greentech Media research partner, expects Italians to install 150 megawatts of solar power during 2010.
The market could easily exceed that because of the country's feed-in tariff, which pays solar-power owners a set rate for renewable energy fed back into the electrical grid, according to Prometheus President Travis Bradford.
"The Italian feed-in tariff is very lucrative," he said.
But no matter how good it looks on paper, harnessing the Italian market won't be easy.
Wall Street agreed Thursday, sending the company's stock down $1.32, or 1.04 percent, to $125.84 per share, on the news of the acquisition.
Compared to other countries, Italian solar market is quite small. In 2006, the country installed less than 12 megawatts worth of solar. But industry watchers are expecting those numbers to grow.
Bradford said getting projects up and running in Italy requires weeding though heavy bureaucracy.
"There is definitely a preference of Italian customers and policy-makers to work with people they are comfortable with," Bradford said.
SunPower's acquisition, which amounts to "buying local knowledge," might help there, Bradford said, adding that the move will give SunPower a jump on doing business in Italy over others looking to come in from the outside.
"This is the only way to quickly get local acceptance," he said.
Bradford added that other international companies also might enter the Italian market, perhaps through an acquisition, particularly companies that already have bought solar-integration and distribution companies.
SunPower's move also highlights the solar-industry trend of so-called "vertical integration," where companies expand activities into multiple parts of the supply chain.
In addition to Sun Power and First Solar, companies such as European giant Conergy also have pursued the model.
In May, Conergy subsidiary SunTechnics, a renewable-energy installer, also bought Aztec, a solar water-heating company.
But not everyone likes the trend. Some entrepreneurs have questioned how much one company should take on, saying it's too difficult to perfect the whole solar chain at once (see Solar Companies Debate Doing Everything).
SunPower, which also designs and manufactures solar systems, stands by its approach.
By snatching up companies like Solar Solutions, Aschenbrenner said SunPower establishes a brand preference with "end users," or the owners of homes and businesses where solar systems ultimately end up.
But the company isn't out to do it all.
"We've clearly made a decision to not fully integrate upstream," said Julie Blunden, SunPower's vice president of public policy and corporate communications. For example, she said, "You haven't seen us announce a polysilicon plant."