Follow physics professor Tom Murphy on an exercise in galactic energy that points out the absurdity that results from the assumption that we can continue growing our consumption of energy forever.
In late 2007, Evergreen Solar hit an all-time high with a $9.8 billion market cap. Less than four years later, it has filed for bankruptcy, with its secured debtors trying to recoup $165 million in notes from an asset fire sale. Its unsecured debtors, meanwhile, pray that Evergreen’s assets might exceed that figure, leaving something for them. Good luck.
The tale of Evergreen matters because the company fell victim to shifting forces — subsidy rollbacks in Europe, intense competition from inexpensive Chinese labor and declining silicon prices — that are currently redefining the solar market. Evergreen had an edge with a process that required less polysilicon per solar panel. But it couldn’t predict that polysilicon prices would drop from $475 per kilogram in early 2008 to $52 today, or that Germany and Italy, the two largest solar PV markets, would pare back subsidies. And it couldn’t predict that those two factors would result in oversupply and plummeting prices.
Evergreen is not the only victim: Intel-backed Spectrawatt shut its doors last week, and there have been a slew of earnings disappointments in the past few weeks as public companies reported second-quarter numbers. Typically in a consolidation we’d be seeing bigger companies snap up the assets — technology or customer base — of those that didn’t make it. But we’re seeing neither.
What’s happening instead is a shakeout as a new business model emerges. As prices dive, those with the leanest supply chains win. Meaning that unless you have a manufacturing edge, you’re in trouble.
Still, while it may seem like the sky is falling in the solar power industry, there are some silver linings. The flip side of falling prices is that solar panels are becoming more competitive, dipping under a $1/watt in some markets. Concentrating the industry among fewer players like market leader First Solar, which is already highly profitable, will allow for more focused R&D spending and, more importantly, investments in the leanest manufacturing processes.
There are new solar markets emerging that look promising: India is coming on strong. It plans to add another 10 gigawatts of solar power by 2022, and we’re seeing early signs of demand as First Solar, which had a disappointing second quarter, has said that it anticipates a rebound with demand from the Indian market double what it had expected. Japan, still reeling from the Fukushima disaster, passed a renewable energy bill on Friday that will drive solar power adoption by introducing feed-in-tariffs similar to those in Europe. Two Japanese financiers indicated last week that they would commit 15 billion yen ($193 million) in loans and investments for solar farms. It’s not a huge amount, but it’s a start and a good sign in a country that desperately wants off nuclear power and currently only uses renewables for 2.9 percent of its energy mix. Even Eastern Europe is getting into the action with countries like Ukraine, which is now mandating that 30 percent of its energy must come from renewable sources by 2015.
If the solar power industry has learned anything from a business model built around government incentives, it’s that you have to go to markets where there’s broad political support for renewable energy. Sadly, there are signs that domestic support is eroding. Surely as PV panel prices continue to fall, more companies will go down (there’s speculation about Energy Conversion Devices Inc. and Q-Cells). But maybe this is what this industry has needed after all: stiff competition and declining prices. Sooner or later, the industry will have to get off government subsidies, and no one said the process wasn’t going to be painful. Despite all the carnage, the solar power industry is closer to grid pricing parity with coal and natural gas than it was last quarter. Which is good news for the survivors.
Question of the week
Here are some interesting posts from around the ‘Net to catch up with over the weekend:
- Six Revisions: “Collaboration Tips for Designers Working with Developers”
- iA: “What’s Next in Web Design?”
- ReadWriteWeb: “5 Web Apps To Keep Your Startup Organized”
- The Oatmeal: “Ten Things You Need to Stop Tweeting About”
- GigaOM: “How the Internet Changed Writing in the 2000s”
- Harvard Business Review: “Predictions for 2010: Five Changes in the Way We Work”
- jkOnTheRun: “CES Impressions: Tablets, Er Slates, Are Everywhere”
What are you reading this weekend?
While PG&E (s PCG) is waiting for the California Public Utilities Commission to approve its 500 megawatt (MW) distributed solar PV project, the northern California utility is moving ahead on some of the legwork anyway. PG&E wrote on its blog this morning that it’s inviting solar suppliers to submit their information for a contract to supply materials for, and/or build, a 2-MW, ground-mounted solar pilot project near a PG&E substation.
PG&E wants to use the small pilot plant to develop its process for working with third-party solar vendors, which will eventually help PG&E build out the rest of the planned 500-MW distributed solar photovoltaic project — 250 MW of which it will own outright. PG&E expects the initial pilot project to be built before the end of the year, and according to PG&E’s materials, interested solar suppliers need to offer the entire solar generating system, including engineering and materials, and can potentially build and commission the project, too.
The 2-MW contract might be small, but it could pave the way for the winner to get more of the massive solar distributed project. PG&E writes in its blog post: “suppliers it recruits (by competitive bid) may also be tapped to build many more such projects in the 1-to-20 MW range if the CPUC approves PG&E’s proposal.” If your company is interested at all in submitting for PG&E’s larger solar PV project, it should definitely get in on this one.