First Solar, Inc. (NASDAQ:FSLR) First Solar Analyst Day September 7, 2023 11:00 AM ET
Company Participants
Richard Romero - IR
Alex Bradley - CFO
Caroline Stockdale - Chief People and Communications Officer
Georges Antoun - Chief Commercial Officer
Jason Dymbort - General Counsel and Secretary
Mark Widmar - CEO and Director
Markus Gloeckler - CTO
Conference Call Participants
Philip Shen - Roth
Colin Rusch - Oppenheimer
Operator
Richard Romero
Good morning, and welcome to our 2023 Analyst Day. My name is Richard Romero. I lead Treasury and Investor Relations here at First Solar. We always start off with the safety moment. If evacuation is necessary, access can be found at the back of the room. And if emergency services are necessary, there are First Solar associates available to assist.
In terms of housekeeping, photography is not permitted. Restrooms are available to the right of the stage. Plant tour logistics will be shared after lunch, and a replay of today's presentation will be available on our Investor Relations website, as well as the slides. This can be found at investor.firstsolar.com.
We have a great agenda planned for you today. We'll start with presentation setting out our points of differentiation, our balanced business model and our vision for the future. This will be followed by a Q&A session. And then we'll conclude with a tour of our state-of-the-art vertically integrated Series 7 factory. This tour will also be available virtually for those joining on the webcast.
Please note that we will be making forward-looking statements that involve risks and uncertainties. There are many factors that could cause actual results to differ materially from management's current expectations. A description of these factors can be found on our most recent 10-K, 10-Q and on slide six of this presentation.
And with that, I'd like to hand things over to Mark Widmar, Chief Executive Officer.
Mark Widmar
All right. Thank you, Richard, and thank you, everyone, here for joining us, and welcome. Welcome to the largest solar manufacturing facility in the Western Hemisphere, something that's been created over the last several years, something in which you're going to get a chance to actually experience today, one of our factories, our newest Series 7 product in production. It's a joy to have everybody here in the room. It's also a joy to have everybody who is participating virtually as well.
So today, we'll talk a little bit about our growth journey. How it's evolved and how we expect it to continue. We'll talk about our technology, the evolution of our technology and ultimately give you a view and a thought around how we think we can create a truly transformative, disruptive technology advantaged in the marketplace and enduring long-term position of strength. And then we'll also talk a little bit about our business model, the financials, most people are most interested in that. Alex will walk through that and give you a sense of what the next several years could look like for us, okay?
So as we move forward, I thought it would also be helpful maybe to step back in time. So the last time we had an Analyst Day was 2017. There's a lot of different time back then. If you remember kind of the conversations and what was going on at the time, we talked a little bit about was solar investable or not? How could you get to an investment thesis that would make sense? A lot of oversupply in the market, uncertainty, predictability of forward-looking demand, but we positioned the company around points of differentiation that we thought could create value, whether it was inherent in our technology, inherent in our vertically integrated manufacturing process, strength of our balance sheet. All those points of differentiation, we believe, created value and created a different investment thesis for solar -- unique to First Solar.
If you think about, though, where we are now, if you go forward to today, I don't think there's any real doubt that solar truly is investable. I don't think there's any real doubt that there's an underlying sustainable demand profile. You can reflect upon it and look just in our contracted backlog as we reported in the last earnings call, 77 gigawatts that's contracted, multiple years that is contracted. So I think we've changed the game. And we'll talk more about how we think we're going to continue to change the game and further enhance and leverage those points of differentiation that we've created.
But across that journey, when you look at it from 2017 to 2013, a lot happened. A lot happened in terms of what we did in terms of simplifying our business model, simplifying the company. We did -- across that journey, everything we did across that journey was a decisive decision making that was led by a strategic thesis for an outcome that we've been able to realize. We started first off on our product strategy. We were in early innings in 2017 of transitioning from Series 4 into Series 6. We then cascaded that forward into Series 6 Plus, and then we cascaded that forward now into a Series 7 product.
We rationalized, right? So if you think about the business model that we had when we were last together, it was vertically integrated, EPC, development, O&M. We stepped back and we reflected and say, do we have positions of strength in each of those respective verticals? Are there others that have cycles of innovations that can do things differently and better than we could? Is it the right deployment of capital?
And what we came back with the conclusion is that our greatest position of strength, our greatest point of differentiation is inherent in our technology. So we simplified and what we made ourselves today as a module, technology and manufacturing company. That's what we are. And we're going to do that better than anyone else in the world. We also got more engaged on policy. We didn't have a very active policy engagement position back in 2017. But we have gotten more engaged in policy, actively engaged. And I think we're starting to see the benefits of that, not just here in the U.S. but in other markets like India, and we're starting to see other things evolved in Europe.
And we also talked to you a little bit about when we were together last time about the growth potential for our business model, how it could be leveraged against fixed cost, how we could drive contribution margin into op margin expansion. And I think you'll see the result of that when Alex goes through the financials from that standpoint.
So we outlined the plan in 2017, and we delivered against that commitment. But the journey is not stopping. The journey is going to continue. One of the things that we said we wanted to do when we entered into this decade is to make sure the company was stronger as we exited the decade. We still have a lot of work in front of us. I would say we're one-third of the way through, and I think we're in a pretty good position. So we've got a lot more in front of us. And I would say the first one-third has largely been focused on manufacturing and capacity expansion. The balance of the decade, which Markus will spend more time on with you today, is going to be around technology leadership. How can we take this platform to be something truly that's disruptive and that can be inherently competitively advantaged in the marketplace? And Markus will talk more about that.
So when I think about the pillars of growth, we'll just go through these relatively quickly, things that we said before, balanced business model. Everything we do will be disciplined. We've always said demand leads supply. We commit to supply when we have highly predictable foreseeable demand. That's what the value of that contracted pipeline gives us. It gives us certainty when we make commitments to invest around the offtake of that capacity. We also look to focus on continuing optimizing our technology and our product. And there's this balance that has to be achieved to truly be disruptive and inherently competitively advantaged. There has to be a balance between energy, efficiency, and cost. And this is really important, and I'm going to come back to it, and Markus will spend some more time on it as well.
And then from a manufacturing standpoint, repeatable manufacturing processes, replicated, copy smart, copy exact, whichever terminology you want to use. My terminology is manufacturing excellence. What we want to do is we want to lead through manufacturing excellence. When you go out and you see our new factory, I don't think there'll be any doubt in your minds that this is by far world-class, best factory, world-class in terms of what we were able to do, and it's in production today. And we've made that -- think about the commitment we made, it's only about two years ago when we announced the factory. And to see where it's running today and next-generation capabilities and automation, leveraging artificial intelligence, machine learning, capabilities, metrology, statistical process control, quality operating system, all of that, I would say, is best-in-class, and we want to continue to lead with that.
Also, we want to continue to focus on our supply chain and making sure that it's scalable and creating deep relationships and partnerships with our suppliers. And I'll talk a little bit more about that. Then we want to continue to invest in our differentiation, not only invest, but leverage and scale and grow. So there's points around our technology and certainty and Responsible Solar. I'll talk more about each of those. Markus will go more detail around technology, but I'll spend time on the certainty and responsibility.
What this does for us is this all powers that long-term growth profile. It creates resiliency. It helps us deal with the dynamic environment that we have experienced in the past and most likely will experience in the future. But these are the pillars of growth that will help power long-term growth for us as a company.
Let's go back to my points of differentiations real quickly, because I referenced them high level, but let's talk about them in a little bit more specifically. We talked about a lot of these in the last time we were together at the last Analyst Day. What this is trying to say is that you look at where most of our competition is and where do we differentiate ourselves, how do we differentiate ourselves, and how do we create value? And our view and our thesis is that differentiation creates value, and value creates profit pools.
Again, Markus will talk more about our energy and our technology advantage, but let's start first by looking across certainty. Certainty of pricing, this is delivered certainty, and these are comments that have come from our customers. What I like about -- and if you look at [Indiscernible] comment, it talks about a trusted partner. If I look at Eric’s comment, talks about a partner, quality, responsibility made products. And then I look at Sheldon in his comment, he talks about we have been critical and rapidly scaling his business. We are a trusted partner. We deliver certainty. Investments, billions of dollars of investments can be made, relying on First Solar to deliver their commitments. It's a unique value proposition that we have in the marketplace.
If you look at it from a crystalline silicon standpoint, there's concern around trust. There's a lack of trust. When you're making development decisions that can be multiyear projects, hundreds of millions of dollars and that $1 billion projects, to have somebody you can't rely on, to try to have somebody not deliver against their commitment, whether it's on price or supply, to have to redesign your project because you have to find a new supplier, to have to go out and refinance your project or find alternative sources of financing because your supplier didn't live up to their commitments.
The value of that certainty and that value of that relationship that we have with our partners is only increasing, and not just because of the geopolitical issues and other challenges that are evolving and uncertainty around long-term commitments with some of our competitors. Think about what's evolving. Solar is becoming more complex. Solar is now being integrated with storage. If you think about green hydrogen, now it's the PV plus the electrolyzer. The CapEx dollars are basically doubling. None of it works unless something can take a photon and make it an electron. You can invest all you want in the development. You can have the best siding, the best interconnection. You can have the best technology for an electrolyzer. You can have the best technology for the storage and the batteries. None of it works unless somebody can take a photon and make an electron.
So what our customers are doing is they're derisking their projects by committing to First Solar because of the certainty that we've been able to deliver to them, the value proposition that we've been able to give them. And we've earned this reputation not just because of what we've done in the past and how we stood by our contracts, we demonstrated even in the most challenging times 2022.
If you go back and you can look at what happened across the pandemic, first year of the pandemic, First Solar did extremely well. Second year of the pandemic, we did well. Between those first two years, we earned about $8 million of earnings. A lot of companies are struggling at that point in time, getting their supply chains uncertainty and delivering to customers and everything else. We managed through that extremely well. We had committed associates to make sure that all of our factories continue to run. These factories run 24/7.
Today, in a little over a second, a model comes off of a line somewhere. As we continue our growth trajectory, we've already committed to through our most recent announcement in Louisiana in less than a second, somewhere in the world, a panel's coming off the line. Our associates stayed committed to that to make sure that we could run these factories to their fullest potential even in the most challenging times. We stood by our customers. It's clear we were off side. We didn't anticipate in the third year of the pandemic the inflationary pressures that we were under, the commodity cost increases, the disruptions in the global supply chains, sales trade costs. That cost us over $0.5 billion. Between sales trade and commodities and everything else, it cost us over $0.5 billion.
If we wanted to be more transactional, we potentially could have engaged with our customers and renegotiated. We chose not to. We chose to honor the commitments. We look at this as a journey. These are partnerships that are going to last decades. Sometimes they're going to be more challenging for us. Sometimes they're going to be more challenging for our partners. But we have to work together, and we have to stand by each other. And I do believe that as a result of doing that, it became one of the catalysts that's resulted in the contracted backlog that we have right now, okay?
Certainty. Another point of differentiation and comment is around distributed manufacturing. This is the journey that we've been on over the last -- since 2018. The first, if you look at 2018, that 6.6 gigawatts, 600 megawatts, that's a total production of Series 6. So this journey is a journey of where we started with Series 6 in 2018. We made the announcement around Series 6 in the end of '16. Beginning of 2017, if you were to look out this window, there wouldn't have been one tool in the factory. Every tool that we had for Series 4 was scrapped. We did the same thing for our Malaysia factories. And we did the same thing in Vietnam. We retooled every factory from the ground up in order to start that journey.
What I can say is when you look at this where we started from, I would imagine most people felt that it was unlikely First Solar was going to be able to deliver what they said they were going to do, to start from scratch and to create new capacity, new product. In the backdrop of the uncertainty in the environment that we're in right now, I'm sure there's a lot of people that are skeptical. But the certainty of which we deliver to our customers is the same amount -- same type of certainty that we deliver to our factory capacity expansion and the commitments and the announcements that we made around them. We created a journey that can go all the way up to 25 gigawatts now from something that was basically zero in 2018.
A lot's happened, right, a lot that's happened across that journey, not only our transition into a new product but just the thesis around the value equation and strategic sourcing decisions and manufacturing decisions, the geopolitical risk. The pandemic did one thing for sure. The pandemic clearly created anxiety around overreliance, especially in areas that are strategic. So think about it from a standpoint of strategies around long-term energy independence and security, strategies around climate change goals. What we've seen is a lot of people are deciding that they have to control their own capabilities. They can't be over-reliant on any one particular country, potentially a country that could be very adversarial.
So the thesis now around domestic content has become more and more valuable. As I mentioned already, just around 2022 with the disruption around the supply chains globally, the value equation for local sourcing has changed. Being dependent on international global supply chains that could be unreliable, the view has changed from that standpoint.
The world has changed, but we have stayed the same. Our strategy has always been distributed manufacturing. Within the four walls of the factories that you're going to see today as a completely vertically integrated manufacturing facility. Unlike any of our competitors, we had a thesis from day one that we were inherently competitively CapEx advantaged and cost advantaged through a vertically integrated manufacturing process that starts with a sheet of glass that goes in the front. In a matter of about four hours, it's completed in the back end. Conceptually, now with our distributed manufacturing here in the U.S., we can get a module to a customer in about 24 hours. By the time we produce it, by the time we ship it anywhere in the U.S., we can get the product to the customer that fast.
Now not to worry about international transit times that at some -- during the pandemic, they were going as high as 180 days. Remember the issues with the Suez Canal and the block edge, and basically the world had to come to its knees because unable to get global supply chains working because of the challenges that were created. We've alleviated that, but that's been true to us. While a lot of these points that I mentioned were catalysts, we've always been distributed manufacturing. We've always been core to being end market close to our customers, delivering against our commitments.
And today, when you do see a factory, just remind yourself that, that's only half of the capacity. We have about 6.3 gigawatts that sits here in Ohio. About 3 gigawatts will be in the new factory, the other 3 is outside of that, started with 600 megawatts globally. We're now 6.3 just sitting here in Ohio.
