This week eight Chinese banks asked a court to find Suntech subsidiary Wuxi Suntech insolvent and to allow it to begin restructuring. Suntech responded to the court and said it would not object. The New York Times reported that the bankruptcy is “expected to lead to a takeover of the Wuxi operations by Wuxi Guolian, a financial conglomerate controlled by the city government of Wuxi.”

The solar market has seen an oversupply of solar panels and plummeting prices for those panels for over two years now. Two thirds of solar cells are made in China, where the Chinese government has given Chinese solar makers access to large low cost loans. The oversupply and drop in prices has led to huge solar manufacturers like Q-Cells to startups like Solyndra and Abound Solar to file for bankruptcy.

Suntech solar panels

Suntech may be the largest to date, but it won’t be the last solar maker to crash. As MIT Tech Review put it earlier this week: “hundreds of solar companies need to fail to help bring the supply of solar panels back in line with demand.”

The weeding-out process will help slow the fall in solar panel prices and allow demand to rise back up again. Down the road the re-balancing will enable these companies to continue to invest in more efficient cells and new innovations, which will bring down the cost of solar through technology even more. Another 180 solar panel makers could reportedly disappear by 2015 due to consolidation.

At the same time, Suntech’s woes partly come from a financial scandal. The company got in trouble with a fund it controlled that financed solar power plant development in Europe.

Of course, it’s not all positive that Suntech has declared bankruptcy. As Ucilia Wang wrote for us last week:

The drama presents an ugly turn for a company that was solid and took technology and market risks to grow. . . Chinese companies in general had been known more as mass producers rather than innovators. . . Suntech’s decline also leaves a depressing note in the efforts by the federal and local governments to expand solar manufacturing in the U.S.

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“… America cannot resist this transition; we must lead it. We cannot cede to other nations the technology that will power new jobs and new industries — we must claim its promise. That is how we will maintain our economic vitality and our national treasure. . . “

Obama used his first term to provide an unprecedented amount of resources for clean energy projects and companies through the stimulus package, but some of the Department of Energy’s loans and grants went to energy companies that struggled or went bankrupt. Examples include the now infamous solar maker Solyndra, battery maker A123 Systems, solar company Abound Solar and electric car maker Fisker Automotive.

As a result, clean energy became highly politicized and the Energy Department’s support was criticized by House Republicans. Many of Obama’s original “Green Dream Team” are leaving, including reportedly the Department of Energy Secretary Steven Chu.

Obama was also criticized by Democrats for not being aggressive enough on climate change-targeted policies in his first term. He seemed to stop using the term in prominent speeches in recent months, and abandoned a carbon cap-and-trade policy early on in his first term.

The President’s direct mention of climate change and sustainable energy sources in his inauguration on Monday morning came as a surprise to many in the clean energy sector. Obama’s definition of clean energy sources — which he called “sustainable energy sources” in his speech — includes natural gas, clean coal and nuclear, as well as renewable energy like solar, and wind power.

Updated with reactions from the clean power sector:

Rhone Resch, president and CEO of Solar Energy Industries Association: “We praise the President for emphasizing that a transition to sustainable energy sources is vital – and that the U.S. must lead it. . . Over the next four years, solar will grow to be the largest new source or energy, and employ more than a quarter million Americans.”

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Alta unveiled two designs on Friday that are charging mats of 10-watts and 20-watts, both of which are much smaller than other solar charging mats out there. Alta plans to make the cells at its existing, 2 MW production line and hire another manufacturer to put the cells into the mats.

The company’s CEO, Chris Norris, told us Alta also plans to announce a military contract within the month, and from there raise a new round of funding in 2013 to build a 40MW factory, which could end up being located in Asia. Alta Devices was founded in 2007 and has raised $120 million in venture capital from investors such as Kleiner Perkins and Dow Chemical.

Solar-powered soldiers

A soldier’s pack could weigh 100 pounds, and over a third of that are batteries to power various communications and safety devices. Alta claims its solar chargers could reduce that battery heft by 70 percent, or roughly 25 pounds.

The company says it can pack more charging power into a small footprint than other solar cell developers because it’s developed a process for harvesting more energy from a set of materials that already are inherently better at turning sunlight into electricity than the more common materials. Alta’s solar cells can convert a whopping 28.8 percent of the sunlight they take in into electricity, compared with the mid- to high-teens that most common solar cells on the market can achieve today.

