SOLAR:

Solyndra bankruptcy reveals dark clouds in sun-power industry

Many of the problems that forced solar company Solyndra to shutter operations threaten other businesses in the sun-power industry, with more upheaval likely in the coming months, analysts say.

The bankruptcy last month of Fremont, Calif.-based Solyndra comes as solar manufacturing undergoes a major transition. Prices of solar panels have plummeted, causing a supply glut and slicing company revenues.

Solyndra's collapse marked the third time in as many weeks that a solar company declared bankruptcy. Evergreen Solar Inc. of Massachusetts and SpectraWatt of New York also filed for protection.

"It coincides with the fact that the industry is in trouble," said Ken Zweibel, director of the Solar Institute at George Washington University. "There is a crisis in the solar manufacturing world there's no question about it. With three companies declaring bankruptcy in three weeks, there's no question that they're all under pressure."

Solyndra's bankruptcy also comes as Congress battles over spending and the best way to create jobs. Solyndra had received $527 million in federal loans authorized by a program in the 2009 stimulus act. Many in the GOP say that President Obama's bid to create "green jobs" has been a failure. That could make it hard for solar to fight for any new federal help.

States like California are adding new incentives, however, which the industry hopes will keep it healthy.

The solar industry's trade group, meanwhile, has urged people not to see Solyndra's bankruptcy as a sign of trouble for the sector.

"What we are seeing in solar happens in every industry that is maturing and growing more competitive," said Rhone Resch, president and CEO of the Solar Energy Industries Association. "You're going to see winners emerge who find innovative ways to offer consumers the most competitively priced products."

Solyndra had some unique problems, analysts said, that helped accelerate its demise. The company made a unique product: cylindrical solar tubes equipped with copper indium gallium diselenide thin-film technology.

The cylinders could "capture sunlight across a 360-degree photovoltaic surface," Solyndra said on its website. Designed for commercial rooftops, the product offered "the fastest and easiest installation, a non-penetrating mounting system, and superior wind, snow and soiling performance," Solyndra said.

But the tubes also had limited uses, analysts say.

"It was a specialty product that could be used in certain applications, that would be very attractive for those applications, but wouldn't be generally useful for large fields or even [all] rooftops," Zweibel said. "They have misunderstood the marketplace."

That made Solyndra different. But it also had something in common with other solar manufacturers. The Chinese government is investing in solar production, which has led to a burst in production that has boosted supplies and forced down product prices worldwide.

The price of panels has tumbled more than 40 percent in a year, Zweibel said, a drop that followed price declines in 2009.

Analysts believe companies beyond Solyndra will face tough financial decisions.

"There's a lot of turmoil in the solar industry," said Joshua Linn, a fellow at Resources for the Future, "a lot of new companies starting and a lot of companies going out of business around the world. There's going to be a lot of uncertainty."

Finding niches

Companies that are succeeding in the market are mostly those who make a product different from their competitors, Linn said. Two that appear strong are SunPower Corp. and First Solar Inc.

San Jose, Calif.-based SunPower makes modules that are relatively high cost, Linn said, but they convert more sunlight to electricity than some competitors' panels. That allows the company to charge a premium, he said.

French oil company Total SA owns a majority stake in SunPower.

Meanwhile, Tempe, Ariz.-based First Solar makes panels that avoid the cost of silicon by using cadmium telluride thin film. Producing the modules is less expensive than other technologies, Linn said.

"They have been very successful and have grown very rapidly," Linn said.

The company manufactures in Arizona and Ohio as well as Malaysia, Germany and Vietnam.

Other companies are finding ways to sell their solar panels.

Mitsubishi, which makes solar panes in Japan and has a sales office in Orange County, Calif., said that in the face of substantial drop in panel prices, the company is focused on the dependability of its product.

"We're focused on the quality and performance of our product," said Allison Arnold senior manager, marketing and public policy for Mitsubishi. "Just like any quality product, there's a premium for that.

"Our loyal customers are aware of the quality aspects of the product in terms of quality and reliability," Arnold said. "We sell those features."

To qualify for financial incentives offered by California, Arnold said, manufacturers must warranty their product for 25 years. "Our advantage is we have been in the business as long as the warranty" requirement, which gives Mitsubishi customers additional confidence in the product, she said.

Mitsubishi also is helped by the fact that it is a large, diversified company, she said.

Solar panel makers and analysts see the market as in transition with the best technologies killing off less sturdy competitors. At the same time, incentives are shifting.

In the Golden State, the $3 billion California Solar Initiative has been winding down, with rebates for installing solar dropping or no longer available. The state Legislature just passed legislation requiring the state's three investor-owned utilities to collect another $200 million from ratepayers to fund the program.

"That will give the commercial market some boost because there's a waiting list of projects that queued up in anticipation of this funding becoming available," Arnold said.

California in November will start a type of feed-in tariff for small-scale solar and other renewables (ClimateWire, Aug. 22). The state's three investor-owned utilities will hold reverse auctions to buy renewable energy contracts up to 20 megawatts in size, until a total of 1 gigawatt is reached.

The reverse auction, which accepts the lowest bids, is intended to spur small-scale solar. Because there is not a fixed price as is normally seen with a feed-in tariff, California hopes to avoid the overbuilding seen in some countries.

Feed-in tariffs have spurred growth in solar worldwide, Arnold said.

"We know it's effective," Arnold said.

Solar expansion

While the drop in solar panel prices puts pressure on companies, in the long run it is good for the industry, analysts say.

"It is exactly what solar wants," Zweibel said. "From the standpoint of solar, low prices are helping. Everybody realizes that and everybody wants that."

The death of some companies in the process is somewhat inevitable, he said.

"The issue is really the U.S. doesn't want to lose all of its manufacturing in solar and the Europeans don't want to lose all their manufacturing in solar," Zweibel added.

At Mitsubishi, Arnold said, "we do want to see solar become affordable for everyone. The drop in price of the product is a good thing for the industry, but it's been a precipitous decline so it's impacted American manufacturing because U.S. manufacturing is more expensive."

While some believe China benefits from lower labor costs, Arnold said, "in fact much of manufacturing of solar modules is automated. Really the reason that countries like China are able to sell product at lower cost is they have cheaper access to capital," because of government investments.

Incentives from the U.S. government might be hard to hold on to and gaining new ones all but impossible with the partisan battles in Congress over spending and "green jobs."

In addition to programs like loan guarantees, Mitsubishi said solar needs government actions that boost the demand side of the market, Arnold said, such as rebate programs or performance-based incentives.