Another point of differentiation is the strategic sourcing. I mentioned this a little bit. In our view to our supply chain is no different than our view with our customers, they're partners. We need true partners in our supply chain to be successful. We need partners that can grow with us, that can invest with us, that are committed to the same standards in which we are around Responsible Solar with zero tolerance for forced labor, having the same views around sustainability, carbon footprints. We need those partners that align with us strategically, and we're fortunate that we have those types of partners. Geopolitical risk, as I already referenced, has sort of created this desire to be closer to your supply chain. We've been closer to our supply chain since day one, and we continue to leverage that.
Here in the U.S., our new product, Series 7, uses U.S. American-made glass, U.S. American-made steel. The top of -- if you look at the top of the graph, NSG Pilkington is our glass supplier. And their supply chain cascades down into silica in Michigan, in soda ash in Wyoming. If you look down below the Ice Industries is our frame back rail supplier, and their steel is actually sourced by Worthington here in Ohio. We've also highlighted Rio Tinto. Rio Tinto is actually one of our sources for tellurium. Rio Tinto is aligned with us from a sustainability standpoint.
Strategically, they see the world the same that we do. They have a product which they refer to as green copper. We are actually not only getting tellurium from them from a supply chain standpoint. We're actually even providing the modules for an on-site solar array that will actually power their refinery that they have, their smelting that they have in Utah. These are strategic partnerships. We're ahead of the pack. These partnerships have just not started. These partnerships go back decades. These relationships are deep. They're aligned strategically and to ensure that each of us can grow successfully.
Responsible Solar, ESG. ESG is in our DNA. Sustainability is in our DNA. Responsible Solar embodies sustainability. It's what we do, it's how we do things. While we won't show you it today, but here on this campus is also the world's first recycling facility. When we started the company, we started the company with a circular economy approach, understanding sustainability, high value-added recycling, recovering the semiconductor and reusing it. Our semiconductor can be reused up to 40 times. The life of a panel is 40-years. None of us in this room, even the youngest ones, are going to be around before that semiconductors reach its end of life. But that's part of what we do and how we do things each and every day.
And it's another thing that we think creates a position of leadership, something that First Solar has taken upon itself to be a leader in this industry, given the DNA and the focus around sustainability. And we've taken it to the next level with this view around Responsible Solar. And we've leveraged this significantly with our customers, with our suppliers, and we leverage it in our policy avocation as well. It's a position of leadership. Expanding that position of leadership is our vision. Our vision is leading the world's sustainable energy future. It's six words, but they're overwhelming.
When you think about what we put upon ourselves each and every day when we come to work is how do we get to a point where we can lead the world's sustainable energy future? How can we influence and impact the generations to come? How do we address the goals that need to be accomplished from a climate change standpoint? That in and of itself is daunting. The other challenge is tied back to our points of differentiation a little bit. We are unique. We're the only one that does what we do. We compete largely against a conglomerate of competitors that don't play on a level playing field. But we still have to win. We have to find a way to win, not only win but thrive.
Even with that challenge, knowing what we want to do from a vision and knowing who we have to compete against and knowing we don't have a level playing field, we have to find a way to thrive. I think we've done that. I think we've done that, and I think we have a path to continue to do that. This vision that I talked about, I already mentioned a little bit, is around we want to turn photons into electrons, and we want to do it better than anyone else in the world. We want to create a technology that's unique and disruptive that no one else in the world can accomplish. And that is a position of leadership that's embedded in our vision.
I want to go back to this one. I'm going to talk about -- it sort of threads back into this leadership position. So I mentioned this before. It's one of our pillars of growth. And the words are on there, transformative, disruptive. But let me just spend a minute on this, and Markus will go into this in more detail. In order to accomplish, if you truly want a technology platform that is disruptive and transformative, you have to solve this equation. You need a technology that is highest efficiency, highest energy profile and lowest cost. Nobody has solved it yet today.
First Solar basically sits on highest energy profile and lowest cost, lowest CapEx, lowest cost production, right? We sit there. And we also -- that also informs our decision-making on what markets that we serve, which is largely utility scale. And Markus will spend a little bit of time just educating all of us in the room on energy.
I think what happens, unfortunately, is most of the people in the room think about efficiency only. Efficiency is important. Efficiency will determine the number of watts in a panel in a given form factor. That's what it tells you. It doesn't really tell you a lot about the energy. You can have a 30% efficient module that has an annual degradation rate of 2%. That's uncompetitive in the market. The product lasts 35, 40 years. The energy has to be there for 35, 40 years. If you get a very high efficiency technology day one, but degrades very fastly after year 10, you've lost 30%, 40% of your energy. It's not valuable. It can't compete in the marketplace.
So what you have to find a path to do is solve all three simultaneously. And what I'll say, there's others in the market that have gone after the path of high efficiency, but higher costs. And you could start with IBC-type of technology, SunPower Maxeon's type of technology, right? High efficiency, it did extremely well, very high cost, okay. You can even talk about HJT, next-generation N-type, higher efficiency, much higher cost, have to find a path to solve all three in order to truly to create a disruptive platform that can serve any segment of the market.
What you're largely seeing today is technologies have been from a standpoint of focus on market segments is where they -- greatest position of strength, which is why First Solar says what we do, which is largely utility scale. We want to get to a path where we can actually serve the entire market. We want a disruptive technology. We want to be first to market around that disruptive technology that inherently creates a competitive enduring advantage for us as a company for our customers and for our investors.
We believe inherent in that disruptive technology is the future belongs to thin film. To capture that and to optimize that equation, we believe thin film will be the key enabler of that. Whether it sits with CadTel, whether it sits with CIGS, whether it sits with Perovskites, wherever it may go, we believe it's thin film. We think we're uniquely positioned to develop and commercialize a thin film platform and technology. The learnings that we've had for two decades around what we've been able to do in our manufacturing environment or what we've done in our development lab, a lot of those key learnings will translate into next-generation thin films.
We also believe that it potentially is going to be more than a single junction platform, and it could be multi-junction. And what Markus will tell you is that even in that situation, the key to enable that multi-junction platform is a thin film technology. So that's what we believe. We believe thin film is the future. We believe we have the potential to create this uniquely disruptive and transformative technology.
After Alex goes through the presentation and goes through the numbers and everything, I'll come back in the wrap up, and I'll say, well, what could it potentially mean? If we're successful, what could this look like? It's a continuation of the growth journey that we're on for sure. But what are the opportunities beyond what we do today?
Okay. With that, I'd like to introduce Markus, who is our Chief Technology Officer.
Markus Gloeckler
Thank you, Mark. My name is Markus Gloeckler. I'm the Chief Technology Officer here at First Solar. A little fun fact about myself. I interviewed here when we were producing the Series 1 module. I wasn't participating yet. I was interviewing. When I started, the first pilot line had ramped up right across outside of this building here at 25-megawatt capacity. It was the world's wonder. And we were producing a Series 2 module. And so I've been through this journey and through this journey seen a lot of the many challenges that some of you may be familiar of the PV industry. And I've seen how our people with the grid, the ingenuity and the agility that our people bring to work every day have solved these challenges.
So today, I want to share with you part of the story that brought us here and then together work and walk down the path of what the future may hold for us. Mark already mentioned the leaning into the differentiation of who we are on a technology basis has shaped this company like nobody else. We believe that this differentiation positions us in a competitively advantaged position. And we also believe it is the most optimal position as we look far forward into the future towards ultra-high efficiency tandem PV technologies coming to market.
Technology differentiation is at the foundation of everything you hear about today. Our fully vertically integrated manufacturing facility template, our ability to provide an unparalleled level of supply chain transparency that you will hear Mike speak about later in the section, our leadership in sustainability and Responsible Solar, it determines where we produce, how we produce and also how we can deliver our product to our market and the relationships we can engage with, with our customers as Mark was discussing.
All of this started with an idea there has to be a smarter way to make solar panels than to use the expensive and energy demanding methods that are applied to crystalline silicon. The methods for crystalline silicon are well developed in the middle of the last century. They've been matured. But our visionaries that founded this company had this conviction that if you can find simple processes and deposit a solar cell in any substrate, it will be transformative in enabling for low-cost disruptive solar manufacturing.
Now I have to mention that this vision was born when PV was at $8 a watt in the 1990s. And the scale of utility did not exist yet. The picture here took us about over 10-years to develop. This was the first manufacturing line, which became the template for replication to overseas into Germany and Malaysia later on. This was actually in this facility right behind me -- behind these walls are Series 4 fully integrated manufacturing line. All of this gets removed in 2017 to make space for Series 6. But this was the start. And this vision is alive, and the visionaries that came up with this, they were absolutely correct. There is a more efficient way at commercial scale to improve these solar panels.
You hear Kuntal later speak about we believe we operate the leanest, most efficient manufacturing facilities. And you will see for yourself under one roof the future of solar manufacturing operating today, far less materials, on glass, fundamentally cheaper and fundamentally more eco efficient. Our sustainability metrics that Mark mentioned, they are the results of our technology, a differentiated technology with inherent value creation, cost advantage, competitive solar power.
We had a lot to learn. So in 15-years from when we started manufacturing solar panels, we started engaging in many different activities, including the downstream. We became active in project finance, product development, EPC, O&M. And through these activities, we really learned what absolutely mattered the most here, what matters the most to our customers.
You need to not only maximize the efficiency of the panel, you need to maximize the energy. And not only the energy of the module, you need to maximize the energy of the system that ultimately will be built. You need to maintain the highest standards for quality and reliability because that's the only way you can ensure that the energy will ultimately get delivered. And you need to optimize the product for the segments that forms the basis for our business, utility scale solar. So these experiences and this is real-world data, this is not something done on a spreadsheet on a piece of paper. The real-world data, 15-years of experiences, continuous feedback, this is what shaped our R&D and our product development priorities.
The first outcome was Series 6. Our first product, truly optimized for utility-scale solar applications. For the first time, a thin film panel, there's one on the left in the room here, is taking -- it's synergistic and it's taking full advantage of the PV structure ecosystem available. Series 6 was an overall at the factories, but it allowed to provide an improved value experience from the panel creation to installation in its use.
Series 7, our latest and greatest. It's the most differentiated product available in the market today. It is not only designed for our customers. This is -- we also designed it with our customers, larger form factor, a frameless higher efficiency design and an innovative steel back rail, which also enables us to optimize our supply chains as Mark already mentioned.
We will continue to innovate on the Series 7 platform. It is our fastest energy payback time. It's our best eco-efficient product today, fastest energy payback time, lowest carbon footprint, lowest water consumption, and it uses 16% of recycled content as it is today.
In the next evolution, in 2024, we expect to launch a returnable pack. The returnable pack will then reduce waste that is generated at the project site, again, enhancing our customer experiences. So I skip to the mechanical change, the Series 6 and Series 7. But I said the first two most important lessons were really around the energy and energy optimization. So let's go back and dig a little deeper into this.
Why is energy so important? You've seen this triangle, Mark just discussed it. Ideally, the most disruptive product will exceed on each one of these attributes of energy efficiency and cost. Let me try to provide a quick definition of what we mean by each one of these. Efficiency is a method, a standardized method of measuring and assessing a module. It affects the cost per watt as well as the number of modules I need to install to meet a certain DC capacity of a solar panel -- of a solar array.
However, energy is the cumulative generation that occurs over the year and of the life of a project. The more generation I have of energy, the more value I generated for my customer. Cost, I will not touch on cost very deeply. Alex will discuss some of that later. However as we're speaking here of the cost to produce. And as Mark mentioned, we are now leveraged into capacity expansion.
However, the more we can drive costs down, the better will be our operating margins, obviously, and more value to our investors. So to truly excel, you need to be -- to truly be disruptive, you need to excel at all these three of these aspects. And we aren't there yet, but let's spend a moment on competitiveness, where we are today and how it positions us in the market.
So one of the key messages here, efficiency. This is what efficiency looks like. It's an incomplete measure. Efficiency is proportionate to the nameplates, the watts on a panel for a given size. It is measured under standard test conditions at 25-degree Celsius, and there are a spectrum that is called the air mass 1.5. It is defined under a blue sky in a specific location at 37 degrees tilt to the sun.
When you look at efficiency, you're missing everything that's on the slide now. Everything on this slide will determine ultimately the success to the customer, which is the energy that is being generated on the system.
In the efficiency, there was no information about what happens during the 8,760 hours in the year. There was no information what happens when the temperature goes up or down, when clouds cover the sky and so forth and so -- or what happens over the 30 years or 40 years life.
The EPC design also matters. I will not go into depth here today. We spent 10 years working with premier EPCs optimizing power plants to maximize the energy output of the plants. And our customers buy from us because we optimize for this. We optimize for the real world conditions.
So I'm going to touch on a few specific factors in detail in a matter of examples and then we'll look at how our future CuRe technology will compare against the next generation TOPCon technology. First example, the temperature response. So I don't know how you feel in the room. Some feel it's a little cold, some feel it's a little warm. This is about room temperature here. And this is the temperature in which you measure a solar panel.
Now think of the Arizona desert. That's a temperature the module actually operates. It's very different. Typically, in the range of 40 to 65 Celsius or 100 to 150 degree Fahrenheit for the solar panel. All solar panels reduce their power output as temperature goes up. Some lose less than others.
We've always been designing our product to minimize this efficiency loss across the changes in temperature. This remains true for the future CuRe technology when we compare it against the next generation TOPCon. Our modules will continue to perform better in hot humid conditions where much of the world's solar capacity gets installed.
Second example, degradation. All modules, regardless of technology, reduce their power output over time. It's either an intrinsic degradation of the semiconductor property in some cases or the robustness of the module construction itself.
First Solar modules, with an industry-leading product warranty to backstop the performance, lose less with a superb semiconductor degradation in best-in-class module construction. The area under this curve is directly proportional to the total lifetime energy production. And you can see, we're not standing still. We continue to push this envelope. The competition is improving as well, but we're substantially differentiated in long-term degradation rates.
