Explosive growth for state's surviving solar firms

Jan 20 - McClatchy-Tribune Regional News - David R. Baker San Francisco Chronicle

To many Americans, one word still sums up the solar industry -- Solyndra.

The Fremont company's high-profile bankruptcy in 2011 cast a pall over solar power in the public's eye, creating an image of failed startups and wasted investments.

Yet many California and Bay Area companies are in a period of explosive growth. Companies such as SolarCity, Sungevity, SunPower and Sunrun are installing panels at a heady pace, and adding jobs along the way.

Their expansion has been fueled by the same phenomenon that doomed Solyndra -- a worldwide plunge in the price of solar cells. While many manufacturers have struggled to stay afloat, companies that design and install solar systems for homes, businesses or utilities have seen their sales rise.

"They're not just survivors -- they're strong survivors," said Lyndon Rive, chief executive officer of SolarCity in San Mateo. "And it's not just us. It's the industry. ... The notion that it's a failure is so outrageous."

The number of solar installations -- both large and small-scale -- is booming. In 2013, the United States added enough new photovoltaic panels to generate a maximum of 4.2 gigawatts of electricity, roughly the output of four nuclear reactors. Over the past five years, the number of residential installations has grown at an average annual rate of 70 percent, according to the NPD Solarbuzz market information firm.

Frugal customers

Financing innovations that allow homeowners to lease solar panels rather than buy them outright have attracted customers more concerned about their pocketbooks than cutting fossil fuel use and fighting climate change.

"The demand today is coming from the fact that someone can put solar on their house and save money," said Paul Nahi, CEO of Enphase Energy, a Petaluma company that makes microinverters for solar arrays. "It is true that they may also be saving the planet. But that's not their main consideration."

Public perception of the industry hasn't been completely wrong.

Five or six years ago, Silicon Valley teemed with startups trying to perfect new ways to make solar cells or build solar power plants. But after China flooded the market with cheap silicon cells, driving down panel prices 75 percent since 2008, casualties mounted.

Companies such as Nanosolar, Optisolar, Senergen and SolFocus either filed for bankruptcy, sold themselves to competitors at fire-sale prices or faded into obscurity. The failures were expensive. That was particularly true with Solyndra, which burned through $1.1 billion in private capital and $528 million in government loans before it imploded.

But a few manufacturers survived. And the companies that finance or install solar systems began to boom.

The drop in prices isn't their only reason for growth. Companies including SolarCity, SunEdison and Sunrun began offering solar leases or power purchase agreements to homeowners and businesses. Rather than buy the panels, customers could just buy the energy. That financial innovation revolutionized the industry.

"You just have to make it as simple a sale as possible," said Edward Fenster, co-CEO of Sunrun in San Francisco. Many homeowners, he said, don't have the time or inclination to research different solar products, trying to figure out which makes sense for them.

"No one wants to know about that," Fenster said. "People just want power, and they want it to be reliable and affordable."

'Leading' solar

California officials a decade ago made encouraging solar power's growth a priority, hoping to make the state a hub for the industry. California adopted a law requiring utilities to get 33 percent of their electricity from renewable sources by 2020, spurring construction of large-scale solar power plants. Rebates offered to homeowners who go solar helped build demand for rooftop installations.

In many ways, the effort appears to have worked. The state did not get the manufacturing surge that officials hoped for. But California has become home to more solar companies large and small than any other state. The Solar Energy Industries Association trade group counted 6,100 solar companies across the nation in 2013. Of those, 1,700 were in California. Many of the country's largest solar companies have their headquarters in the Bay Area.

Solar jobs data for 2013 won't be available until February. But in 2012, the solar industry accounted for 119,000 jobs nationwide, according to an annual census conducted by the Solar Foundation research and advocacy group. About 43,000 jobs were in California.

"I think manufacturing was always going to be hard in California," said Sheeraz Haji, CEO of the Cleantech Group research firm. "There's no doubt that the story played out a little bit differently than some people expected. But there's also no doubt that California is the leader in solar."

Solar survivor

San Jose's SunPower Corp., for example, has emerged as one of the country's last major solar manufacturers. But it makes most of its equipment abroad, principally in the Philippines.

The company survived by branching into other lines of business. And by finding a big backer.

For years after its founding in 1985, SunPower focused on making cells and panels. But as competition increased, SunPower branched into the residential market through a network of installers. The company also dove into developing solar installations big enough to sell their power to utilities. That "vertical integration" strategy let SunPower generate demand for its own panels and cells and helped the company survive.

"We've gone from making solar cells to making panels to offering services," said CEO Tom Werner. "We're turning into an energy services company."

SunPower also had to slash expenses, cutting costs about 20 percent per year for three years in a row, Werner said. But in the midst of the manufacturing downturn, the company also received help from a new source: one of the world's largest oil companies. Total of France bought a 60 percent stake in the company in 2011.

SunPower lost $613.7 million that year and $352 million in 2012. But for the first nine months of 2013 the company made a $73.3 million profit, and analysts say it appears to be on solid footing. SunPower now employs close to 6,000 people, not counting the independent dealers who sell its products to homeowners.

"After 30 years, we're just at the beginning," Werner said.

Challenges to growth

The industry could face headwinds in the next few years.

A key federal tax credit, worth 30 percent of the cost of a solar installation or project, is set to expire at the end of 2016. But it's unclear if it will continue and opponents point to Solyndra as the reason why the subsidy should sunset.

Its loss, analysts say, wouldn't kill the industry but would slow its growth.

"We don't need it to be permanent," said Rhone Resch, CEO of the Solar Energy Industries Association. "But we need it long enough to scale up and lower costs."

Another potential snag: a solar manufacturer in December asked the U.S. government to slap new import duties on modules from China and Taiwan.

"It would be bad policy to impose those tariffs," Fenster said. "It's just going to increase costs for consumers."

David R. Baker is a San Francisco Chronicle staff writer. E-mail: dbaker@sfchronicle.com Twitter: @DavidBakerSF

www.sfgate.com

http://www.energycentral.com/functional/news/news_detail.cfm?did=31257775&