Two months ago we asked whether utilities should invest in solar manufacturing because Pacific Gas & Electric was proposing to do just that. The answer from California regulators, who were divided over the issue, was “no” as they voted 3-2 to deny the request on Thursday.
PG&E wanted permission to invest $9.9 million of taxpayers’ money into a solar manufacturing service from SVTC Technologies, which would offer solar companies engineering expertise and manufacturing equipment to create product prototypes. The service aims to help silicon solar companies, especially startups with no money to buy their own factory equipment for pilot production, to get their technologies ready for commercial production.
PG&E’s request is unusual because it typically puts money into power generation, not manufacturing technology development. The utility has been signing power-purchase agreements with solar power plant developers in order to meet a state mandate to get 33 percent of its power supply from renewable sources by 2020. It also is developing its own solar power projects to meet that requirement. The $9.9 million investment would’ve given PG&E an equity stake in SVTC’s solar business.
The utility’s request also came at a time when solar manufacturers in the U.S. and elsewhere have struggled to survive in a market with an oversupply of solar panels. Many companies have filed for bankruptcy or shuttered factories. Industry stalwarts First Solar (s FSLR) and SunPower (s SPWR) both announced factory closures and layoffs last month. Also, many solar startups are not using silicon but other semiconductors in their quest to make cheaper and better solar cells and panels.
PG&E said the investment in the SVTC project will help reduce the cost of solar power and benefit consumers. SVTC secured a $30 million grant from the U.S. Department of Energy last summer to run this prototyping service in Silicon Valley. SVTC’s president, Gunter Ziegenbalg, told me last month that the company was getting factory equipment from companies such as Roth & Rau and other in-kind services for the project. Overall, the project would cost $85 million to launch. SVTC needed the PG&E investment to claim the money from the DOE, and it was running up against a June deadline to do that.
Ziegenbalg also contended that the prototyping service will be in demand precisely because manufacturers are under more pressures than ever to improve the performance of their solar cells and panels in order to survive a tough market.
In a bid to persuade the commission to vote for the proposal, SVTC last month wrote a letter that offered to increase PG&E’s equity stake with the same $9.9 million investment. Both PG&E and SVTC refused to divulge the size of the proposed equity stake.
Commissioners Michel Florio, Catherine Sandoval and Mark Ferron voted for the proposed written decision to deny PG&E’s request. The decision said the manufacturing service project is too risky and there aren’t clear benefits to Californians. It also noted that PG&E initially claimed the project will make enough money to return the taxpayers’ investments, but it later changed its argument to say the main benefit for the taxpayers is to have potentially lower priced solar electricity. Critics also said PG&E should use its own money instead of funds from ratepayers to invest in SVTC.
Commissioner President Michael Peevey had drafted an alternative proposed decision that would have approved the utility’s request. He supported PG&E’s argument that the project would likely lead to cheaper solar electricity, and he noted that research and development, by its nature, is a risky undertaking to start with, and no one can accurately predict the success rate of any such effort.