The solar manufacturing business is marching through its third year in a hellhole, and the steep climb out of it is hardly over.
That was my takeaway after interviewing executives and walking the exhibit halls at Intersolar — one of the largest solar trade shows in the United States — in San Francisco last week. The show was smaller than last year’s partly because so many companies have gone bankrupt or sold. Before its unceremonious death in 2011, Solyndra’s booth drew big crowds because its solar panels, made up of cell-lined tubes, were so unusual. Thanks to the current lack of enthusiasm from venture capitalists for anything capital intensive in the solar biz, I didn’t see as many novel and promising new technologies this year.
Bad news about solar companies even surfaced around Intersolar this year and reminded the industry that the struggle to right the imbalance of supply and demand worldwide and figure out ways to live without too much government support remain two tough challenges. Another Silicon Valley startup, Nanosolar, is selling its panel assembly factory in Germany and auctioning off equipment from its cell factory in San Jose. Around the same time, SoloPower, another thin film startup from Silicon Valley, defaulted on a $10 million loan from Oregon for a factory it built.
One telltale sign of a market recovery is the number and size of orders for factory equipment to make components that go into solar cells and panels. Those new orders are hard to come by still, said Jeff Nestel-Patt, director of marketing and communications at New Hampshire-based GT Advanced Technologies, which designs equipment for creating silicon blocks to make solar cells.
China is home to some of the world’s largest silicon and solar cell makers, and they are running their factories at 60 percent on average, he said. GT doesn’t expect to see market improvement until next year. GT Advanced Technologies bought a Silicon Valley startup, Twin Creeks Technologies, on the cheap last year partly to expand its reach beyond solar.
Although manufacturers have suffered the most, intense competition and declining government incentives in key European markets, such as Germany, Spain and Greece, are hurting some project developers and installers as well. A major German project developer, Gehrlicher, filed for bankruptcy earlier this month and cited the tariffs recently imposed on Chinese solar panels by the European Commission as a reason for its struggle to survive.
Major Chinese solar panel makers have been posting losses for over two years now. After supersizing their factories in the past seven years and pushing down production costs more quickly than anticipated, Chinese manufacturers became targets of investigations by the United States and European Commission over whether they have competed unfairly, such as by selling at below fair market prices and receiving hefty financial support from the state-owned banks. The U.S. imposed tariffs on Chinese silicon solar cells last year.
The tariffs are meant to counter the effects of unfair trade practices. Has it worked? No, said Cecilia Aguillon, director of marketing and government relations at Kyocera Solar. To circumvent the tariffs, Chinese companies turned to cell makers in Taiwan and Korea and assemble them into panels.
Plus, an oversupply of panels, thanks in part to Chinese companies’ buildup of factories, has depressed prices and forced everyone else to lower their prices, too. Average wholesale prices for solar panels have fallen by 60 percent since the start of 2011, according to GTM Research and the Solar Energy Industries Association.
“It’s made it hard for us to sell,” Aguillon said.
Like its competitors, Kyocera isn’t building its business only around selling solar panels. The Japanese company also distributes other pieces of equipment that make up a solar energy system and offers project engineering and management services. Kyocera also decided to reduce manufacturing, just like many others. The company stopped production at its 30MW panel assembly plant in San Diego in April this year, Aguillon said.
While solar manufacturers have suffered, installers and project developers certainly have benefited from lower prices. Some solar farm developers have turned to using solar panels instead of other types of solar technologies. The U.S. is set to install roughly 4.4 GW of solar panels this year, up from 3.3 GW in 2012, GTM Research said.
With lower prices and government and privately funded efforts to reduce permitting, sales and other costs, solar energy systems also will become more affordable for consumers not just in the U.S. but worldwide. Creating a greater demand for solar will, in turn, help the manufacturers recover from this horrible slump.