Fri September 30, 2011
Solar Titan Faces Funding Worries After Solyndra
The spectacular failure of the solar company Solyndra has focused attention on the struggle of America's renewable energy industry to compete in a global marketplace.
But there may be a bright spot in Arizona, where manufacturer First Solar makes those iconic solar panels more cheaply than anyone else.
Last year First Solar had sales of $2.6 billion. Now, the solar titan is now trying to stay ahead of an industry in turmoil after Solyndra's downfall puts its federal support into question.
A Solar Bright Spot
In the Phoenix suburb of Mesa, it's hard to feel the gloom that's been shadowing the solar industry. There, First Solar is constructing its second U.S. manufacturing facility.
Melanie Friedman, a cheerful First Solar spokeswoman, shows off the skeleton of a building. When it's done, glossy black panels will emerge from here and blanket the desert floor of a power plant near Yuma in the southwest corner of the state.
"The whole reason we decided to build this factory in the U.S. Southwest was because of the growing demand in this area," Friedman says.
The power plant in Yuma is called Agua Caliente, and 5 million solar panels will eventually power 100,000 homes there each year. The company is quick to say that when it's completed around 2013, it will be the largest solar project in the world.
Industry expert Ryne Raffaelle with the Rochester Institute of Technology says First Solar grew into a global giant for a reason: cost. The company doesn't rely on silicon to make its product like most solar manufacturers. That's allowed First Solar to produce a panel for about 75 cents per watt, while most Chinese competitors can build it for a $1.10 per watt.
"They've done some remarkable things," Raffaelle says. "They took that company from nothing to an international powerhouse. And I'd like to think there are some other First Solars still waiting to emerge from the U.S."
Competing With China
America's solar industry is struggling to stand on its own, Raffaelle says. First Solar got more than $50 million in local incentives for the Mesa factory and up to $5 billion in federal loan guarantees to get its utility projects financed.
That's the same kind of help that California company Solyndra received before it went bankrupt. Now, the loan guarantees are increasingly unpopular in Washington.
"First Solar is in big trouble. Big, big trouble," says Gordon Johnson, a senior research analyst for Axiom Capital Management.
Johnson doesn't believe American companies — even the biggest American company — can compete. Massive government investment in Asia is tipping the scale and helping Chinese manufacturers like GCL-Poly Energy creep closer to First Solar's envied production costs.
"They are going after First Solar's pipeline, and they will win," Johnson says.
Johnson and others say there's another problem: Demand and incentives in critical European markets have fallen, leaving a glut of supply. Johnson points out that First Solar's stock has fallen by more than half from its 52-week high. "It's a disaster," he says.
Lower Costs, Fewer Subsidies
At First Solar headquarters outside of Phoenix, executive TK Kallenbach says the company will get through the uncertainty.
"You have to be an optimist in this business," Kallenbach says. "You've either got to pull your costs down faster, or you're going to have a loss-maker."
By 2014, he says, First Solar will get those production cost from 75 cents per watt down to about 55 cents, and that will go a long way to compensate for China's advance. To Kallenbach, reaching that goal is imperative.
"You can't have a billion people in India and China coming on line with the kind of energy thirst we've had in the U.S. for the last 60 or 70 years. So you've got to do it," he says.
What's more, the lower costs go, the quicker First Solar can wean itself from the political uncertainty of government subsidies. And that's exactly what the company says it wants — to shine on its own.