So zooming back out to the overall comparison, if you do a benchmark and compare module attributes, the module attributes that are on the left that I mentioned to you, those are the ones that drive energy, the translation from an efficiency rating to an energy generation over the life of the product. If you compare this, you have TOPCon is advantaged on efficiency and bifaciality today.
Cad-Telluride, the future CuRe product, will be advantaged on five key factors that are very important when you translate from the efficiency rating to the energy being generated. This is the qualitative comparison on the next chart. We'll look at this at a qualitative example.
Customers make their buying decisions based on this energy. So here is an indicative example of a utility scale solar project. We situated it in the 13 states in the Southeast. This is not one example. This is a case study where we ran over 50 different simulations, optimized power plants placed in 13 different states in the general region of the Southeastern United States.
This will change if you move it to the Northeast or in different areas, but the Southeastern climate is one where there's a lot of activity for solar growth. It's not too dissimilar for India, where we're also very active.
After performing the full value walk of energy analysis for the same size as C-size project, you see that the CuRe technology can produce 4% more lifetime energy than a TOPCon module. 4% may not sound very much, but let me share you some other insight here.
So First Solar customers know that 4% that's an interesting number. What is it? How valuable is it? So we can look at this, we look at this through our backlog. We have contracts. Our customers actually value an energy attribute and energy improvement more than an efficiency improvement.
What do I mean by this? So when we have flexible contracting, right, we have long-range contracts that go out over multiple years. So there are certain uncertainty about exactly the attributes that would be delivered.
We have contracting adjusters. And if you compare the value of an adjuster relative improvement of 1% efficiency or 1% in energy attribute, you get about 3.5 times the value by improving the energy attribute. So remember this example. We ran over 50 cases, Southeastern United States. 4% didn't sound very much, but it's as valuable as 14% relative efficiency increase would be. This is why we're so focused. This is why it has become a priority for us and has been our paradigm to improve energy first.
Yes, efficiency has to improve. And you'll see and I'll talk about this next, but energy has taken the front seat in our activities and priorities of development.
So now we have discussed how we mechanically optimize the panel to the Series 6 and Series 7 that we have in the market today. We introduced this triangle of disruptive product creation, and we discussed the rationale while we're prioritizing energy over efficiency.
In this next section, we'll talk about how we deliver on these improvements by enhancing our strengths of our semiconductor, leveraging our differentiated technology, while we effectively harness its efficiency entitlement. In aggregate, together, the following improvements will deliver the near to midterm competitive position that we just discussed.
Following this segment, we'll take a closer look at disruptive efficiency enhancements. So we announced in June of this year a limited production run of our new Series 6 Plus bifacial line. And the R&D team here at First Solar pioneered a novel patent-pending transparent by content, something nobody else is doing. This is pretty common. This is what it is to live a differentiated life of technology.
We have to innovate. We are innovating and solving our problems. We maintain our high levels of quality and reliability. The commercial rollout here is expected to commence in Q4 of 2023, this year, coming up real soon.
The product will deliver up to 2% energy without any incremental cost to the customer. The bifaciality of 15% may not sound like a very big number when you compare it to silicon. But it punches a little bit above its weight. You get actually more energy. Amongst other reasons, the module temperature gets lowered.
The way our semiconductors work, when you make the back surface transparent, you actually reduce the heating of the panel, the module temperature drops a little bit. So there's a lot of these contributors that you only understand once you understand the full energy analysis and the full energy picture. And you have to go beyond the labeling of the products.
In the near term, we believe the nominal bifaciality can increase to 25%. And in parallel to the semiconductor improvements, we are evaluating what we call a bifaciality boosting technology, which could deliver us 40% to 50%. And it's still in an early stage. But if we succeed in the development, it could implement relatively quickly.
Our next priority is the launch of CuRe and then to capture the full entitlement from our CuRe technology where we remove copper from the device. Let me explain -- let me try to give an explanation of what this means.
So when you make a thin film device, it's like making a multilayer cake. You have a big recipe, right? You have a lot of ingredients that you put in, a lot of the quality of ingredients that you worry about. You're worried about the composition of each layer. You're worried about what you put in between these layers. And you're worried about -- very much worried about the processes how you put them all together.
And what copper is, it's like a spice. It's a dopant in the material. It's a very minor contributor. However, ever since its commercial relevant existence of CadTel technology, the management of this spice has been a challenge. It has been, at the same time, an enabler, but also a challenge and a limiter in future progress.
So this is why it's so important. It's fairly transformative to the semiconductor change. The technology is important to us as it creates a path to better bifaciality, an improved degradation rate, an improved temperature coefficient and also better tellurium utilization because we can get away with thinner cakes. It's better on the waistline.
The specific improvements necessary for the launch of CuRe were realized in a pre-pilot phase in 2022 and are being tested for implementation of manufacturing scale in 2023. We're targeting the lead line implementation in the second half of 2024.
Now I do want to highlight that CuRe's being developed across multiple readiness stages. So we're having one team that works getting it to the manufacturing readiness, and we have teams working on the next node after this, the next improvement after this and after this.
And so when you look at the whole picture of what is -- the activities that are going on, we believe that in total, we see an opportunity to improve the bins by approximately 35 watts to 40 watts in total. The other thing that's important here is that across these activity streams where we look at different nodes of CuRe, we see a high degree consistency, very low degradation rates, to the point that it becomes difficult to measure. And we believe that technology will support a 0.1% rate after its initial launch. So I talked about the semiconductor. And those initiatives all are on the left side of this slide. They are here to enhance the efficiency entitlement of your device.
A different approach is to reduce the known loss mechanisms that are already present in a solar module. Think of it in a silicon module, it's fairly straightforward to understand. You have wafers that are placed on the module. When you put them closer together and you close the gaps in between, you get more efficiency. You enhance the active area or when you transition to an IBC, it's a little bit more complicated. The silicon, there's techniques to improve. The solar cell itself doesn't change very much, but the integration of it to make it a module can be improved.
So in 1989, we in the form of our predecessor, we actually filed a patent on an advanced interconnect. Truly ahead of our time. The patent has expired. You don't want patents to expire. You want to bring patents to market and value.
But the idea, it has been considered and has been dismissed. It may finally see a commercial reality. So what is an interconnect? Think of your portable electronics. You have batteries that you need to put in, right? All these batteries are put in place in a specific order, left, right, left, right in order to put them in series.
The same happens with a solar panel. We have all these solar cells. One module is cut into many individual cells, and they need to be interconnected in a series of solar cells.
This is traditionally done with the laser scribes. You see these lines that are running from -- up and down. And when you go very close nowadays, Kuntal and his team have been so good at this. You see only one line. The reality is that there are three lines. And these three lines are the three laser scribes that form the interconnect.
The interconnect causes us losses because the area between these three lines that you can barely see with your eye alone is not producing power and because the current has to flow across the entire cell in order to be collected. So the advanced interconnect is an idea. Like I said, it's an old idea, but it's technologically quite challenging.
We have this one panel here on the left during the coffee break, if you'd like to swing by. It has a lighting behind it in order to visualize what I'm talking about. You have to step very close to this panel to actually see what I'm talking about. Because if you just go to six feet away, it looks like every other panel. You have to go very close and what you will see is there's a different pattern. There is small micro interconnections on every panel, more than million of them on this one panel that is on display here.
Why is this important? With this technology, we can reduce the active area losses. We can reduce the resistive losses. We can find a path to approximately 18 to 20 watts gain in performance. The goal is to have this at an initial readiness approximately next year.
At this point, I will summarize the improvement opportunities. We're nearly at the launch of our bifacial technology, which is considered the reference technology for this chart as a zero point. We expect this to launch here with bins up to 540 watts for Series 7.
With CuRe technology anticipated to launch in 2024, we'll bring about 5% improvement in the total energy output on the panel. That's a combination of efficiency improvement and enhancements in the energy generation ability of this panel.
With the identified improvements that we currently have in the pipeline for the technology, we'll get to 12% improvement. With the implementation of the interconnect that I just covered, we'll get to about 15% improvement on the energy that is generated from one single panel.
The bin class from Series 7 will go from a high end of 540 to an estimated range of 590 to 600 watts. The efficiency increase in these bars is approximately two-thirds of the 15%. The balance is the increase in the energy. And remember, the 4% to 14% translation, an enhancement of this energy is a lot more value to our customers because it directly drives the system generation ability to produce more kilowatt hours and more revenue.
So taking into account the cost advantage of thin films, the manufacturing perspective that we have here, we believe that this will remain highly competitive in the market against any silicon panel in this decade. So as you can tell, there's a significant number of initiatives going on. And if you have a time during the coffee break, there's a number of prototypes in the room. Many of these improvements are in late stages of development.
And so this is why in October of 2022, we announced a significant investment into an R&D center so that we ensure that we stay ahead and deliver all these improvement in a timely manner. The R&D center, upon its completion, will be dedicated in the memory of Jim Nolan as the Jim Nolan Center for Solar Innovation. Jim Nolan was one of our technology founders. He paved the way for our company in our differentiated thin film technology.
I will now pass the stage virtually for a brief video to introduce the innovation center to you.
[Video Presentation]
Markus Gloeckler
All right. Let's go back to our triangle. And you already heard Mark say earlier this morning that the future of solar PV belongs to thin film. And we intend to shape this future right here in Perrysburg with the investments, the infrastructure needed to accelerate the cycle of innovation. So what does the future look like and why are thin films the key? Let's return to this triangle of disruptive efficiency technology. What does that mean?
So as you all know, the global PV market today, it's by vast majority in the hands of crystalline silicon and only CadTel is available as an alternative. Both of these technologies have a theoretical efficiency limit of 30% and practical limits close to 25%. New concepts are needed. Combining two semiconductors, it's not an entirely new concept. It just has not been successfully applied to the low-cost industry of solar generation.
Combine two semiconductors to grab a greater portion of the solar spectrum with higher efficiency, two cells on top of each other, each optimized for a different range of the solar spectrum. The practical entitlement will increase by approximately 10% from about 25 to 35. So that's what we're after. Now two-thirds of this higher efficiency, two-thirds of the total efficiency is coming from the top cell in a tandem device typically and one-third comes from the bottom. So the top cell is typically the most important portion of a tandem device.
There are other rules that apply how to form a tandem cell. There's restrictions that science puts on us, the solar spectrum places on us, which constrain the opportunity set of what is possible. CadTel silicon are too readily available in bankable technologies. In this approach, you take a high-efficiency bottom cell silicon incorporated in the tandem. There is a module displayed out in the coffee area.
However, you incorporate a high-efficiency, high-cost bottom cell where it creates low to modest value contributions because the top cell has to do all the work. This creates headwind to commercial success at scale.
We have studied this and we are studying this. We have studied this for a number of years and continue to work on it. There are a lot of things that need to and can be learned about tandems on this platform, in particular, how to construct a tandem. It's one thing to make in a laboratory. It's an entirely different thing to make this into a solar PV module that you can deploy with high reliability and high quality the way you're used to buying a solar module.
And how will it perform in the field? There is very little known about the actual energy generation ability of a tandem module today. So this is why we continue to invest in this thread in developing this. Now if you look beyond these well-established technologies that we're all familiar with of silicon and Cad Telluride, there may be one other opportunities that presents itself perovskites. It's been talked about a lot in the technology circles where I live.
They emerged about 10 years ago from the laboratory. They haven't quite left the laboratory yet. They have generated very high efficiencies. The material is compatible to be used as a top cell. The materials are abundant and the involved processes of making it could be very low cost. Nobody is actually doing it yet. The key challenges for this material class is to improve the stability of the material itself, durability as well as the scaling going from record cells that are typically 0.1 square centimeter to square miles, what we do here.
Now perovskites could be coupled with another thin film as a bottom cell or with silicon. But however, like what I mentioned already, in a tandem cell, the top cell already always has to do a lot more work than a bottom cell. So the perovskites cell must have excellent properties in its own right, performance and stability. So we have been following this pretty closely and I'll discuss more shortly about our own investments into this.
So the future of PV, so we established to basic need and interest the common belief actually in the industry that the industry will go to tandems eventually. The future of PV will be a tandem technology. This combination already spoke about, two mature technologies. The only other PV material that has achieved greater than 20% efficiency and that actually makes sense to integrate into a tandem is what Mark already mentioned, a copper indium diselenide, a CIS device. It could be an effective bottom cell.
However, there's headwinds here as well. This technology has been around for a very long time. It did not achieve large-scale manufacturing, which is why it's not in the market today at large scale. There's challenges on our technology, how to scale it as well as the cost. Then there are perovskites. So instead of using Cad Telluride as a top cell, you can use a perovskite. You can put something else underneath it.
Still early innings, challenges of scalability and reliability. There's nothing else. I wish I could make all these pictures smaller and have another six or eight or 10 next to it. There isn't really anything else.
This is what the industry faces to go to tandem. This also means that for what we know today, we don't know what we don't know yet. But for what we know today, all future tandems will require at least one, if not two thin film devices, integrated into a complex tandem module. And there is no company better placed or more experienced to head this journey to a disruptive tandem PV technology than First Solar.
You're surrounded here and you'll see it for yourself the highly sophisticated PV factories where the mass is at scaling thin films to low-cost, high-yield manufacturing. It's at the heart of who we are for two decades. We know how to test and engineer, develop thin films, how to deal with challenges of stability and meta stability, how to develop process tools, how to develop manufacturing and metrology, control plans for these materials, very different, everything is very different from a standard silicon process.
We are here to contribute with our expertise and lead to the next disruptive evolution in PV technology. The future belongs to thin films and nobody understands this better than we do. So let me give you a quick taste in what we are doing. We've been playing this game for a long time for Cad Telluride. We've been on our own for a long time.
There are three areas of emphasis. First is understanding the fundamentals and opening more opportunities. You always start here with studying the principles, doing the science. We've always leveraged innovation outside of our walls where we have aggressively expanded our academic outreach, specifically to address the challenge that I showed you on the last slide, the different flavors of tandems we would like to see to be evaluated to get a serious shot in coming to market, solve the tough problems.
