The upstart Semprius is testing innovative solar panels with module efficiencies up to 35.5%, 1.65 times SunPower's (NASDAQ: SPWR  ) 21.5% efficient X-Series panels. More efficient panels allow you to generate more power from the small real estate, helping to make systems more cost effective. Semprius' panels are already being tested in the real world, and its big investors include the venture capital arm of Applied Materials (NASDAQ: AMAT  ) and Siemens AG  (NASDAQOTH: SIEGY  ) . Cost remains an issue, but Semprius' progress and its connections make it a player that investors need to watch.

 

The cost issue

Cost and supply constraints have traditionally held back high efficiency multi-band gap solar panels. Semprius uses concentrated photovolatics (CPV) technology to focus the sunlight on a limited area, thus reducing the amount of rare materials required.

 

The difficulty with using CPV technology is that trackers must be used to keep the panel pointed at the sun at all times. The good news for Semprius is that the solar industry has already accustomed utilities to trackers. SunPower has an existing Chinese joint venture that produces the CPV C-7 tracker. This system is big selling point for utilities as it helps to lower a system's levelized cost of energy (LCOE). 

 

SunPower's PV products are known for their quality, long life, and efficiency. This has helped SunPower see big growth in the distributed generation market and bring in $2.51 billion in annual revenue. If Semprius successfully commercializes its technology, then it will be a big competitor of SunPower's high efficiency panels.

 

Thin film manufacturers also face challenges

Semprius is a big threat to the thin film manufacturer First Solar  (NASDAQ: FSLR  ) . First Solar recently tested a cell with a 20.4% efficiency, but its average 2013 efficiency was just 13.2%. This means that Semprius' module efficiency of 35.5% is 2.7 times higher than First Solar's 2013 average efficiency. First Solar has generated a large amount of momentum and is working to increase its efficiencies, but there are still fundamental technological advantages to Semprius' CPV technology. 

 

First Solar some has time to deal with the CPV threat. Thanks to First Solar's lack of debt and a 10.7% profit margin the company has the resources to integrate the technology it recently acquired from General Electric. At the same time Semprius' combination of CPV technology and limited amounts of rare materials gives it a fundamental technological advantage.