Why isn’t Alta targeting rooftop solar panels yet? Currently Alta’s panels are more expensive than the less efficient but abundant solar cells that have been flooding the market in recent years. So Alta had to look elsewhere for its initial set of customers, and the military, unlike utilities, power plant builders, and home owners, are more willing to pay a premium for more power in a small space. Down the road when Alta decreases its manufacturing costs, it could go after rooftops.

Alta is hardly alone among the solar manufacturing startups that have been forced to pivot their business plans because the market for conventional solar panels has way too many suppliers. That imbalance of supply and demand has caused high-profile bankruptcies of startups who couldn’t reduce their production costs quick enough. Solyndra, Abound Solar, Global Solar Energy and Twin Creeks Technologies are among the startup casualties.

The challenges that Alta and other solar startups have faced also are plaguing companies working on batteries for electric cars. Electric car sales haven’t grown as quickly as expected by tech companies, and that has sent battery developers to look for alternative markets, such as consumer electronics. But even there, the startups face tough competition from battery giants that have ruled the world of computers, cell phone and other mobile devices for a long time.

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The ITC agreed in a 6-0 vote that Chinese solar producers have benefited from illegal subsidies from the Chinese government and sold products at below fair market value. The ITC’s findings corroborate with the decision by the U.S. Commerce Department in October. The two agencies have to agree on the allegations before the tariffs set by the commerce department last month officially take effect.

Whether slapping tariffs on imported Chinese solar cells will achieve the ultimate goal of the trade dispute – to even the playing field and foster healthy competition – remains to be seen. So far, the dire predictions about the impact of tariffs from both sides of the disputes haven’t taken hold even though the U.S. government began collecting tariffs –as a result of a preliminary decision by the commerce department – earlier this year. The government collected the tariffs retroactively.  Those tariffs will be returned, though, because the ITC didn’t agree with that decision by the commerce department.

Though the tariffs are in place going forward, Chinese companies already have found ways to minimize their impact. They can sidestep the tariffs by using solar cells made in countries other than China and assemble those cells into panels in their factories in China. This approach raises the production cost but not as much as what paying the tariffs would entail. Major Chinese solar manufacturers include Suntech Power, Trina Solar, Yingli Green Energy and JA Solar.

The ITC decision drew to a close a contentious fight brought by a group of U.S. solar cell and panel makers led by SolarWorld, who filed the complaint in October 2011 as the global solar industry saw a rapid decline of solar panel prices because supply far exceeded demand. That glut, which began in early 2011, has contributed to the bankruptcies of dozens of solar cell and panel makers worldwide and stirred up strong resentment against Chinese solar manufacturers, who rose to dominate the world market in the past six years. Silicon solar panels are made up of rows of solar cells, and Chinese companies that make solar panels typically also produce their own solar cells.

Both Solyndra and Abound Solar cited the Chinese companies’ ability to lower prices quickly as a reason for their demise. Solyndra, which is still going through the bankruptcy proceedings, filed an anti-trust lawsuit against Chinese solar manufacturers last month and is seeking $1.5 billion in compensation.

The glut of solar panels has remained, the prices of solar panels are still falling, and the number of manufacturers that are leaving the business is still increasing. GTM Research has predicted that 180 solar panel makers worldwide will disappear by 2015.

The intense competition has triggered similar trade complaints against Chinese manufactures in Europe. The Chinese government, in turn, recently filed a complaint with the World Trade Organization over government subsidies received by European solar panel makers.

On the other hand, the falling prices for solar panels have been a boon for companies that buy and install solar panels. A group that formed to oppose the U.S. trade complaint includes not only Chinese solar manufactures but also project developers and residential solar service providers. Most of the solar power projects that are bidding for power sales agreement contracts with utilities propose to use solar panels instead of other types of solar technologies.

The intense competition, bankruptcy filings and the difficulties of making profits also have generated concerns about the quality of solar panels being made these days. At a conference last week, a Wells Fargo executive said he had been noticing a fair number of substandard solar panels because manufacturers were “cutting corners.”

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The company pitched a hybrid solar cell concept and at the western regional Cleantech Open event last Friday (winners are announced today), and won over judges in the renewable energy category. The Cleantech Open will hold its national competition in San Jose next month.

