Blog Post

Energy Conversion Looks for Revenue in Solar Project Development

Hit by a double whammy of oversupply and a worldwide recession, solar panel installations are forecast to slow by as much as 32 percent this year, according to market research firm iSuppli. So solar panel maker Energy Conversion Devices (s ENER) is trying a new strategy to drive demand for its products: it’s jumping into the solar project development business. The Rochester Hills, Mich.-based firm said today it will partner with Belgium’s Enfinity to co-develop a portfolio of about 10 MW of rooftop solar installations in the U.S. and several European nations.

Energy Conversion, through its subsidiary United Solar Ovonic, will contribute thin-film panels in exchange for equity in the projects. Enfinity, which is currently developing more than 120 MW of photovoltaic projects around the world, will oversee project management and financing. The companies declined to put a value on the deal, saying only that they don’t expect to keep the projects on their balance sheets for long, but plan to sell them to third-party investors within 12 months of the start of commercial operation.

The partnership is part of what Energy Conversion CEO Mark Morelli is calling the firm’s “demand-creation strategy.” The company, a leader in making thin films for the building-integrated and commercial rooftop markets, said today its profits fell to $1.3 million in the most recent quarter from $7 million during the same period last year. Morelli blamed the drop on widespread pressures on the industry, primarily customers’ difficulty in accessing project financing. So the company is looking for creative ways to create demand, and the deal with Enfinity is one of them.

But Energy Conversion’s move is as much about an investment opportunity as it is about spurring solar panel sales, according to Jed Dorsheimer, an analyst with Canaccord Adams. “Credit is tight, so companies are exploring the idea of taking an owner-operator position for a temporary time frame with the belief that if the market rebounds, their investments will provide a good return,” he said. In other words, the firm truly believes it’s making a smart investment decision.

Fellow thin-film maker First Solar (s fslr) has jumped into the project development business as well. In March, the Tempe, Ariz., firm agreed to buy the photovoltaic project pipeline of OptiSolar, including a 550 MW project to supply electric utility Pacific Gas & Electric (s PCG) with solar power. The thin-film maker also has entered into a 25-year power purchase agreement with Tri-State Generation and Transmission Association, a wholesale electric power supplier serving Colorado, Nebraska, New Mexico and Wyoming. As part of the deal, First Solar will build and operate a 30 MW ground-mounted PV power plant in northeastern New Mexico.

Tough times in the solar industry call for innovative initiatives. Companies must either find ways to survive, or follow MMA Renewable Ventures’ path and sell off their assets.