Second, acquiring the know-how that complements our own expertise. In May of this year, we announced the acquisition of Evolar. Founded in 2019 by veterans of the copper indium gallium diselenide industry. Evolar now is focused on developing solutions, including the manufacturing equipment to commercialize tandem technologies based on perovskites. And we will continue to evaluate our options to use strategic acquisitions in the future that bring new ideas, new materials, new methods into our existing portfolio of thin film expertise.
And lastly we already discussed part of this. We're investing in infrastructure to address the challenges of scaling. Supported by encouraging results we achieved in our California Technology Center, we're now making an investment of approximately $78 million to construct the development line for perovskites. This is not the same as a pilot line yet. This is not at the full size. This will feature an intermediate form factor size that is effective in doing the R&D that still needs to be done to bring this technology to a reality.
We expect the completion of the construction here in Q2 of 2024 and then the ramp of the development line in the middle of next year. When we are ready with it, that Jim Nolen Center for Solar Innovation has already space allocated. This was part of the investment. There's already space allocated to put a future tandem semiconductor pilot line at full scale into this facility to be faster with the scaling ability.
When you need to start moving, you don't want to be constrained. You want to be able to leverage what you already have and build from there.
So to summarize my key takeaways, the efficiency isn't a complete assessment of PV technology. Maybe the slide we have efficiency and then the full picture will help to keep this. The efficiency isn't a complete assessment of the PV technology.
CuRe can outperform TOPCon and lifetime energy by meaningful differences and these differences are highly valued by our customer. The PV industry is set on the path to tandem, but there is no path without thin films. And we are making extensive investments in developing this future of thin film technologies. And we believe few other technology companies are in a position as well positioned as we are.
So I leave you with this. The future of solar PV belongs to thin film. Thank you. So up next, we have a video from Kuntal and Mike on our differentiated approach to manufacturing and supply chains.
[Video Presentation]
Operator
Thank you. Now we'll take a 20-minute break, and we'll resume our presentations at around 10:15.
Welcome back, everyone. We'll now resume our presentations, and I'd like to hand things over to Alex Bradley, Chief Financial Officer.
Alex Bradley
Okay. Good morning. It's nice to have you here, and for those joining on the phone, welcome. We're excited to have you here. You've heard from Mark. He's given you some of the overall strategy. You've heard from Markus. He's given you a view of the technology. I'm going to try and translate that into numbers for you.
So this morning, I want to cover three things. I'm going to talk a little bit about our business model and the investment thesis for First Solar. I'm going to walk you through some items on the P&L, and then I'm going to touch on liquidity. Because I'm doing that, as Richard mentioned in the beginning, this will include forward-looking statements. The slide here again, please refer to that for more information.
So First Solar has come a long way in the two decades or so that we've been producing modules. If you look at the history, it took us 12 years to get to the first 10 gigawatts of production. It took us 17 to get to 25 gigawatts. It's taken us two decades to get to 50 gigawatts of production. With what we have announced today, the announced capacity, most of which is already in construction, our new Louisiana factory will start construction soon. We are in a path to having a nameplate capacity that will allow us to do this every two years.
So it's a change in the scale of what we've been doing. And this is a result of a long-term vision. You heard this earlier. We are looking to lead the world's sustainable energy future. That's how we intend to do this. And we get there through a business model philosophy that is constant, right? These are the principles that guide us, the long-term strategy that guides us.
When you think through the shorter-term strategy, when you think through the tactics, right, where we focus, where we spend time, where we spend money, how we execute, those are things that need constant objective evaluation. And you can see that is evident if you look through the history. So if you go back to the decisions we made in 2016 to retool, to pull out Series 4, to start building Series 6, that initial period of 2017 out to 2020, we announced 10 gigawatts of Series 6 capacity across 6 factories.
If you go into the period 2021 to 2022, this saw the arrival of Series 7. And we announced two new factories, larger scale factories built from the ground. And this takes capacity announced up to the mid-teens. And then you go to the last 18 months, again, added two more factories, Alabama, Louisiana here. And combined with some optimization of our existing sites, this has taken our announced nameplate now up to 25 gigawatts.
And we've done this in the context of exiting the systems business. You heard Mark say this earlier. We did this not because it wasn't a good business at the time, but because we constantly reevaluate that strategy and it was not the right future strategy for us. It was the right future strategy to come back to our roots as a manufacturing company and be able to grow that manufacturing business. And that's set the stage to where we are today that allows us to grow.
So why do I give this brief bit of history? Why is this relevant to you? The reason I think this is relevant for you, as analysts, for investors here, investors on the phone, this is the investment thesis. This drives our decision-making. So Mark and Markus, Mike and Kuntal on the video have talked around differentiation, talked around execution. I'm going to talk you through the bottom part of this triangle. I'm going to talk you through the numbers and how we balance growth profitability and liquidity.
And that sounds very straightforward. It sounds obvious. It sounds like something anyone would do in any business. In fact, in our industry, it's not. In our industry just looking to balance is a point of differentiation. So I'm going to walk you through the P&L from revenue down to operating income, which encompasses growth, encompasses the profitability side. I'm going to talk you through how we think about capital, capital liquidity, our approach to capital allocation.
As it relates to specific guidance, so for 2024, we will give our usual guidance metrics at our Q4 2023 earnings call, which we expect will take place in February of next year. What I intend to do today is provide you with the building blocks to model the business over the next three years. That's the intention here.
All right. So let's start with the P&L. This is our announced nameplate capacity. With the addition of our factory in Louisiana, we now bring our announced nameplate up to 25 gigawatts by 2026. If you look at this on a product basis, you can see Series 6 grows marginally as we get some throughput and yield efficiencies in the factories. What you're actually seeing is the new factories coming in line are all Series 7. So that mix shift takes place as you go out from 2023 to 2026.
From a geographical perspective, in '23, we're about one-third U.S. production. As we get out to 2026, that changes to a little over half of our production coming from the U.S. The rest is approximately evenly split Malaysia, Vietnam and India. If you look at this on a production basis, so previously talking capacity now, talking of what we produce, here, you're going to see a rise from around 12 gigawatts in 2023 out into the 20s gigawatts by 2026. So production always lags nameplate capacity, and it does so for a few reasons.
One is that in this time period, we still see downtime in our production associated with technology upgrades. So we are not running our factories at the full entitlement for all of the year. The other reason is that when we talk about our nameplate capacity, we look at the full year, the entitlement of the factory in that year and assume that runs for 350 days. As we work through the year, as we're going through a period of technology improvement, the factories are not running at their full theoretical entitlement all the way through the year. So another reason that you have a lag between the theoretical nameplate and the actual production that we have.
If you talk about our CuRe road map, so Markus talked about where CuRe is. We are projecting to have our CuRe lead line in operation here in Perrysburg in 2024. The replication of that will be pushed out. So we will start spending money in 2025 and into '26. And the replication happens towards the end of 2026, and you'll see a lot of production in 2027 and beyond.
Now as I'll show in a few slides, this does have an impact on the technology upside at us that we talk around, and we'll come to that in a minute. That is balanced by reduced downtime associated with not doing those upgrades in the near term. But there are a couple of reasons I want to talk to as to why we're pushing that replication out. The first is around CapEx. So we intend to put our lead line into place in 2024.
We are then going to look at how we can optimize that CapEx. And we are working with our vendors, with our suppliers. There are ways of potentially taking some of that CapEx out of our factories, having it work on the side of our vendors, which could make this a lot more CapEx light than its forecast to be today. So one of the learnings that we can take from the lead line before we replicate across the fleet is how much it's going to cost to do this.
The second is around downtime. So today, we're sold out through 2026. That means every module that we have is allocated. We need to continue to produce. To replicate across the fleet would incur downtime. And that downtime today comes at a very high opportunity cost, especially in the U.S. when we talk about the impact of the IRA. So the CuRe application here, we are planning to push out. And you'll see that hit out in 2026 at the very end and into 2027.
So that's what we make, how we contracted. And before I go through this, I really want to start discussing the structure of our contracts a little bit. So in the U.S., what shows up in our backings and our backlog is contracted volume. We have signed deals. In India, it's slightly different. In India, even if we book something -- even if we contract something, excuse me, we do not call it a booking unless we have 100% security against that deal.
Now typically, in India, we are prepaid for deliveries, but that security typically does not arrive until a month or two before delivery. So you are very rarely going to see much, if any, of our India contracted volume sit in the backlog. The backlog that you see reflects U.S. and rest of world ex-India volume.
Broadly speaking, we have two types of contracts: individual asset fairly self-explanatory and framework agreements. Framework agreements, if you go back in time, what we originally had as a company back when we launched Series 4 when we were selling mostly into Europe, this framework is at a much smaller scale. Over time, we saw an evolution where people stopped buying on the frameworks and looked to buy for individual assets. We've seen that come back now.
Today, we are signing framework agreements that are multiyear, multi-gigawatt. That's good for us. It's good for our customers. It's long-term visibility. The challenge for our customers is they sign deals without exact visibility into timing. So when we think through a framework deal, there is some flexibility and timing inherent in a framework, right? And that flexibility is also why we have the relationships that we do. It's beneficial for our customers, and in many cases, it's beneficial for us as well, and I'll talk to why in a second.
But what all our contracts do have in common? Fixed pricing. So there are some variance around pricing. Things can move. Bin classes can change in their adjusters. We can have upsides for technology. We can have risk mitigants around steel or aluminum in the frame that could impact ASP, but these move small amounts. What these are not, these contracts are not market pricing and they're not indexed to polysilicon. They're not indexed to anything that helps in the market. They are largely fixed price contracts.
The other piece is around certainty. So I mentioned there is some flexibility on delivery timing under frameworks. There are also some contracts that have a limited amount of termination for convenience clauses. In the event that we do that, we have a termination of penalty associated with that. But overall, our contracts, we have an obligation to deliver a module and our customer has an obligation to take that module and pay for that module. So that's important to understand as we think about the context of our sold position.
If you let us today, 2024 onwards, we have approximately 71 gigawatts of booked volume. That means we're sold out through 2026. Now depending on the timing of framework allocations, this may imply that we're actually over-allocated in certain times. If you look at our paper today, we are potentially over-allocated in the 2024, '25, '26 time frame. And that overallocation is deliberate. It's typically in the range of 5% to 10% of our production value. It's not huge. Generally, the further out we go, the more we're willing to over-allocate.
But this provides resiliency to two things. Firstly, it's resiliency to what I just mentioned around the framework timing, that timing is inherently uncertain. The other thing it provides resilience to is the natural tendency for the development process and the delays you see with that. So it is very rare for a project schedule to pull it. It is very common for our customers to come to us and say, we will need to move something out a week, a few weeks, a month. And this is something that's been the case for us for many years.
If I go back and look at the position we were in coming into 2021. Coming into 2021, we were over-allocated coming into that year. We exited that year with inventory. If I look at 2022 coming into the year, the same thing. If I look at the coming into this year, we were over-allocated coming into this year. Today, we're balanced for the year. I expect we will end the year with a small amount of inventory. So this is normal for us. It's important for you to understand as we think through our sold position.
It's also where customer relationships are key. We will work with our customers if they come to us and ask to move things around within the bounds of the criteria that we have, where we have commitments to you, to the Street to our investors to meet certain financial targets. But we are perfectly willing to work with our customers and we do so every day. The flip side of that is a long-term relationship that works both ways. Our customers will work with us when we look to move things again in the small amounts in weeks and months. So that relationship is very important.
The other key risk mitigant here, which I want to make sure is clear, is India. And we mentioned this on our last earnings call. On our last earnings, we announced some bookings at a time frame that we were already sold out. We could do that because there are always movements in the pipeline, but we could also do it because we can take some of the volume from our India factory and bring that into the U.S. So if we are in a position of our allocation, that India factory provides some flexibility to help as well. But overall, I would say, supply/demand is a constantly evolving and fluid exercise for us. It's a matching and balancing exercise that we perform on an almost daily basis.
And then I'll lead into pricing. So if you look at our fleet average ASP in the backlog, just under $0.30. We're forecasting in 2024 that to be a little under there, around 28.6, and I'll show you a range later. 2025, 2026, we're seeing around $0.30 of ASP in the backlog, base ASP. As I said, in times where we're over-allocated, things move. These numbers can change. The overall backlog number is in the contracted pipeline. We do see some upsides on technology. As I mentioned earlier, some of this is reduced from the last numbers you'll have seen on our earnings call as a function of the timing of the CuRe application being pushed out.
The other piece that's here is we do have some risk mitigation. So we still have mitigation and risk around metals in our contracts for frames, steel, aluminum. Generally, those are indexed. And we see sales freight protection in substantially all of our contracts today. If I think about this overall, it's hard for me to look at the history of our company or many companies in this space or other spaces where you've seen a picture that's strong as this, right? If you look at where we are today, we are in a very, very strong contractual position. We have high visibility into a revenue profile for the next three years.
As I'll show you in a minute, we also have high visibility into a gross margin profile that accompanies this, which is equally important. Mark mentioned earlier the pandemic. We had a couple of years of great operations and high profitability throughout the pandemic. We performed very well. We also had a year where we struggled significantly based on commodity pricing and sales freight. And as Mark mentioned, there's a reason that we ate those costs. It was the right thing to do contractually. It's the right thing to do to set us up long term, but we also learned from those mistakes. And we today have better risk mitigation structures in our contracts that allow us to have better visibility into long-term gross margin and operating margin.
I also want to put this in historical context. So our contracted backlog is at a historic high today. Our pipeline is not actually the historic high, but if you look relative to the long-term history, it's still at a very high point. And this pickup again, you can see 2020 going into 2021 has accelerated from then on. The IRA was signed in the middle of 2022. This has undoubtedly helped our backlog. It's undoubtedly helped demand. But this story began prior to the IRA, and I want to make sure that's clear. This is a story of fundamentals, not just a story of policy. So why has this happened? Why are people buying for us? The value of certainty, the value of certainty of supply, the value of certainty of pricing, lack of tariff and import risk, Responsible Solar. All of these are contributing to what is a historic demand for our product. Policy helps, but it is not the key driver.