The ultra efficient semiconductor materials are in the III-V family, and each III-V cell will sit on top of a silicon cell. Silicon is found in most of the solar cells on the market today, and the most efficient among them, made by SunPower, can convert 24 percent of the sunlight into electricity.

Malachite plans to stack a silicon layer with a gallium-arsenide layer to create a cell that should theoretically be able to achieve 38 percent efficiency, said Robert Weiss of Malachite during the pitch to the judges. Weiss was the former CTO of DayStar Technologies, which makes ultra thin solar panels using copper-indium-gallium-selenide (CIGS).

The III-V cells are less common because their materials and manufacturing process are more expensive. The cells are usually made with a combination of materials such as indium, gallium, germanium and arsenic. These cells are typically found in solar panels that are equipped with lenses to concentrate sunlight onto the cells to boost their energy production. Using the optical booster means the cells themselves could be far smaller, which then reduces the overall equipment and production cost. The most efficient III-V cell, made in the lab and not subject to any concentration, has achieved nearly 30 percent efficiency.

As with many solar cell technologies, the scientific concept Weiss presented isn’t new. The big challenge is to design the process and equipment to not only produce the desired efficient cells but to also produce them in large quantities at low costs. That last part is what has stumbled many solar technology startups such as the now bankrupted Solyndra and Abound Solar over the past year, especially when they were trying to scale up production at a time when there was a bumper crop of solar panels in the market and much larger rivals were able to cut prices and take losses.

Not a cell maker

Malachite doesn’t want to sell solar cells. Instead, it wants to sell the factory equipment for making those cells, perhaps to silicon solar cell makers. The III-V cells usually are made in a process called metal organic chemical vapor deposition (MOCVD), which is expensive and slow. Weiss proposes to use the physical vapor deposition (PVD) process, or sputtering, that knocks loose atoms from semiconductor materials and attach them to a substrate to form a cell. PVD has been used for making CIGS thin films.

Weiss wants to raise up to $2 million to engineer and show a workable cell design. After that, the startup will likely need $10 million to assemble the equipment to complete a prototype cell. Another $30 million should enable Malachite to deliver beta equipment to customers for testing, Weiss said.

Catching investors’ interest will be difficult these days. Many solar cell and panel makers have built up huge factories, some at gigawatt-scale, only to find that demand isn’t there yet. Some of the top 10 solar manufacturers, including Suntech Power and First Solar, have scaled back production or postponed factory expansion plans. Many have filed for bankruptcy, including veterans such as Q-Cells, which is being sold to Korea-based Hanwha Group.

GTM Research released a report on Tuesday that is projecting that 180 solar panel makers will disappear all together or get bought by 2015, and nearly half of them will close factories in places with high manufacturing costs, such as the U.S., Europe and Canada.

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The latest is one is a 12.4 kilowatt system for utility Austin Energy, which is touting a “shop locally” mantra by installing a solar project with panels from its neighbor. The project is part of a pilot program by Austin Energy to lease rooftop space from businesses and nonprofit organizations for solar installations. Before that, last fall, HelioVolt talked about a 23 kilowatt installation at Texas A&M University.

Beyond that HelioVolt has yet to announce any big sales deals, at least not in recent years. HelioVolt seemed to be terminally ill when it announced last September that it had managed to line up an equity investment of $50 million from SK Group (the $50 million was part of an $85 million round).

HelioVolt’s founder, BJ Stanbery, told us then that the Korean investment will enable HelioVolt to improve its manufacturing technology and expand production beyond the small-scale 20 MW factory at its headquarters in Austin. One of HelioVolt’s investors, New Enterprise Associates, told Dow Jones that HelioVolt could be building its first large-scale factory in Korea.

The company, which has raised over $200 million since its inception, has stayed fairly quiet since then. In June, it announced the offering of a new set of solar panels.

How long that $85 million will last for HelioVolt and whether it will be able to compete at a time when solar panel prices have crashed remain to be seen. We’ve put in a call to HelioVolt to find out whether it might still be building a factory in Korea, and we will update the post if we hear back.

