Solar industry faces head winds but remains hopeful

Jan 22, 2009 By Matt Nauman

Solar-industry executives paint a bright future for their industry, one where photovoltaic panels adorn roofs of homes and businesses and huge power plants capture the sun's rays to generate electricity. But the industry currently finds itself under cloudy skies and buffeted by threatening winds.

The solar tax credits approved late last year gave the industry a boost, and its leaders are hopeful for an even bigger boost by President Barack Obama, who has promised to promote clean technologies and energy alternatives to oil. But it's far from clear just how much help will come, and when.

Meanwhile, many once-promising solar companies struggle to maintain momentum against the strong head winds of the financial crisis. Feel-good headlines about well-funded startups and new jobs are giving way to grim announcements of factory delays and layoffs.

OptiSolar of Hayward, Calif., announced this month it would lay off half of its 600 employees. The company, which has a contract to produce electricity for Pacific Gas & Electric, blamed its inability to get financing to expand a factory in Sacramento.

"We haven't been able to access the investment capital we were able to get earlier," said Alan Bernheimer, an OptiSolar spokesman. "It's a bitter pill."

OptiSolar's pink slips could be a harbinger of bad news from other companies needing millions of dollars to finance the costs of building factories and huge power plants.

"These companies are going to be large consumers of capital," said Patrick Pohlen, an attorney who works in clean-tech financing at Latham & Watkins in San Francisco. And banks aren't lending right now.

"I liken the solar industry to the semiconductor industry 40 years ago," he said. "What a semiconductor company had to do was build a fab -- a factory -- to make a chip. That's kind of where solar companies are today. And the challenge is that to build a factory requires debt."

OptiSolar is just the latest solar company to come under threat by the bad economy:

• HelioVolt, a Texas maker of thin-film solar panels, opened a 122,000-square-foot factory in Austin three months ago. At that time, the company said it would ultimately employ 160 workers. But it recently announced a round of layoffs, though it wouldn't say how many.

• SpectraWatt, an Intel spinoff, said in June that it had raised $50 million and would open a plant in Oregon to make photovoltaic cells starting in mid-2009. But according to recent press reports, the company suspended factory construction for six months and threatened to consider building the plant in another state that offers more incentives for green businesses. SpectraWatt did not return an e-mail seeking comment.

• Evergreen Solar, a Massachusetts maker of solar cells, recently closed one of its two factories, which led to layoffs. Other solar companies confirming layoffs include GT Solar, which makes solar equipment in New Hampshire, and SunEdison, a Maryland company that finances and manages solar-electricity projects.

When Congress passed an eight-year extension of the federal investment tax credit on solar projects late last year, an industry-sponsored study said 400,000 jobs would result. Now, according to a representative for the Solar Energy Industries Association, they're not as confident.

"We are concerned the solar ITC will not work to stimulate demand for solar installations as Congress intended, given the current economic clime," Monique Hanis said.

The group, as well as the American Wind Energy Association, now wants the tax credit to be refundable, she said, meaning companies and individuals would get cash back instead of a credit in their tax filings.

"Due to the recession, projects are now being put on hold, factories are closing and workers face potential layoffs unless Congress refines the tax credits now so they work as originally intended," said Rhone Resch, the solar group's president.

Nathaniel Bullard, lead solar-industry analyst with New Energy Finance in Washington, D.C., said financing problems are universal in the clean-tech industry right now, and are especially acute for companies without large orders or ironclad projects. Wind-energy and biofuels companies also are suffering.

And Bullard doesn't expect the financial environment to improve anytime soon. In six months or a year, "it's still going to be rocky for everybody," he said.

Some solar companies will fail and the survivors will retrench, he said, drawing back on some ambitious expansion plans.

Companies already in the regulatory pipeline for plant approval are likely to get financing dollars, Bullard said. But he added that companies that haven't started seeking approval "might have a hard time."

Many companies need factories to construct the components used to build power plants. That was OptiSolar's situation. With today's credit market, Pohlen said, these firms face "the complete double whammy."

Still, most within the industry remain optimistic -- about the long term, at least.

Many in clean tech assume that the Obama administration, as part of its massive stimulus plan, will create programs to jump-start clean-energy projects, including adding solar systems to federal buildings, schools and military facilities and training workers for green jobs.

Venture capital firms add to the rosy outlook by continuing to pour billions into solar. Researcher GreenTechMedia noted that in the fourth quarter of 2008, VC firms globally invested $1.3 billion in 28 deals with solar companies. That was more than the amount invested into biofuels, wind energy, energy efficiency and the smart grid and batteries combined.

Alex Klein, research director at Emerging Energy Research in Cambridge, Mass., remains positive about solar's prospects beyond 2009 -- with a caveat.

"Weakened capital markets and low demand will continue to constrain new project investment in 2009," he wrote in a research note. "But the fundamentals for a significant transformation in energy infrastructure _ and the corresponding investment opportunity _ over the long term remain sound."

___

(c) 2009, San Jose Mercury News (San Jose, Calif.).
Visit MercuryNews.com, the World Wide Web site of the Mercury News, at www.mercurynews.com.
Distributed by McClatchy-Tribune Information Services.

Explore further: Going nuts? Turkey looks to pistachios to heat new eco-city

add to favorites email to friend print save as pdf

Related Stories

Tech giants look to skies to spread Internet

7 hours ago

The shortest path to the Internet for some remote corners of the world may be through the skies. That is the message from US tech giants seeking to spread the online gospel to hard-to-reach regions.

Making 'bucky-balls' in spin-out's sights

4 hours ago

(Phys.org) —A new Oxford spin-out firm is targeting the difficult challenge of manufacturing fullerenes, known as 'bucky-balls' because of their spherical shape, a type of carbon nanomaterial which, like ...

Unlocking secrets of new solar material

2 hours ago

(Phys.org) —A new solar material that has the same crystal structure as a mineral first found in the Ural Mountains in 1839 is shooting up the efficiency charts faster than almost anything researchers have ...

Ikea buys wind farm in Illinois

Apr 15, 2014

These days, Ikea is assembling more than just furniture. About 150 miles south of Chicago in Vermilion County, Ill., the home goods giant is building a wind farm large enough to ensure that its stores will never have to buy ...

Recommended for you

Obama launches measures to support solar energy in US

Apr 17, 2014

The White House Thursday announced a series of measures aimed at increasing solar energy production in the United States, particularly by encouraging the installation of solar panels in public spaces.

Tailored approach key to cookstove uptake

Apr 17, 2014

Worldwide, programs aiming to give safe, efficient cooking stoves to people in developing countries haven't had complete success—and local research has looked into why.

User comments : 0

More news stories

Growing app industry has developers racing to keep up

Smartphone application developers say they are challenged by the glut of apps as well as the need to update their software to keep up with evolving phone technology, making creative pricing strategies essential to finding ...

Making graphene in your kitchen

Graphene has been touted as a wonder material—the world's thinnest substance, but super-strong. Now scientists say it is so easy to make you could produce some in your kitchen.