GE narrows scope of solar power investment

Mark Auble sold glass coating to manufacturers of flat-screen computer monitors before he realized in 2006 that a similar type of thin-film technology would transform the solar power industry.

That year, Auble and five partners secured funding and founded PrimeStar Solar, based outside of Denver, which aimed to develop second-generation solar panels that compete on cost with other sources of electricity.

"The real holy grail is when the cost is attractive on its own," he said. "Thin film, in my view, has the best opportunity to get to that point."

In 2007, General Electric Co. dipped its toe into the emerging market for thin-film photovoltaic (PV) panels, taking a minority stake in PrimeStar. In June 2008, GE became its majority shareholder as the conglomerate increased clean-energy investments tied to its Ecomagination marketing campaign. At the time and in recent speeches, GE executives suggested the company wants to compete with solar industry giants such as First Solar, the Tempe, Arizona-based leader in thin-film PV manufacturing.

But despite an underlying enthusiasm for solar power, in the past year GE hasn't ignored corporate shakeouts and economic pressures squeezing that industry. Ecomagination, the brainchild of GE CEO Jeffrey Immelt, means wind and gas turbines, engines, high-efficiency appliances, smart meters and clean-tech investments. For solar power in 2009 and 2010, Ecomagination has meant guessing the direction of a capricious, capital-intensive solar panel manufacturing sector -- then choosing a winner and a loser.

At the end of December, GE pulled the plug on its solar panel plant in Newark, Del., selling it to Taiwan manufacturer Motech Industries. GE scaled back assembly line operations there primarily because the plant builds conventional crystalline silicon solar panels that have fallen behind in the race to be the least costly and most efficient solar cell system.

"It's costing us more to manufacture than what we could sell the panels for," said GE spokeswoman Milissa Rocker. "We believe thin film will be more efficient and more cost-effective."


Wind remains strong; solar outlook is cloudy

GE finances solar projects indirectly through its lending arm, but Christopher Glynn, a senior equity analyst at Oppenheimer & Co., said public subsidies and corporate synergy matter most on the manufacturing side. Wind energy is a natural fit for GE, he said, because of GE's core business in the manufacturing of power generation turbines. U.S. and foreign government subsidies have also buttressed GE's investments in wind power and power grid technology designed to help consumers control costs and cut electricity use. GE has estimated billions of dollars in revenue will spring from energy-related projects tied to government stimulus funding packages through 2013.

Solar power prices collapsed last year. They dropped nearly 50 percent in 2009, and analysts predict prices could drop another 20 percent in 2010, helping the industry become cost-competitive with other energy resources but squeezing some companies out of business. The economic downturn and falling power demand in the United States and Europe have contributed to the price collapse, but the major cost driver has been the fluctuating supply of polysilicon, the primary raw material used to develop solar energy units. Polysilicon has gone from a major shortage to massive oversupply, and bank analysts have projected an oversupply of polysilicon until 2012.

Thin-film PV solar cells built from a compound called cadmium telluride have a more cost-effective manufacturing process. That has helped companies such as First Solar, the leader in the field, to build at greater scale and drive down costs.

PrimeStar is still in the research and development phase of producing its thin-film, second-generation solar panel. GE has held close to its vest information about when it intends to start manufacturing the panels at PrimeStar's Golden, Colo.-based plants, and Rocker said GE is keeping an eye on the solar power market before expanding further. "We're open to opportunities across the globe, but there's nothing on the forefront now," she said.

"We continue to believe in the long-term success of the solar business for GE," she continued.

GE's PrimeStar has not factored into the short-term predictions of equity analysts eyeing the solar market. But long-term industry development could be affected by if or when GE turns from research and development to large-scale manufacturing of thin-film solar panels.

First Solar rides the wave

James Hines, a San Jose, Calif.-based technology analyst at research firm Gartner, said China's Suntech Power Holdings and other Chinese companies are strong international competitors. Smaller companies that face tight financial margins are disappearing. "That's one reason why GE might be moving away from that. They might see crystalline silicon as essentially a commodity play," Hines said. Thin-film solar, he asserted, reopens the door to innovation and competition.

Hines said it shouldn't be a surprise that GE has held off from making a major investment in solar power. Still, its financial heft would make a difference in the industry. "Certainly GE is a very large company with a lot of resources," he said. "They could have a big impact."

"It would make sense that as the PV market grows, we'll see larger players with established relationships in the energy industry move into this sector," Hines added. "That will create some formidable competition for pure-play solar companies that are riding the wave."

With relatively small competitors around, First Solar is the biggest company now riding the wave. With big partners in Asia and a solid base in the United States, the company has rapidly expanded its market share. First Solar talks in gigawatts of electricity, not kilowatts, estimating that there is 3.2 gigawatts of capacity in its pipeline through 2012 and 6.3 gigawatts of potential global opportunities. It plans to increase production capacity in 2010, spend $365 million on production plants and increase capacity by 424 megawatts. CEO Robert Gillette estimates that 2010 sales could reach $2.9 billion.

"Asking the question 'Which one of the alternative energy technologies will win?' is not really the right question," Hines said. "It comes down to which one is best suited for certain applications."

On price, solar power is still a tough sell for middle-class American consumers. But its greatest advantage, according to Hines, is that solar power can be scaled up quickly. "If it grows, it will certainly attract big companies like GE and others that can drive large-scale industrialization."

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