Okay. Switching to the cost side. So I'm going to start -- before I go into where we think our costs will be, I want to set the framework around cost and provide some background to our cost numbers. So this chart here indicative costs on the X axis, low to high. There's no Y axis here. So if I start with our fleet module cost produced, right, this is made up of multiple factories, multiple products in different locations. India, we expect to be the lowest cost factory to produce in our fleet. Malaysia and Vietnam are also lower costs than the fleet average. Our U.S. factories, both Series 7 and Series 6, are higher than the fleet average. And there's a lot of reasons for that. It's across fixed costs, cost of manufacturing, the cost to install the building, variable cost, labor, multiple reasons.
If you look at this on a sales freight story, India remains the lowest cost. Primarily, we sell India into the domestic market. But the story flips for the U.S. and Asia. The U.S. ships mostly domestically. And so you have a sales freight cost from our U.S. factories that is below the fleet average for sales freight. The converse is true for Malaysia and Vietnam. Most of that product is shipped out of Asia into the U.S. or into Europe. And with the impact of transoceanic freight, that leads them to have sales freight higher than the fleet average. When you add these together, what you see is India remains lowest cost. On a sold basis, Malaysia, Vietnam are still cheaper than the fleet average. The U.S. is still more expensive than fleet average.
But you see a reversion to the mean, given the impact of sales freight. So these come closer to the fleet average. But this is just cost. And cost is clearly important, but it's not the entire picture, right? Cost, if you don't see a value to it, going up is bad. Cost going up when you see an increase in ASP is not necessarily bad. So what you have to think through is gross margin. What is the gross margin impact of what you're doing? And so for that, secondly here, I'm going to show a chart. Now you have cost on the X axis, lower to higher and ASP on the Y lower to higher. And then we have a diagonal line, which shows impact to gross margin. Above the line is accretive, below the line is dilutive to gross margin.
To begin again with the fleet average. First, look at India. India has a significantly lower cost to manufacture. However, it also is a significantly lower ASP entitlement market. You combine those two results in a gross margin profile equivalent to the fleet. If you take that same story to Malaysia, Vietnam, also lower cost to manufacture than the fleet average, but also working in an environment with a lower ASP entitlement, especially for products shipped into the U.S. relative to a U.S. produced product. And so you see a gross margin profile that can be a little above or a little below the fleet average. There's a range here.
The U.S., the opposite is true. Higher cost to manufacture in the U.S., undoubtedly, offset partially by sales freight, but higher cost, but also operating in a higher ASP entitlement market. People will pay more for a U.S.-produced product. And so again, you see a gross margin profile with a range that can be slightly above or slightly below the fleet average. Same is true with technology. So if we look at technology, start with our current product today, monofacial QED, non-CuRe product. Making that product bifacial costs. So when you make a product bifacial, you lose some front-side watts. For the same absolute dollars to produce that module, you therefore increase your cost per watt for that module. And yet you have a higher energy profile that drives a higher ASP entitlement. So ultimately, despite higher cost, this is accretive to gross margin.
Same is true of CuRe. Markus walked you through CuRe. CuRe is fairly CapEx intensive, but it comes with significantly higher lifetime energy. That energy value in ASP more than offsets the incremental cost from the manufacturing process. And again, similar to bifacial, despite that cost increase, it is gross margin accretive. And finally, the same is true with domestic content. I wanted to call this one out specifically. If we take a nondomestic content module, to turn that into a domestic content module comes at a higher manufacturing cost.
Again, there's some offset with lower inbound freight, but it is a higher cost module to produce. However, we are seeing significant value and if you look at the conversions that we've announced on our recent earnings call, we've seen value in the $0.03 to $0.05 a watt range for conversions from non-U.S. product to U.S. product, more than offsetting the incremental manufacturing cost. So I wanted to set the stage to make you understand how we think about cost. Lowest cost is important, but there are times when adding cost is okay if it comes at an accretive margin profile.
Third thing I want to cover is risk mitigation. So if you look at our module today, about a third of our module cost is fixed cost, about two-thirds is variable cost. On the fixed side, covers depreciation, labor utilities. On the variable side, as we've said before, about two-thirds of our variable cost sits in three pieces: front glass, back glass and the frame. In the remainder of the variable costs, you have multiple line items, none of which get above 10% of the bill of material. So you don't have significant concentration risk outside of those three items.
The good part of this is, if you add the fixed costs and the roughly two-thirds of the variable costs, which we either forward contract, have long-term agreements for or have contractual mechanisms to pass costs through to our customers in the event that those costs change materially, you end up at a point where approximately three quarters of our future costs on the module is derisked. So if you think about this, this gives us a very high level of gross margin visibility. As we think through how can we look forward and price out into the future comfortably, this allows us to do that with visibility into our cost structure.
And as I mentioned before on the sales freight side, substantially all of our product now has some form of sales freight derisking in it. So when you take your cost of produced through to your sold, there's risk mitigation in that piece as well. So all of that put together, what does that mean? If you add all these factors up, this year, we expect the cost of production somewhere in the $0.193 to $0.197 per watt range, excluding ramp cost, which I'll come to later in the presentation. So a midpoint of about $0.195 to produce.
In the forecast period as we go forward, if you go '23 to '24, we actually expect to see up to a 1% increase in cost watt produced. Now there's a couple of things that are happening here. One is, as we grow, we have ramp costs. Those are pulled out from here, and I'm going to cover those later as a period charge. But as we grow, we do have downtime, that downtime comes at a cost. That cost is still reflected in our cost per watt. So we have an underutilization penalty inherent in these numbers due to growth. If you strip that growth out, you would actually see a decline '23 to '24. But it's a drag on cost per watt as you go into next year because of the growth that we're seeing.
The other piece you see in here is the addition of more U.S. capacity. So as I mentioned before, U.S. capacity is more expensive. As we increase the mix of U.S. capacity in the fleet, you see an increase in the cost per watt impact. Going beyond '24 to '26, we're seeing about a 1% to 2% reduction per year forecast and the cost per watt produced. If you look at the sales freight side, we expect sales freight to come down to historic norms by about the end of this year. The converse is true to the point I just made on cost for the U.S. As the U.S. mix increases, it actually benefit sales freight as we have less transoceanic freight. So we expect to see freight come down into the 2.2 range and thereafter decline in small amounts as we add mix.
The other piece I should say is here, as I mentioned before, even if this were to increase, we have a contractual protection in substantially all of our contracts around this piece. So we add those two together, cost to produce, cost of freight, again, excluding ramp, we see 2023 to '24 expected reduction 0.5% to 1.5%. Going '24 to '25, we expect 1.8% to 2.8%, and then going out '25 to '26 about a 1% to 2% reduction in cost. Now there's one other comment that's worth making on this slide. As we expand into the U.S., we do see impact to our cost per work for more U.S. production. A greater mix of U.S. production impacts our cost per watt. If you look at recent announcements from our competitors, if you look at what we're seeing in terms of announced CapEx per watt, we're seeing numbers that are 2 to 3 times higher CapEx per watt.
If you look at labor costs per watt, the amount of employees that our competitors are putting in press releases for their new facilities in the U.S., we're seeing numbers 3 times or more. It comes back to a point that was made earlier around we've long said that we believe CadTel has a technology entitlement. It has an entitlement to be the lowest cost technology if we're in a level playing field. We have not been historically. But as we start to see more capacity talk about coming into the U.S., we do believe our CadTel technology to be advantaged. And the recent announcements we're seeing from competitors are bearing that out in terms of CapEx and labor.
Okay. Other key component of cost is overhead. What does it take to run the company? So there is a small piece around $35 million of cost that sits in the cost of sales line, so above the line into gross margin. The rest, the majority what we talk about as OpEx when we give you guidance is SG&A and R&D, which sits in the operating expenses line. You can see here, we've talked often about the value of leveraging a largely fixed operating cost structure. So we are forecasting almost flat SG&A as we go across this horizon. We are taking the opportunity to invest in R&D. So you see the R&D dollars increasing here. And this brings our forecast out to 2026 to around $400 million of SG&A and R&D expense combined.
But importantly, when you look at this on a per watt basis, when you look at this on a produced basis, you see a decline. You see the value of scale. So here, we're leveraging our fixed cost structure and you're seeing on a cents per watt basis, SG&A coming down by about a third. R&D, I just said to you, we are increasing dollar spend. But when you take a value of scale, you're still reducing R&D on a per watt basis. So when you look at this overall, by 2026, we see ourselves just under $0.02 a watt of overhead, which we believe to be globally competitive.
So this is the story we've told many times before, continue to say. Growth is accretive to us. Contribution margin leveraging our fixed cost base helps operating margin expansion. This is what you're seeing here.
Growth costs. So we do have costs to grow. As we grow, we will incur these. Start-up is preproduction, and it impacts operating expenses. Ramp is after start-up but before we get to scale manufacturing, and that sits in the cost of sales line. If you look at what we're forecasting for the next few years, we're seeing here a midpoint of about $300 million of growth-related costs over the next three years. The majority of this associated with our new factories in Alabama and Louisiana. As you can see, the profile here decreasing over the years. A lot of that spend happening 2024, decreasing in 2025, where through the start-up phase by '26, you still see some ramp of those factories out in 2026.
Okay. The IRA. I said earlier, this is non-IRA story. There's clearly benefit from the IRA, but it's not driving the fundamentals. If you look at the IRA, we do expect to benefit from tax credit incentives here for domestic manufacturing. We expect that to be a fully integrated credit, slightly over $0.17 per watt. In terms of structure under the IRA program, a 10-year program, we can elect a period of five years at any time for refundability. Outside of that period, there's a transferability of the credit.
Importantly, on a recent clarification, that election for refundability takes place at a facility-by-facility level, not at a corporate level. So although we will elect refundability starting this year for our operating factories, as we bring on new factories online in Alabama and Louisiana, the five-year clock for those factories will start at the time they come online. So that is a benefit to us as we do expect there will be some haircuts in outer years to transferable credits. I don’t think it will be significant, but there will be something relative to the refundable that we see at the beginning.
How do we account for this? On the P&L, you see this as a reduction to cost of goods. In terms of cash, I would say, the timing is still uncertain. So in a typical cycle, what we will do is we would expect to file a full-year tax return in Q2 or Q3 of the year subsequent. So our 2023 return will be filed Q2 or Q3 of 2024. We would expect some time after that to receive the cash, timing uncertain.
In terms of what this means in terms of the credit, you take that cents per watt, this is the US production volume that we expect. This will give you the dollars that we would expect to receive. Now again, I want to put this in context again, because if you look since 2021, First Solar has committed over $3.5 billion of capital into the US across Ohio, expanding Ohio R&D facility, Alabama, Louisiana, a commitment of over $3.5 billion. If you look at the forecast spend profile here, we'll spend over $4 billion on these facilities, right? This is creating American intellectual property. This is employing American workers. This is creating American solar modules. This is investment that we are making. If you look at when the Inflation Reduction Act was signed, we're already making these investments. And if you look at the majority of the spend, the majority will occur well before you see any proceeds from the Inflation Reduction Act. So we are investing and investing heavily ahead of this credit. And this is important as we think through capital, which we'll come to later.
Okay. So far, I've talked about mostly the US bookings, US and rest of world. I'll touch on India for a second. So if you think about India fundamentally, as a recap, India has all the hallmarks of a very attractive market for First Solar. So what does it have? It has strong macro fundamentals, has a policy and tariff environment that creates a level and fair playing field, which is all we ask for. And it’s a market that's well suited to our technology. From a spectral temperature coefficient advantage perspective, India is a good place to deploy thin-film cadmium telluride.
I mentioned earlier that in India, we don't count a contract as a booking until we have 100% security. So there is little to no India volume in our contracted backlog today. However, we do have close to 2 gigawatts of signed contracts in India with ASPs in the mid-20s, which, as I said before, will provide a gross margin in line with the fleet average. And we have a multi-gigawatt pipeline of opportunities. I would expect, given the typical contracting time frame in India, the time between contract and delivery, I would expect we will not see the same level of backlog in India that we see in the US. It's not going to happen given the time frame of contracting. This provides us with good visibility into what's happening. But in India, sales cycle can be three to six months versus a two- to four-year cycle in the US. So you won't ever see that same level of long-term visibility. We're very comfortable with where we are in India today.
And as I mentioned earlier, we have to export into the US market as needed. There is actually a minimum export requirement that we have in our India facility. It's small, about 1.5 gigawatt to meet some tax benefits. Here, we're talking about the ability to bring into the US to mitigate any constraints we have on supply-demand balance and also as a potential upside around gross margin in the short term. So, brief commentary on India, but I want to make sure it's not forgotten. It is important to us.
So you put all that together, what does that mean? When you aggregate this picture, when you look at the position we find ourselves in today, record backlog, strong ASPs, managed cost per watt profile, reductions in our cost per watt, managed overhead, some reductions there, reductions on overhead per watt, investments in the US which provide us with an IRA credit, this leaves us very well positioned, visibility into a margin profile and into a margin profile that we think is very attractive. So if we look at this going 2024 out to 2026, we forecast a gross margin, excluding the value of the IRA, rising from 20% going up to 30% over the next three years.
We see operating margins, again, excluding the value of the 45X credit under the IRA, rising from 10% 2024 out to 24% over the next three years. And what you're seeing here as the gap between gross margin and operating narrows, you're seeing the value of scale. So what's happening here? You're seeing the value of growth, the timing of that value as start-up costs roll off, and you're seeing the ability to leverage that fixed operating cost structure over increased volume. Hence, you have a declining gap between your gross margin and op margin. As you will see reported, when you add in the value of the Section IRA 45X credit, we see gross margin forecasting to rise up to the 60s on a gross basis and the 50s on a net basis. So this is the story. This is the balanced growth and profitability investment thesis, leveraging fixed costs that we've been talking about, we've developing, we've been working towards over the last few years.