UPDATE: HelioVolt’s vice president of business operations, John Prater, told us that the company and SK are still actively planning that commercial-size factory, but the decisions on the location and size haven’t been made. ”We are thrilled to have SK on board, and (SK’s involvement) eliminates a lot of uncertainties,” Prater said.

Lining up a big investor can really help a startup survive tough market conditions. MiaSole, another thin film startup, is looking for that financial rescue and hopes to announce something there within 90 days. But in the meantime, the company is laying off people in its manufacturing operation, the company said yesterday. MiaSole, located in the Silicon Valley, declined to disclose how many people are leaving.

HelioVolt’s solar panels use an ultra-thin layer of copper-indium-gallium-selenide for converting sunlight into electricity. The majority of the solar panels on the market today use a much thicker layer of silicon instead. HelioVolt is one of the startups that sought to use alternatives to silicon to make cheaper solar panels that use less materials. These companies attracted billions of dollars in venture capital because they promised to deliver low-cost solar panels at a time silicon was super expensive.

The price of silicon has dropped by over 10 fold since the mid-2000s. Meanwhile, silicon solar panel makers, particularly those from China, have built massive factories to reduce manufacturing costs and grab market share in ways that startups with limited funds just can’t compete effectively. Startups such as Solyndra and Abound Solar have gone bankrupt.

Even large companies with lots of money have had a hard time competing. GE recently suspended its plan to build a 400 MW factory to make cadmium-telluride solar panels.

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It was only last month when a company spokeswoman told me by email that GE was still building its factory and hoping to start production in 2013. But the company reconsidered that plan in recent weeks after seeing solar prices tumbled significantly for over a year, and it stopped the factory building activities last week, Merfeld said.

The company also has down-sized the number of people working on its solar team, but Merfeld declined to disclose the number of layoffs. Since the goal now is to focus on technology improvement, those who were hired to work on, say, factory operations were let go.

“We are banking on the fact that with the technology improvement and our investment in technology today, we will put out more competitive products coming out of that factory,” Merfeld said.

The time line for re-starting the factory isn’t firm right now, but GE is looking at doing that in 2014. That doesn’t mean the factory will be mass producing solar panels then, though. The factory space, located in Aurora, still needs some infrastructure work before solar panel production equipment could be installed. After the equipment is in, it would usually take a year or longer to test the machines and bring them online for mass production.

GE was building the factory to make solar panels based on the technology from a startup called PrimeStar Solar, which GE bought last year. The technology would enable GE to produce solar panels with an ultra-thin layer of cadmium-telluride to convert sunlight into electricity. First Solar is the best known cadmium-telluride solar panel maker, and its growth to become one of the world’s largest solar panel makers has inspired many startups to develop the same type of technology and try to become an alternative source of supply.

But solar manufacturing has been a hellish business to be over the past year and a half, as a glut of solar panels caused the wholesale prices to drop near 50 percent alone during 2011. The oversupply problem isn’t going away any time soon, too, according to GTM Research, which is forecasting 59 GW of solar panel production for a global market that can only take 30 GW this year. That supply-and-demand imbalance is set to continue beyond 2012.

A long list of manufacturers have filed for bankruptcy in the U.S. and abroad. One of the most recent casualties is Colorado-based Abound Solar, which received a $400 million federal loan guarantee to expand manufacturing but by last fall it could no longer meet certain goals to continue to make use of the loan guarantee. It tried to line up more investors and customers but couldn’t do it, and last week it finally conceded that it couldn’t stay business any longer.

The new path GE has charted sounded similar to what Abound said it would do back in February this year, when it first revealed that it was laying off hundreds of people and refocusing its effort on improving its technology in order to come up with better performing and cost competitive products.

GE wants to improve how efficient its cadmium-telluride solar panels can convert sunlight into electricity because that is one way to reduce production costs. Last year, a GE executive said he expected the new factory would start shipping solar panels with 14 percent efficiency. Now the goal is to achieve more than 15 percent, Merfeld said.

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The Colorado company already appeared to be in serious trouble when it was laying off a few hundred full- and temporary workers earlier this year. At the time, the company said it needed to switch production equipment to produce a new line of better performing solar panels. The plan was to restart mass production by the end of this year, the company said.

The startup, founded in 2007, was also hurting for money but failed to line up an investor to prevent it from going out of business, according to Greentech Media, which first reported Abound’s plan to close.

