Solar Industry Faces Head Winds but Remains
Hopeful
Jan 20 - San Jose Mercury News, Calif.
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 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."
The company has been retrofitting up to 1 million square feet of space at
the old McClellan Air Force Base and was just starting to install
manufacturing equipment there when the decision to halt
work was made. The result was 185 layoffs in Hayward and 105 in Sacramento.
OptiSolar will continue manufacturing in Hayward, and it is shipping solar
panels to Canada for a power plant under construction there. And it still
plans to fulfill its PG&E contract, once the economy improves, Bernheimer
said.
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 (ITC) on solar projects late last year, an industry-sponsored study
said 400,000 jobs would result. Now, according to arepresentative 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, such as
Palo Alto's Ausra and Oakland's BrightSource Energy, 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 in Silicon Valley and elsewhere 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."
Contact Matt Nauman at (408) 920-5701 or at mnauman@mercurynews.com.
--SunPower, the San Jose solar-module maker, plans to construct a
250-megawatt photovoltaic power plant in California Valley in San Luis
Obispo County. (In California, 1 megawatt is enough electricity for 750
homes.) Online: 2010.
--Solel, an Israeli company, is scheduled to build a 553-megawatt
solar-thermal plant in the Mojave Desert. Online: 2011.
--Ausra, a Palo Alto company, is preparing to construct a 177-megawatt
solar-thermal plant in San Luis Obispo County. Online: 2011.
--OptiSolar, based in Hayward, plans to build a thin-film photovoltaic solar
plant producing 550 megawatts in San Luis Obispo County. Online: 2011.
--BrightSource Energy, an Oakland company, plans to construct a series of
solar-thermal plants generating up to 900 megawatts in the Mojave Desert.
Online: 2012.
Sources: PG&E; news reports
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