Okay. Shifting gears to capital. So I'm going to start with allocation, how we think about capital. And this is the slide that we showed you on our 2017 Analyst Day. It reflected our position back then. If we bring that forward, working capital is still top of the triangle. It's still how we fund our core business remains the first thing that we look at. I would say, our working capital intensity has decreased as we exited the systems business. But at the same time, as we add more production capacity, more modules, you do see a slight offset to that in inventory. Capacity expansion and maintenance CapEx, clearly a point in the cycle where that's key for us. Right now, it's a significant use of cash. We're investing a lot into income and cash producing assets at high ROICs. We have exited the systems business. So this is a big piece of what was a view of capital that's gone. However, we are allocating more into research and development, including into building a dedicated R&D facility here, as Markus showed you earlier. So there's a CapEx association with R&D that is increasing.
Think about M&A. M&A has always been a relatively small part of what we did. When we had the systems business, we would acquire systems-related pipelines. As we exit M&A -- exited the systems business, apologies, M&A became smaller. We recently acquired Evolar in Sweden to help us advance our CIGS and perovskite efforts. M&A is something we will continue to look at. We'll continue to analyze. I would say that if we can see things that are adjacent to next-generation technologies, this is something we may spend more money on in the future.
And then finally, capital return. So at the end of the triangle, it still stays there. Given the right opportunity, we would always prefer to deploy our capital back into income and cash-producing assets. However, in the event that we have excess cash that we cannot deploy that capital at the right risk-adjusted returns, we would look to return capital. In the event that we get there, we would more likely look to return capital through buybacks than a dividend. But I believe we are still a long way from this. And one of the main reasons is where we are in the investment cycle.
If you look at our forecast upcoming, we forecast deploying just under $2 billion of capital in 2024. Most of that is associated with growth in the R&D facility. If you look at that across the three horizons, it's $4 billion or so of CapEx. This supports capacity growth, R&D investment, technology initiatives. So we're still in a significant investment cycle in the CapEx cycle today. So what does this mean as we think through the overall capital position? If we start with the uses, CapEx is clearly the main use of our cash. So we have relatively small annual maintenance spend. But we are in a growth cycle. We've got about $1.5 billion of committed capital associated with growth. We've got about $0.5 billion associated with the R&D facility. And on the technology side, there's a significant CapEx profile associated with bifaciality, the advanced interconnect that Markus talked about earlier and CuRe. In addition, there is a potential or opportunity for us to work with our vendors and supply chain, which may require capital or allow us to use capital to optimize supply chain.
And lastly, M&A. If you think about our sources, we forecast ending this year between $1.5 billion and $1.8 billion of net cash. Now this was before the announcement of our new facility in Louisiana. That will incur about $100 million to $200 million of CapEx spend this year, a core business that's producing strong operating cash flow. We also currently have about $1.5 billion of customer deposits for future module deliveries with us, which has certainly helped us as we think through the expansion profile we're going through. It's also an opportunity. As we announced our new facility in Louisiana, as we continue to contract, there's an opportunity for incremental deposits and a source of cash associated with that. As I mentioned before, the IRA Section 45X credit, significant cash, but timing uncertain.
And then I think through debt and liquidity. So today, we have a fully funded $0.5 billion facility from the DFC against our India factory. We have $1 billion of revolving credit capacity undrawn today. On the cash side, about two-thirds of our cash sits offshore. Conversely, on the CapEx profile, about 90% of our CapEx spend is onshore. If you think about 2017 tax reform, it made it significantly easier to repatriate cash. We effectively paid repatriation taxes at the federal level on that cash, but there is some tax burden that would remain at the state level. Today, we assert that our cash is permanently reinvested offshore. To bring that back would incur some costs.
And then as it relates to further liquidity, as we think about bridge financing, as we evaluate the need potential for bridge financing, if I had every Section 45X dollar in my pocket at the time I report the earnings, if I had that cash at the same time, this wouldn't be a question. But the reality is, effectively, I have a large receivable. Now that receivable is backed by the full faith and credit of the US government. So it's the best credit you can get, but it's a large receivable. Given that timing uncertainty, this is why we continue to evaluate need for potential capital bridging, if any.
Okay. So let me summarize some key messages before I end. Start with the growth thesis. So the investment thesis is driven by differentiation, by a balanced business model. It's also driven by execution. It's easy to announce capacity. It's harder to build it, right? We have a proven record of execution. If we announce it, we build it. Likewise, if we contract it, we fulfill it. We've done this with strategic intent thoughtfully. We've positioned ourselves for a forecast production increase that's significant, overall production, domestic production. And we've also contracted it at what I think are very attractive ASPs.
When you flip that forward to profitability, those ASPs are supported by cost reduction, by risk mitigation, on the cost per watt level, both at the module production and in the overhead side. That leads to the attractive gross and operating margin profile that we just showed you at the core business as well as including the value of the Section 45X credit. And on the liquidity side, we're managing our capital position through an incredibly heavy CapEx spend cycle, balanced with strong operating cash flow. So overall, we believe that to be an attractive position.
And with that, I'd like to invite Mark back up to provide some closing remarks. Thank you.
Mark Widmar
All right. Thank you, Alex. Obviously, a lot of great information, a lot of details and specifics. I'm going to just have some closing remarks, a handful of slides and some comments, and then we'll open it up for Q&A. We'll bring the entire ELT up here as well. So I'm sure there's quite a bit of -- quite a few questions given the length of the presentations we've had already.
But from a closing remarks standpoint, we use this type -- slide a lot as we just sort of think forward, right? And we do this as a reminder that we're playing the long game, right? I mean there is a horizon that's out in front of us. We're still in the early innings. The world of electrification is just starting. The opportunity is in front of us. It's evolving. So we always want to kind of look forward. Look, we set out an objective in 2017 to create a growth company, I think we delivered that. If you look at where we were to where we are right now, I think we delivered against the commitment and the aspirations that pretty much any of us had in terms of what we could do in such a short period of time, and we delivered with execution, and there's no doubt about that.
I mean, the challenges that we had to deal with trying to put these factories and ramp these factories through the pandemic that we all were dealing with, most of these tools that you see out in this at factory floor and the ones that you'll see in our new factory are embedded with dozens, if not hundreds, of chips, semiconductors, right? Each one of those had to be managed at the lowest level of detail, micromanaged to make sure we cut the supply chain lined up so those tools could be delivered on time, that those tools could be installed on time, that those tools could be up and operational on time, that could meet their equipment process qual and their process quals, right? The equipment qualification and process qualifications to make sure they can be fully functional and then we could hit the ramp, right? So we've delivered against our commitments, and we've executed. There's no doubt about that. But we got to keep playing a long game. We got to keep thinking about what's in front of us, what's next, where are we going.
And we've also indicated that the reality is that we are a balanced business model. We make decisions that are informed by understanding the market, understanding our customers' demand, understanding our customer product requirements. That's reflected in our backlog. But Alex indicated, from '24 forward, it's 70-some gigawatts. We have 7 gigawatts, which will still be delivered this year. So if you add that together, it's 78 gigawatts of forward-looking demand that we can then lean into, that we can make investment commitments and we can deliver against. It's embedded with manufacturing excellence and capabilities to get these factories up and operational. It's embedded in our technology platform that we have today that is advantaged on a cost and energy basis. And hopefully, that was clear through the presentation. If not, let's make sure that those questions come up, so we can address them. It's embedded with our responsible solar approach. We do it differently and we do it better than anyone else in a responsible way that accretes values to our customers and to our shareholders.
The one thing I'll also say is that when you look at a couple of those, our technology platform and of our manufacturing excellence, they're very synergistic, right? They complement each other. Hopefully, some of you saw outside when you walked in, that there's a 550-watt Series 7 module that's produced off of our production line. If you would have thought through with our current semiconductor, our QED product that we have today and said, what was the potential of that technology when it was released through our development process, it would never have said 550. The art of the possible didn't exist at the time. The art of the possible happens when we get into our manufacturing capabilities, and we optimize the technology. Keep that in mind as you think about that technology road map. That technology road map is reflective of what we believe and understand through our development lab. It doesn't fully optimize yet to understand what we can do and what the potential is in our manufacturing environment. I believe there's more opportunity once we get it into production. That's why we're going to be slow though.
As it relates to CuRe, we will take our time. I don't want to go and over-invest in capital that I don't need. I also want to make sure that's fully optimized before we replicate it across the fleet. Our contracts allow for that. Our contracts are structured in a way that we do not have to deliver the CuRe attributes in the horizon that we are looking to roll the technology out. So we'll be disciplined and mindful in that regard.
Look, we've got a goal. We've got a goal that we entered this decade, we want to be stronger when we exit it. I think we've given you a lot of the building blocks on how we think we can make that happen. Let's talk about a little bit of this. We go back to our triangle, like, this vision of what we need to create this disruptive technology, this transformative technology, this enabler of the world of electrification that needs someone to take photons and make electrons. That's where we're going to sit. That's what we're going to do better than anyone else. And we'll figure out how to optimize this triangle. We indicated the future belongs to thin film. That triangle can’t be fully optimized without thin film.
Capabilities that we have over the decades that we've been a company are going to best position us to enable that optimization of that triangle and that technology platform. Once you have that technology platform, as I somewhat indicated earlier in my comments is that, most people have been optimize on two nodes, not three nodes of that triangle. Nobody other than us is really focused on responsible solar because embedded around all that is responsible solar. No one else focuses on that but us, right? So we've got two nodes, and we've got responsible solar. That's unique and differentiated and valued by our customers. We can create that third node that keeps everything else still in balance, that efficiency node. Now we can expand our addressable markets. So how do we think about that? This little -- these gears that are showing up here as well, how do we think about that? We're going to focus on markets that have sustainable demand -- predictable, sustainable demand. We're going to make sure that we are engaged actively in a policy environment to ensure a level playing field. And we think in those markets where there's a level of playing field, we outcompete.
We think our technology today can outcompete. The technology of the future, we think is even going to be more advantageous in those markets. We get the right product fit embedded by the right technology platform. We can expand our addressable markets significantly above and beyond what we do today. I mean Alex said a number of times, we're mainly focused on the US markets, US, India, it's Europe, it's utility scale. That's not the entire market we can serve with the right technology and the right platform. So what do we want to do? We want to exit this decade stronger than we entered it. Hopefully, George is okay.
The -- so we're going to exit the decade stronger than we entered it. We want to serve all the markets. We want to focus on how do we do that. We want to commercialize the next-generation PV. And that -- if we do that well, that can create the potential that this journey that we created and delivered on so far will continue and it will thrive. We believe there is a potential as we exit this decade, that we can see that we're double the size we are now. Whether all that capacity is up and operational at that point in time, may not be. But we can see that horizon in what we can do and expand our addressable markets.
And as I think through that, I could see growth maybe 10 to 15 gigawatts in our traditional utility scale. And that's going to be a much stronger presence in Europe, probably more capacity in India, maybe a little bit here in the US. But we can also now start serving markets like the Middle East, Southeast Asia, LatAm because I’ll have the best technology in the market in all applications, all of my customer needs and requirements, highest efficiency, best energy profile, lowest cost. I can also see us having 10 to 15 gigawatts of opportunity in residential, distributed generation of some type. Again, highest efficiency, best energy, lowest cost. All that enables growth beyond what would have been envisioned when we last met at an Analyst Day. The potential is there.
As I indicated, as we look across this horizon, the first third is behind us. It's largely been around manufacturing excellence, building our backlog. The balance of this decade is going to be focused on technology leadership and disruption that we think we can do to further expand and enable growth in this company. We are a module manufacturing and technology company. That's what we do. And we want to do it better than anyone else. We are passionate about leading the world's sustainable energy future. Through technology leadership, the journey we're on now will continue. Thin film is the future. There's no doubt about that. We have the capability, now we need to deliver.
All right. Thank you. Those are my closing remarks. We're going to bring up some chairs and then we'll bring the ELT up as well.
Question-and-Answer Session
A - Caroline Stockdale
Everybody, it's a pleasure to have spent the morning with you before we transition to lunch and then the tours that we all want to ensure that you get a chance to see this in action. We wanted to ensure that you have an opportunity to ask questions. We do have some that have been pre-submitted, which we will pepper in throughout the -- this time period. I do want to remind everybody quickly that we've pulled lunch in about 15 minutes just to ensure that we've got enough time to allow shuttles to the airport to come a little bit earlier and make sure everybody can get home. With that, if you all are ready, we've got a first question already.
Philip Shen
Thank you. Thanks for the presentation today, Mark and team. I want to talk about bookings, and I was wondering if you could share since the Q2 earnings call, how have they been? And then we've seen a fair amount of movement with pricing for some of the crystalline silicon players. But the UFLPA-compliant crystalline silicon companies are still pricing at the same level. And so -- but I'm wondering if that -- if their pricing specifically Jinko, JA Solar, Trina, if that pricing starts to come down a touch, to what degree could that impact how you guys price your product for some of these outer year time frames? So that's question one.
Question two, Alex, you just talked about the gross margin breakout, right, between products from different geographies. For the US, you had it higher, for -- especially the domestic content value. It seems like some of your customers may need tracker now to hit that domestic content bonus. Some are even sharing with me that they may not be able to do it with Series 7 alone. And so not only Series 6, but also Series 7 may need tracker. Can you talk about the domestic content approach math -- approaches and math for Series 7 and Series 6? And then at one point, maybe a year ago, you guys had contracted about $0.04 a watt, I think, for the domestic content out of a $0.10 per watt value. Are you still able to hold that level? Or has that come in a touch because your customers may need tracking? Thanks.