Update: In a statement, Abound said it plans to file for bankruptcy next week, and it’s ceasing operations and laying off 125 employees.

“Abound believes that, at scale, its USA-made (cadmium-telluride) panel technology has the ability to achieve lower cost per watt than competing crystalline silicon technology made in China.  However, aggressive pricing actions from Chinese solar panel companies have made it very difficult for an early stage startup company like Abound to scale in current market conditions,” according to the company statement.

Abound was hoping to become a major player like First Solar when it opened its first factory in 2009 to make solar panels lined with an ultra thin layer of cadmium-telluride to convert sunlight into electricity. At the time, Abound’s CEO, Pascal Noronha, had expected his company to make solar panels cheaply right away, at under $1 per watt like First Solar was doing, never mind that it took First Solar four years of commercial production and multiple factories to reach that level of production cost. Abound didn’t hit that initial goal.

The startup then lined up a $400 million loan guarantee from the U.S. Department of Energy in 2010 to expand its production. The loan guarantee allowed the Abound to borrow money from the Federal Financing Bank. But Abound used up $68 million of the promised loan before the DOE stopped doling out additional money last September because Abound was having trouble meeting certain goals, said a DOE spokesman.

Abound joins a long list of solar panel makers that crumbled in the last year and a half because solar panel supply has just far exceeded demand in the global solar market. Meanwhile, government subsidies for solar power projects, particularly in Europe, the largest solar market, have been shrinking fast. This oversupply problem will likely persist beyond 2012 as more factories are set to open, partly because some companies believe the glut wouldn’t last long or they need to expand manufacturing to reduce costs or else they will never be competitive.

Abound is the second solar manufacturer and DOE loan guarantee recipient who didn’t make it. Solyndra was the first one, and its demise drew a big debate over the wisdom of the loan guarantee program and gave the Republicans ammunition to attack the Obama administration.

The Colorado company has lined up money from investors including Invus Group, Bohemian Companies, BP Alternative Energy and West Hill Investors, DCM (Doll Capital Management) and Technology Partners. Abound had received over $300 million in private funding as of December 2011, the DOE said.

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The new equity round, according to a Securities and Exchange filing from last month, followed the $23.47 million round that the Silicon Valley company raised last summer. Solexant, which set out to make solar cells by depositing cadmium-telluride nanocrystals on rolls of metal foil, hasn’t said much about what it’s been up to since a new CEO, Brad Mattson, took over last year. We briefly caught up with one of Solexant’s board members, Cynthia Ringo, a managing partner at DBL Investors, on Wednesday. Ringo confirmed the new funding and said the company is sorting through options on how to bring its technology to market.

The company was supposed to build its first commercial factory, a 100MW project, in Oregon. The state announced a $25 million loan and $18.75 million in tax credits for the factory, to be located in Gresham, in 2010. But the company missed technical milestones and didn’t take some necessary financial steps to start using the loan, a state official told the Oregonian last July.

Ringo wouldn’t comment on what Solexant plans to do with the new $30,000 million round yet, and said, “It doesn’t behoove us to talk about a lot now because we are not selling in the market right now.” She referred questions to CEO Mattson, and we will update the post if we hear back from Mattson.

Solexant’s technology is based on research from the Lawrence Berkeley National Laboratory. The company was founded in 2006, when the price of silicon was expensive and investors were pumping lots of money into startups that were investigating alternative and cheaper materials for converting sunlight into electricity. Cadmium-telluride and copper-indium-gallium-selenide (CIGS) became two popular choices.

The success of First Solar has made cadmium-telluride an attractive choice, and many startups have hoped to become an alternative source of supply for cadmium-telluride solar panels. But none has taken off in the market as quickly as anticipated. Abound Solar, after securing a $400 million federal loan last year to add production, announced a suspension of production and layoffs so that it could modify the factory equipment to roll out a new product. Meanwhile, GE has announced a 400MW factory to take on First Solar, and the energy giant’s entry doesn’t bode well for smaller players who don’t have the same financial muscle and production scale.

I caught a presentation by Solexant’s co-founder and previous CEO, Damoder Reddy, at a Dow Jones conference in December 2009. Back then, the company had completed a 2 MW pilot line and raised $22.5 million. It then raised at least a $41.5 million round in 2010.

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