Clear Skies Solar, Inc.(fka CSKH)

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Solar firms face tough competition as prices fall

David R. Baker, Chronicle Staff Writer



Sunday, September 4, 2011

The solar industry stands at a point that renewable energy advocates have yearned for - and feared.

Solar cell prices have plunged, making the technology affordable to a growing number of homeowners and businesses. Sales are soaring as a result.

But as last week's surprise bankruptcy announcement from Solyndra showed, fast-falling prices mean that some solar companies are going to die.

"This is what we were hoping for," said Rhone Resch, president of the Solar Energy Industries Association, a trade group. "You have more competition, that leads to lower prices, and it's great for the consumer. But it's hard for some companies to compete."

The Fremont firm abruptly announced Wednesday that it would lay off its 1,100 employees, file for bankruptcy and close its factory, built with a $535 million loan guarantee from the federal government. The news shook the Bay Area's clean-tech industry and quickly became a political embarrassment for the Obama administration, which had touted Solyndra as a symbol of the United States' economic future.

Solyndra offered a unique product - tube-shaped solar modules that could absorb sunlight from any angle. But the company, created in 2005, found itself undercut by low-priced panels churned out by new factories in China, built with substantial backing by the Chinese government. Other U.S. solar-panel companies face the same pressure. Solyndra was the third domestic solar company to announce bankruptcy last month, joining Evergreen Solar and SpectraWatt.

"The U.S. solar panel industry is in horrible shape, and that's likely to continue as long as China continues to flood the market," said Severin Borenstein, director of the University of California Energy Institute in Berkeley. "At the current (price) levels, most U.S. companies can't survive."

Consumers benefit

Borenstein was referring specifically to companies that make solar cells and panels. But the solar industry also includes companies that focus on selling or installing systems, or developing large solar projects for utilities. Some of them thrive when panel prices are low.

"When you have prices going down, it's really good for downstream solar companies," said Sheeraz Haji, chief executive officer of the Cleantech Group consulting firm. "It's really, really good for consumers."

Growing demand

Last year, enough photovoltaic panels were installed throughout the United States to generate 887 megawatts of electricity - more than twice the number installed the year before. Five years ago, according to data from the industry association, solar panels generating just 105 megawatts were installed across the entire country. A megawatt is a snapshot figure, roughly equal to the amount of electricity needed to power 750 typical homes at any given moment.

California set a record last month for the number of homeowners seeking state rebates for installing solar systems on their rooftops. The California Solar Initiative received 3,544 rebate applications from homeowners, up from 1,648 applications in August 2010. The average price California homeowners pay to install solar has dropped about 12 to 17 percent in the past four years, according to data from the California Public Utilities Commission.

Exports lead imports

A study this spring from Clean Edge Inc., a market research firm, found that worldwide sales of photovoltaic solar equipment almost doubled last year, from $36.1 billion in 2009 to $71.2 billion in 2010.

Much of that money still flows to the United States. The Solar Energy Industries Association published a report last week - before Solyndra's implosion - showing that the United States is still a net exporter of solar energy products, with exports surpassing imports by $1.9 billion last year. The country's solar industry even had a trade surplus with China.

The group reached that conclusion by examining sales data for elements of the solar industry that often get overlooked, such as companies that produce polysilicon or create the machinery that makes solar cells.

Frugal consumers

"That strongly suggests that U.S. companies are not only competitive but are winning some of the competitions," said Ralph Cavanagh, head of the energy program at the Natural Resources Defense Council, an environmental group. "It's the performance of the entire sector and the U.S. trade balance that matters, not the fate of one individual company."

Still, solar-panel companies will continue to face a difficult market. The flood of inexpensive modules from China has turned the solar cell - once considered a high-tech product - into a commodity. Analysts say there will still be room for innovation - for newer, more efficient cells. But the companies making them will have a hard time charging a premium.

"You're in a tough place if you think you have an opportunity to differentiate and have pricing power but your customers think it's just a commodity and they're going to go find whatever's cheap," Haji said.

E-mail David R. Baker at [e-mail]

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