Mark Widmar
I'll pass it over to George on the pricing. But what I’ll say on the bookings at this point, Phil, we're not commenting on any incremental bookings since the last earnings call. Obviously we'll cover that coming up in our next earnings call to the extent there's any large framework agreements, obviously, we potentially would evaluate communicating those at appropriate times. But other than that, we're not going to make any comments specific to that. On pricing, I'll let George give a little bit more color. The one thing I want to say around pricing and then George can provide his comments is that we can be patient. We're sold out through 2026. We've got a good portion of ‘27. And we can make sure that we're disciplined in how we engage the market. One of the things we talked about in the last earnings call and reflected on Alex's slide as well. We saw a really relatively large reduction in our pipeline and transparent. It was with a very large multi-gigawatt customer, which we couldn't reach agreement on. Their view around pricing was much lower than we were willing to accept. And so we walked away from that. And we'll continue to sort of demonstrate that discipline. And we'll engage with the right time and we'll negotiate pricing that we believe is acceptable. And if we can get to that point, then we'll contract it. But we don't have to rush. We've got time. But go ahead, George.
Georges Antoun
Yeah. No, I agree. I mean we talked a little bit at the break. We can be very selective in the way we approach things. I think your question has a few things behind it, which I'll state. Where is the competition going to be in '27? We're selling in '27, '28, '29 and beyond, right? So I think what you're also putting out there is where the competition is going to be. You mentioned big three. But those customers that basically has been with us, those partners have been with us, they're basically booking right now. Those that basically are trying to play and see where the market is going to be, we can be selective with them and really evaluate things down the road and see how the market evolves. But we feel we're in good place. Our cost is fantastic. Our pricing ability or power is there for us to close deals. The only thing I would say is since we're selling into '27, '28, '29, there's a bit more discussion with our partners, but normal path for us and the team.
Alex Bradley
And as it relates to domestic content, so I think the language that came out was perhaps not as simple and as clear as anyone would like. I would say that we are probably best positioned in the market to help people use the language as exists and meet the criteria they need. If you look at our Series 7 product, we said that our Series 7 product under that definition is 100% US content. But our Series 6 is not quite there, but it's a very high percentage of content. We are working with our customers. We are providing them the level of detail they need in order to meet the reporting requirements they have and the analysis they need to ensure that they can achieve that credit.
Now can they do it with our product alone? Maybe, maybe not. It's for them to decide if that's the case. In terms of value, the $0.03 to $0.05, midpoint of $0.04, we've seen that number on our conversions over time. We think if you do the modeling, there could be upwards of $0.10 to $0.15 of value creation by having that domestic content depending on how you optimize your financing. So if they're paying $0.03 to $0.05 to us, it leaves them room to pay for other pieces of equipment that they may need in order to meet the domestic content threshold. So I think it's possible for them to do. And we're certainly hearing from at least one leading tax equity provider they are looking to provide tax equity financing that would include the value of domestic content for projects that include our modules. So we're seeing it happening out there. It's perhaps more complex than we would like, but I do think it's possible, and we're working with our customers to make sure that we provide them what they need to enable that credit.
Caroline Stockdale
Okay, thank you. Let's see. We'll take one in the back and then we'll take, Brian, you.
Unidentified Analyst
Hi, good morning, guys. Thank you very much. Maybe just to follow-up on the '27 to '29 commentary a second ago and talk about the technology road map, you guys laid out conceptually the thought process about tandem is the answer. You laid out several different permutations of what that tandem could look like. At the same time, you guys stopped short and saying, look, through '26 is our plan. How do you think about what that time line is to reconcile when you get to tandem versus beyond the '26, right? What does S8 look like, if you want to call it that, for instance, is it a further expansion and implementation of the existing cell technology of S7 in maybe a different scope or a different size or generally talking about a tandem deployment in that '27 to '29 kind of time frame as we brought it up a second ago. We can speak to that specifically here.
And then second question would be more about -- you alluded in your final remarks about the international expansion opportunity in terms of sales prospects. Obviously, US versus global has different ASP dynamics. How do you think about the timeline to be able to go out to international sales? Obviously, considering that clearly in the near term, you're sold out with your existing capacity announcements.
Mark Widmar
All right. So I'll take maybe the comment around S7. And then, Markus, I'll let you take the tandem conversation, and then I'll come back to the discussion around timing for expansion outside of the US. One thing I want to make sure is clear is Series 7 with our CuRe roadmap is highly competitive. We are very comfortable going head-to-head with N-type, like, TOPCon as an example, again, because of the energy value.
And we know that, that is a very highly competitive product. So Series 7, as we look across the horizon, the journey is really what Markus laid out, which is CuRe and then HDI and then further expansion around bifaciality. I think his prepared remarks indicated '25 is the commitment, but there's a path potentially to go above and beyond that and go to as high as S50. And if we're able to get that across that horizon, very comfortable with how that would compete in the marketplace. Next-gen product, if you want to use the word Series 8, most likely would be something beyond single junction semiconductor, but maybe Markus give us some thoughts around that.
Markus Gloeckler
Yes. I think the I try to paint a picture today about where the industry as a whole is with these technologies, right? So everybody sees and likes us to talk about the tandem as this future technology know it. You can read many reports out there about the silicon road map leading, this and this and this and eventually then there will be magically a tandem appearing on the horizon.
The reality is that tandems need to be constructed with materials and the materials, I covered all of them that are available. And the challenge that we see is that all the ones available, still have significant challenges to bring them to scale.
So an exact date, is this a '27 or is this a '28? We don't have an exact date to communicate today. It is a formidable challenge still to talk about having a Perovskite or otherwise thin-film, which is required for a tandem device to come to market, be market ready with the maturity that the industry expected on a quality, on the reliability and on the scalability, being able to do this, what we do large-scale manufacturing, there's a lot of hurdles still to cross.
Georges Antoun
Yes. From a sales perspective, we're selling CuRe. This is our road map today. I think the team and Markus showed you what's the possible the innovation with tandem and Perovskite and others. But from a sales perspective, we're selling our road map, our existing road map today, and it's playing very well as what Mark said, and the proof is in the bookings.
So we're closing '27, '28. And we're working on our energy value. You've seen it the CuRe road map and HDI, and that's been very important for us. So for me, as the commercial guy I stay consistent on selling what's on the truck as they say, and then the innovation, waiting for the innovation to happen and then that communication happens with our customers and then we try to adjust from there. But right now, I'm very comfortable with what we have in front of us and closing deals based on our current road map.
Mark Widmar
Yes. I would say, go back to your question around kind of international expansion or other markets. Look, one of the things we showed you is kind of how we think about technology and how do we think about market segments or how do we make sure that we've got a market fit that works, right, in that market fit is sustainable, reliable, highly predictable demand policy environment and then the right product with the right technology.
So without technology evolution disruption that it would come from a tandem product as an example or maybe commercialization around Perovskite or what have you, is we're pretty much going to be utility scale. And if you look at where we fit today with that is India and the U.S., they hit the intersection of what we need, right? It's reliable and highly predictable, sustainable demand, policy environment that ensures a level playing field and then we have the right product fit, because there's a large utility scale applications and opportunities.
And one of the other things that is very attractive around India, it's hot and humid. And if you probably didn't catch it in kind of the attributes that create value where we differentiate ourselves around. Energy is also our spectral response or how our technology is impacted by moisture in the year. We're less impacted by moisture in the air than crystalline silicon, therefore, will perform better in humid environments.
So I could see playing another factory expansion in India, potentially another one here in the U.S. Europe's got a long ways to go would be my next priority in terms of the policy environment, but it hits the other requirements. It's trying to move in the right direction. I think it's unfortunate that it's slow. We have submitted kind of a response to a request for proposal and for - Germany had a process where they were trying to run for manufacturing in Germany.
I think we made that public before that we had submitted to that, to understand what programs and constructs could be put in place in Germany, and we'll see how that plays out. But that's kind of where I would say with our single junction CadTel technology, largely where we're going to play. What expands meaningfully beyond that, though, is if we get to that next evolution of the technology platform is in it expands my addressable markets in the key markets I'm already serving, plus it allows me to expand into other markets that I don't serve today, geographies.
Caroline Stockdale
Great. We're going to Brian, and then we'll get some in the back.
Unidentified Analyst
Yes, thank you. Good morning, everyone. I guess on that point, Mark, if we think about capacity growth for the back half of the decade, a lot has to do with the technology road map, which is a bit uncertain, but you still have Series 7, you still have CuRe advanced interconnect. So I guess big picture, what's the gating factors to what you're doing next on capacity growth? I would assume it's still going to be Series 7. Is it getting CuRe fully rolled out? Is it at advanced interconnect? Is it just capital and getting IRA credits coming in? And then, I guess, related to that, what's the visibility? When do we start to see or hear the technology add are starting to show up in price? And can you kind of walk us through how much of that is CuRe, how much of that is some of the other developments you sort of outlined here today?
Mark Widmar
Yes. I'll let Alex talk to the technology adders and how they flow through and the mix of what they relate to. The governing factor, which hopefully was clear as well in the presentation for us is we're always going to be led by demand. If the underlying market demand is there, bookings continue to remain strong, whether they're in India, whether they're in the U.S. or elsewhere, then it lines up to a capacity expansion need.
We have - we're highly confident of continuing our capacity expansion on Series 7. So there's not a gating factor of the next technology platform to enable growth. It's really around continuing to serve the needs of our customers. And as demand is realized or we have visibility to, then it enables commitments around further capacity expansion. And look, we'll continue to see how the balance of this year and early into next year plays out. We continue to sort of give indication to our supply chain of always think about this continued cadence of rollout of whether it's our equipment suppliers, whether it's our glass suppliers, keeping them in - on the radar and keep, make sure it's visible that there is further growth because I need them to be running with me.
I don't need them to fall behind us. So that visibility is embedded there as well. CuRe does give us thinning of our semiconductor, which also creates - enables more capacity utilization over our tellurium supply chain, which is critical for us. So that is kind of complementary to the growth as well. We want to make sure that CuRe's fully realized from that standpoint because it addresses tellurium as a supply chain opportunity that we need to keep in balance as we think about our growth. But yes, it's not gated by the next-gen technology or product. It's - we're very comfortable continuing to expand on our Series 7 platform and technology.
Alex Bradley
Yes, Brian. So if you think through the adjusters, they're not necessarily when you contract them, they're not linked to CuRe as a whole. We link to the different attributes that CuRe could bring those attributes could come from other areas. So we look at spectral responsibility, we look at degradation, we look at bifaciality. So we don't provide the breakout, but that's how we think about how we contract them.
So as you think through CuRe, for instance, even parts of CuRe that could come in earlier in another part would still bring a benefit if it gave you the piece that you acquire around degradation or the piece you acquired around temperature coefficient.
In terms of the value, again, I don't have the full breakout, but if that 0.4, you can assume the majority of it sits 2026 and 2027. So you could have something in the range of 0 to 100, 150 of that across 2024 and '25, the remainder sitting out in 2026 and 2027.
Caroline Stockdale
Before we get another one from the audience, we did get a pre-submitted one that touches on what you were just talking about, Mark. Can you - why don't you comment, please, on the tellurium runway? And what -- how far it can get our growth trajectory?
Mark Widmar
Sure. So I think one of the themes that we've talked about today is playing that long game, right? And part of that long game is the preparation, and we've been working for years with our supply chain partners, right, to be prepared to ensure that we're appropriately positioned for that growth. We think specifically about tellurium and one of the things that we look at is copper growth, right? Tellurium is a byproduct of copper.
As copper continues to grow, tellurium, obviously comes along with that. Mark talked specifically about Rio Tinto and the green copper and the circular economy that CadTel actually brings to a copper provider. We're seeing more resiliency in that and seeing some domestic mining operations continue down that path. Additionally, we work on the technology side with Markus, that thinning of the technology is beneficial there as well.
And then Mark also hit earlier today on the recyclability of our process. We have over 50 gigawatts of CadTel modules in the field today. Those are going to come back, right? We recycle, reuse that product as well. So we are very esteemed to make sure that we're positioned for growth in the future.
Caroline Stockdale
We're going to take one in the back and then we'll come back to the front.
Unidentified Analyst
Good morning. And thanks for taking the questions. So I think it was in Markus' section, there was a reference that CuRe outperformance TOPCon and energy in 13 states in the Southeast. I was wondering if you could disclose what states those are? And then sticking with the discussion on CuRe, if I recall correctly, I think there might have been an issue getting to like manufacturing readiness or something. Can you refresh us what those issues were? And if you've gotten past those hurdles? And then finally, for Alex, those technology adders that you disclosed for '24, '25, '26, what's the margin on the incremental adders? Thank you.
Markus Gloeckler
Alexander, you want me to take the state question?
Alex Bradley
Yes, you can take the state.
Markus Gloeckler
So on the state question, I think there's a latitude and longitude. We just took a latitude on Longitude. It's about mid Texas over to the East Coast and then Tennessee down to Florida. So, the second part question in regards to manufacturing issue with CuRe, I believe you're referring back to 2021, 2022 time frame.
So, CuRe has been with us in the R&D pipeline for quite some time. When we set our path to launch CuRe the first time in 2021, we made that decision on the basis of all the R&D signals showing that we should be ready to go based on how we have done the development in the laboratory, what we saw, what we anticipated would be happening.
As we got into this, into the scaling aspect and started to bring the processes to the manufacturing tools, new issues emerged. Technology development is never without risk. So here's one where will we experience more and more challenges. And then in early '22, we made the difficult decision to pull it back and say, "Listen, we aren't ready. We got to put this back into the development pipeline." And that's exactly what we did.
So the big difference, what happened then though is we had learned about a lot of the challenges. And when we pushed this back into the R&D development pipeline, we put the full scrutiny on it like we would be launching it tomorrow, the full testing vehicles, right, that we apply typically at the later stage of the program.
We pushed it all into the R&D development pipeline to make sure we check all the boxes in an earlier stage before we consider the technology for scaling again. So we reached that stage at the end of 2022. This is what I referred to preproduction sort of environment, what we call our development line.
We've been able to now reproduce with the full fidelity nearly equivalent to a full production launch, the capability at the device level that we need in the process scalability. Now this educates us further into the replication. We want to demonstrate this on the manufacturing toolkit in a production-like run before the year end in 2023 and then be ready for scaling in 2024.
Alex Bradley
The other piece, I'll just add to that before I come to your question, you justice. So the last time we pushed CuRe out and had an issue with CuRe. As Markus said, we took it back to the lab. The other constraint we had was if we were to try and push it forward at that point, we may have seen significant downtime associated with implementation, right?
