Supply Chains

TREND: Solar Doldrums

While the Obama administration in Washington is lauding solar energy as a major part of an alleged transition to renewable energy, the U.S. companies that make solar modules to turn the energy in sunlight into electric power are hurting. Prices for PV cells are falling, and domestic firms are seeing waves of red ink on their books, falling investor interest, and are responding by moving production offshore.

What happened, according to industry analysts, is that firms built their business plans on silicon prices that made sense at the time. But as is common with commodity markets, the price crashed as more and more producers entered the market to supply the growing demand. Among the victims:

  • BP Solar last spring closed its Frederick, Md., solar cell manufacturing plant, the largest in the U.S., laying off 320 workers, and moving production offshore. The plant, with its sun-facing roof covered in crystalline solar cells that powered the plant, had been a fixture in the area for decades, and had gone through several owners. BP CEO Tony Hayward told the Washington Post, "We remain absolutely committed to solar." But he said BP was "moving to where we can manufacture cheaply." Three years ago, BP Solar launched a $70 million expansion at the plant. According to BP, solar photovoltaic (PV) prices since then have dropped 40% to 50%.
  • In mid-summer, Solyndra Inc., a San Francisco company with a unique design for a tubular PV technology touted as more efficient than traditional flat arrays, cancelled a planned initial offering of stock to the public because of severe business problems. Earlier, technology mavens at the U.S. Department of Energy (DOE) bought into the concept, and President Obama visited the company in mid-2009 to deliver a $535 million loan guarantee, hyping the company as a model for future energy enterprises.
But the sun quickly stopped shining on Solyndra. The IPO never got off the ground, as investors demonstrated that they were very wary of a company that, said a New York Times article, was “hemorrhaging cash,” after raising nearly a billion dollars in venture capital. The company lost $172 million last year and $242 million in 2008, according to Securities and Exchange Commission (SEC) documents cited by the Times. According to the SEC filings, the company was spending over $6/W for its solar panels and selling them for under $3.50/W.
  • One of the graybeards of the PV business, Massachusetts-based Evergreen Solar, with its shares trading on the NASDAQ at only 75 cents/share, was delisted from the tech-heavy exchange. A decade ago, Evergreen raised a bundle of cash with an IPO and investors were bullish. As recently as late 2008, the stock was trading at above $5/share. But when the bottom dropped out of the PV market, the company’s profits vanished and Evergreen began moving production to China. Greentech Media noted, a comment that applies across the PV business: “The Evergreen saga is illustrative of the falling costs in this market, the questionable value and differentiation of an innovative process that doesn’t come along with innovative pricing—and a grave warning to any solar module company with stubbornly high cost structures.”
  • About the same time Evergreen Solar was cratering, Massachusetts-based Solasta—founded in 2006 with heavy venture capital backing from Kleiner Perkins, one of the most active venture capital firms in renewable energy, and $3 million in DOE grants—was folding up shop. Founded by members of the Boston College physics department, Solasta was touting use of amorphous silicon cells with nanotechnology to improve the efficiency in converting sun to power. In a statement quoted by Greentech Media, the company’s former chief technology officer said, “Solasta has shut down. It has executed a sale of its assets, consisting of laboratory-scale solar cell fabrication and characterization equipment, and intellectual property. The former includes a license to the original nanocoax solar technology, still held by Boston College, as well as additional IP generated by the company. It has been sold to an academic institution in China which plans to continue development toward commercialization. The company also terminated an active $2.7 million grant from the Department of Energy’s Solar Energy Technology Program.”
  • About the same time BP was pulling the plug in Maryland, a venture capital-backed startup, Silicon Valley-based Senergen Devices, folded before it could make much of a mark on the PV industry. The company, which one observer described as a “stealthy solar startup,” reportedly had some $7 million in venture capital financing from Vantage Point Venture Partners and Trident Capital, and was founded in 2007. The company’s business focus was a low-cost way to deposit silicon on a substrate. Of Senergen’s strategy, Greentech Media’s Eric Wesoff commented, “Expect this type of thing to happen quite frequently in the next 24 months as scores of [venture capital]-funded solar startups run out of money and investors run out of enthusiasm—the grim flip-side of the solar investment bubble.”
  • In late July, major semiconductor firm Applied Materials said goodbye to its SunFab thin-film solar panels, laying off 500 workers. The Santa Clara, Calif., firm said it will concentrate its business on crystalline solar cells and advanced technologies including light-emitting diodes. Allied had been in the amorphous silicon business since 2006. With silicon prices collapsing, SunFab’s expensive technology proved a bust. It’s first customer, Signet Solar, scrubbed plans for a factory to turn the technology into generating panels. Then SunFilm, another customer, filed for bankruptcy protection. In a written statement, Applied CEO Mike Splinter said, “The thin film market has been negatively impacted by several factors, including delays in utility-scale solar adoption, solar panel manufacturers’ challenges in obtaining affordable capital, changes and uncertainty in government renewable energy policies, and competitive pressure from crystalline silicon technologies.”
  • Then in August, Suntech Power Holdings, the world’s largest maker of crystalline solar PV panels, said it will take a loss of $147 million to $179 million in the second quarter, as a result of bad investments in amorphous silicon panels and in Shunda, a maker of silicon wafers and polysilicon. Writing off the Shunda investment will cost the company over $100 million, while unwinding the amorphous silicon business will take a $50 million bite out of revenues. Suntech’s main line of business is crystalline silicon panels. The company projected second quarter revenue of $620 million to $630 million.

—Kennedy Maize is MANAGING POWER’s executive editor.

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