Part of the challenge was the replication at scale. We're actually in that same position today in terms of the impact of that downtime. So as Markus says, we're in a much better position with the technology, but to replicate across the fleet, we're now in a position where we're sold out for the next 3 years, whatever implementation there is, there will be some downtime associated with that.
That downtime today comes at a very high expense, especially for any of the U.S. factories where you have not just the gross margin profile on the CuRe business, but also the associated higher rate credit. So as we think through the rollout in the future, we certainly want to roll it out at the lead line, we want to prove the technology.
The question replication becomes partly an economic question. It goes to the economics to the P&L. It also goes to the CapEx side, where we're working with some of the suppliers on the outside and potentially is a way to do this on a CapEx-light basis that could then be accretive to the overall program.
So proving it out is very important. The replication timing, a little bit uncertain pending what we think the optimal cash and P&L impact could be.
Going back to your adjusted question. So, the way we showed you out until 2026, we're assuming in our gross margin and op margin profile that I gave you, a an assumption around technology rollout that will allow us to capture the majority of the benefits in 2024, '25, '26 in that backlog. So assuming that happens, you'd see the majority of those upside adders come through as revenue and gross margin.
Now they set them, the big piece of that hits out into 2026 and 2027, where there's more uncertainty around the technology. So there's risk around does it all come through from a technology perspective? If it comes through, you can assume the majority happens effectively revenue and gross margin all the way through.
Caroline Stockdale
I want to - we've got one up here, and then we're going to [indiscernible] back and forth.
Unidentified Analyst
Hi, guys. Hi Mark. Thanks for having us. Just how do we think about obsolescence or future proofing since you're developing technology so quickly so just the Series 7 capacity now, what you do with it in 2030 or even Series 6 because I think Malaysia, Vietnam were the lowest in the margin contribution and how you think about making investment there? And then the second part is just, I think it's over $1 billion of R&D, you said that you would spend Alex on one of your slides. Just if you could give us any kind of framework on how you allocate that R&D throughout the organization?
Mark Widmar
Yes. So as it relates to the technology and potential obsolescence again, as we look through the end of this decade with Series 7 platform on CuRe and Series 6 on CuRe as well. The two products are going to coexist together. There are certain sites environmental application requirements, standards that you would say Series 7 isn't necessarily as ideally suited to Series 6.
For example, high wind load areas. So you're going to need both products to serve the full market opportunity. So they will coexist together. They both will be evolved to our road map with both CuRe and HDI, which creates an advantaged energy profile and both will compete very well with - against TOPCon and N-type, which is kind of the most prevalent product that we see coming in the market over the next several years.
As we evolve the technology in the platform, if you think about our manufacturing environment, if there's a front end and there's a back end, most of the backbend is going to be the same. Whatever you do on the semiconductor side, doesn't necessarily change your back-end processing, especially around single junction.
So those tools still will be enduring and valuable for whatever the remaining useful life is. To the extent there are some changes on the front end, there could be some tools that would have to be replaced. But you got -- a significant amount of your CapEx sits on the back end and more importantly, the buildings will be reused.
So you're just looking at kind of front-end capital optimization and potential changes that could happen at that point in time. And if you end up going with a tandem product, depending on what your top sell and your bottom sell is, but if it's a top sell CadTel and bottom sell CIS as an example, then all the tools you have today are needed and you have some complementary tools you'll need on CIS in order to enable the bottom sell. So no real impact from that standpoint.
Alex Bradley
From a CapEx perspective, if you look at the technology base CapEx that we announced that covers bifaciality, advanced interconnection and CuRe. About 2/3 of what we're showing is CuRe-related, the remainder being around our advanced interconnection bifacility.
Caroline Stockdale
We're going to work our way forward.
Unidentified Analyst
Thanks. Mark, I was interested to hear you mention residential, and I'm wondering if that is a market you think you can address with some permutation of CadTel or whether we're going to have to wait on some of the multi-junction products for that to happen? The other question I'd have relates to Europe. Obviously, there's lots of incentive money banging around, but that market is also a wash and subsidized Chinese products. So I'm wondering what your thoughts are about putting manufacturing in Europe and what that might take? Thank you.
Mark Widmar
Yes. At least as I see the residential market right now, it's not clear to me that a single junction CadTel product would be highly competitive. There's some aspect now with the domestic ITC that you could potentially look to that segment, especially with the installed cost of residential is significantly higher than it is for utility scale. And therefore, the value of an additional 10% ITC is significantly more, Alex indicated, $0.10, $0.12, $0.14 in utility scale meaningfully higher in residential just given the difference in installed cost. But it's still not necessarily the right product, the right fit for that segment.
So I don't see it being a primary focus. Could we - as we see additional capacity coming online or opportunistically support some opportunities in the residential space, there's a potential path, but I don't really see that as a primary focus for us at this point in time. And sorry, the second question was on Europe? Yes. So Europe, as I said, it fits what we're looking for, right?
We're looking for a market that has sustainable demand, large size. We have a good product fit for it, especially in southern parts of Europe. It's just getting the right policy environment. I think they're struggling with it. And if they can get the right policy environment and clearly, we're trying to advocate to enable that. And as I indicated, we submitted or participated in the request for proposal that was submitted by Germany. And we'll find out. We'll find out how serious they are and what type of incentives are they willing to provide?
And then also what are they trying to do on the policy side? I mean that's really what -- India has led the evolution, I think, that most markets need to think about. If you go back to my statement around how do you envision or ensure long-term energy independence and security and achieving your climate goals, it's a combination of trade and industrial policies and India did it first. And then the U.S. is now replicated. Europe, I think, has aspirations to do it. It's just a matter of getting it done.
Caroline Stockdale
Okay. We're going to start with you.
Colin Rusch
Thanks so much. It's Colin Rusch from Oppenheimer. Guys, you've done a great job of derisking the business, but I'm curious about your ability to derisk both downstream and upstream from your current operations. You've had a great policy team. And I'm curious about your ability to influence permitting, interconnection approvals, those sorts of programs in the U.S. And then also upstream, you mentioned potential investments in some of your suppliers and given the dynamics around the glass market and what may be required to really support your scale. Curious about the metrics that you would look at and how you would think about making those sorts of investments?
Mark Widmar
Jason, do you want to take the policy one first and then I'll take the supply chain question.
Jason Dymbort
I think us now not being in the development business, we're not as connected to interconnection and permitting as we used to be, but part of our deep customer relationships is we continue to work with our customers and continue to advocate any way we can, particularly as it relates to permitting a First Solar project. And we have a lot of material on for solar and the environmental attributes of our panel, which often goes a long way on the permitting side there.
Georges Antoun
Yes. We do participate continuously at the state and local level in allowing permitting or supporting our partners with permitting. But technology is very mature right now to air. It speaks for itself, the sustainability aspect of it speaks for itself, but we do participate sometimes in some areas where there are some strange requests and the team supports it very strongly.
Alex Bradley
I would say one other area we can help. So today, if you're going out to try and bid for a PPA, one of the questions you're going to get is do you have module supply. And there are in many cases, if you don't, you not going to be awarded that PPA. In many cases, if you're bidding a PPA now out into the back end of this decade, the only place you can get credible secure module supply is from First Solar.
So it's not necessarily directly linked, but having our product stand beside you as you go in for that is going to put you in an advantage position. The same is true of financing. We're not in the financing game ourselves and development side. But obviously, we have good banking relationships. We talk to our customers.
There are multiple banks who are looking and saying, we don't want to finance Chinese product today that we're uncertain of, uncertain of timing, uncertain of delivery and uncertain of tariff risk. If you have First Solar product, we're willing to commit capital, commit tax equity to you in a time frame that requires. So it's not necessarily directly linked, but I think having First Solar beside you can help influence part of that development process and also the financing process afterwards.
Mark Widmar
As it relates to kind of the upstream and engaging with our supply chain partners, we are trying to find a way to create as much resiliency and enabling investments that need to happen beyond First Solar capacity or enabling partners or finding partners who are willing to commit their own capital versus having First Solar provide the capital to them. Because as we've indicated, our own capacity plan expansion as well as our technology road map, there's a substantial amount of capital requirements that are needed. We are a very large player in the glass industry. If you look at where we were back in the day when we were about 1 gigawatt or so in the U.S. to now be 14 gigawatts, right?
When you actually look at the amount of float capacity that's in the market, and there's only 1 new float that has been brought into the market over the last 40, 50 years, and that was our facility, which we refer to as Lucky, Lucky facility is in Lucky, Ohio. It's the only new glass float that's been put into the market. But that's why we - you may have saw that - we made an announcement on cover glass with Vitro, right? So that's another partnership that we're trying to develop. And we've got other partners that we're working with and to do it in such a way that they can bring their own capacity or capital to deploy that versus First Solar.
We're doing the same thing on the tellurium side a little bit to continue to enable opportunities for expanding that supply chain, finding the right partners who are willing to make the appropriate investments versus First Solar having to carry that responsibility.
Caroline Stockdale
We've got time for just two last questions. So we'll take one from both sides of the room. We'll start with you.
Unidentified Analyst
Thanks so much. I'm just curious if there's an opportunity to sign some strategic partnerships or agreements with other hardware manufacturers, whether it be a tracker or inverter supplier to make sure customers can meet domestic requirements, and therefore, you're able to monetize some of those ASP adders on top of your base ASP?
And then the second question I have is just relates to the green hydrogen opportunity and how you're thinking about that and how some of those conversations are starting to formalize? I know a lot probably rides on the 45V tax credit guidelines that are expected to come out over the next few weeks related to additionality. But just in - if you could just give us a flavor for how some of those conversations are progressing, that would be helpful. Thank you.
Mark Widmar
So I'll let George take the hydrogen question because it's an area of focus for him and his team. But we are trying to do just what you said around the domestic. We're trying to create a solution not just with the structured providers, but even with the EPC providers, right? Because there's the prevailing wages and what they need to qualify for as well. And so we're trying to find the right solution that we can then provide at the project level, a combination of the tracker with the module with the right EPC with whatever inverter to say, yes, we have confidence that we can achieve the project level requirements, not just 40%, but as they start to increase to 55%.
I think there's still a lot of uncertainty yet beyond the module, right? I mean Series 7, as I said in my comments, is American made glass and steel. If you look at the -- whatever it is 10 components, whatever the number of components were that were included in the guidance, every one of those components is Series 7. So Series 7 will be a domestic product, right, which is a significant impact.
So we know we have position of strength to go out and engage and to have those conversations with the tracker providers and the EPC providers to create the right solution, but there's still a lot of uncertainty with what or what doesn't qualify on the tracker side. And even the labor in the field, in theory, it shouldn't count because it's not -- it has to be what's delivered to the site has to be a manufactured product, and therefore, labor -- infield labor is not supposed to count, but there's some speculation, maybe it does.
So there's just a lot of uncertainty yet. But we are trying to do exactly what you said to try to create those unique solutions to our customers. So George, do you want to talk about hydrogen?
Georges Antoun
Yes. I mean, we are -- it's early stages. Many of our customers are using our modules to produce hydrogen. And I think you're going to see this continue to grow, and we're evaluating all markets, not only the U.S., but overseas, also Europe, Middle East, Japan. And looking at all of the elements of hydrogen production, green hydrogen, offtake is very important.
So we're getting much more educated on the offtake and the potential of offtake and how we can assist and play a bigger role there. Today, our role is really producing the energy to produce and to turn on these electrolyzers. But you might see us get involved further and further as we evaluate the space. It's a big driver for our sales today, the green hydrogen application. But stay tuned to how we play a bigger role as we go forward. So we have people focused on the green hydrogen market.
Mark Widmar
It kind of ties in a little bit to what Alex says, is that -- the reality is that you want to derisk as much of the green hydrogen project as you can. There's a lot of technology risk on the electrolyzer. There's concerns around the financing and everything else, right? And one way that's easy to do derisk First Solar's technology. It's obviously very well positioned for the opportunity.
We're even looking at creating a unique product, potentially that takes cost out even to out of the structure in particular, that can make it a more cost-advantaged product for that segment of the market. But the reality is you want to derisk as much as possible. Especially these are multiyear projects, like I said, that need financing. There's technology risk to it to go with a proven technology provider like First Solar to enable that. Again, takes the photons and makes the electrons. That's a simple answer or a simple decision for a lot of our customers that are going down that path.
So I think our unique value proposition around certainty is going to position us very well in the hydrogen space. To George's point, maybe there's a bigger play somewhere in the mix, not sure yet. We'll continue to evaluate that, but we're excited about the opportunity, and we think we're very well positioned to be a part of it.
Caroline Stockdale
Okay. Before we wrap up and send you all to lunch, we've got one last question from. I'll hand it to you.
Unidentified Analyst
Thanks. Can you share what your bifacial volumes may be in Q4 of this year? And what your bifacial CuRe volumes could be in '24?
Mark Widmar
So we haven't disclosed specifically the volumes, but it's a lead line and it's 1 quarter, right? So think of it as less than 200 megawatts this year. And then next year, it gets fully replicated across the fleet. So as we exit next year, the fleet will be bifacial. So you can take the slides that Alex showed for capacity. And you can see that, that fleet will be bifacial at that point in time. But it's not a lot of volume at this year.
Mark Widmar
All right, guys. Thanks very much. We really appreciate all the Q&A. For those of you who are going to still stay along for the tour, you're going to be impressed. If you're not, reach out to me and tell me why because this is an amazing factory. You saw some of the videos in terms of how this factory runs and it's a continuous manufacturing process. Once that first sheet of glass goes in, it doesn't stop until it's actually in a pack, and it's getting ready to go to a customer.
So thank you very much, everyone here in the room, and thanks everybody on the webcast as well. Thanks very much. Appreciate it.
Richard Romero
Goodness gracious. Okay. For those online, that does conclude the presentation part. And for you, it's automatically going to go roll over to our virtual tour. For those in the room, please hold on for just one minute so we give over the logistics. Thank you.