Solar Industry Prices May Be Coming Down Sharply

According to a chief solar analyst as iSuppli Corp., the solar industry is facing a permanent ratcheting down of price structures that will change the face of the industry. While predicting a strong rebound in demand for solar panels this year, with a 64% increase in installed watts, PV faces such steep price declines that companies will need to accelerate their cost-reduction programs, said Henning Wicht, senior director and principal analyst for photovoltaic systems at iSuppli.

While iSuppli expects overall demand to increase sharply, that picture is clouded by expectations that the feed-in tariff subsidy in Germany, which accounts for roughly half the world market now, will be cut in the middle of this year.

Changes are underway on the supply side as well. Two South Korean giants, Samsung and LG Electronics, are expanding their solar-related operations, as are Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC, Hsinchu, Taiwan) and U.S. engineering giant Bechtel.

The iSuppli analyst said global installed watts for PV systems will grow by 64% in 2010, reaching 8.3 GW, a return to growth levels seen before the fall of 2008. However, the industry will see a continuation of the “tremendous price erosion” that began last year.

On average, iSuppli said crystalline module prices last year fell by 37.8%, solar wafer prices plunged by half, and polysilicon prices crashed, dropping 80%. Price drops will continue this year at a slower rate, with crystalline module prices expected to drop by 20%, wafer prices by 18.2% and polysilicon prices by 56.3%. iSuppli also is projecting that prices, on average, will recover by 10% or more in the final quarter of 2010, despite the declines for the entire year.

iSuppli is predicting crystalline module prices will drop by 20% this year. (Source: iSuppli)

www.isuppli.com

Solar Not Forgotten In Obama’s Proposed 2011 Budget

The proposed 2011 budget that was proposed by President Barack Obama does not exclude investments in clean energy, but subsidies for the oil, coal and gas industries were.

Specifically, the president’s FY 2011 budget request includes the following:

• Lending authority to support approximately $40 billion in loan guarantees for innovative clean energy programs;

• More than $108 million in new funding to advance and expand research in the areas of wind, solar and geothermal energies;

• More than $217 million in new funding for science research and discovery, including an additional $40 million for the existing Energy Frontier Research Centers program and $107 million for Energy Innovation Hubs; and

• $300 million for the Advanced Research Project Agency – Energy.

In developing this budget, several program reductions and terminations are proposed, including eliminating more than $2.7 billion in tax subsidies for the oil, coal and gas industries. This step is estimated to generate more than $38.8 billion in revenue for the federal government over the course of the next 10 years.

The budget includes $302.4 million for the solar energy program, a 22% increase from last year’s spending, according to the Solar Energy Industries Association (SEIA). The Department of Energy’s (DOE) Building Technologies budget includes another $7.2 million for solar heating and cooling, also an increase over last year.

These increases comes at a time when most of the government received substantial budget reductions, SEIA notes. In addition to the solar program, the president has requested a $5 billion expansion the Section 48C manufacturing tax credit that was passed in the American Recovery and Reinvestment Act. SEIA expects to see the expansion of this program pass as part of the Jobs Bill now under development.

The breakdown of the DOE Solar Energy Program is as follows:

• $152 million for PV, increased from $128.5 million;

• $98.2 million for concentrating solar power (CSP) – including $50 million for a new demonstration program – increased from $49.7 million;

• $30.7 million for systems integration, increased from $23.3 million; and

• $21.5 million for market transformation, decreased from $23.5 million.

The DOE Building Technologies Program includes $7.3 million for solar heating and cooling. Transmission-related budget requests include continued support for renewable generators and reliability, as well as an additional $6.4 million for “permitting, siting and analysis” to educate states, regional grid operators, federal agencies and help assist in modernizing the electric grid. The Department of the Interior budget includes a total of $73 million investment in renewable energy.

www.solarindustry.com

Solar Power In Germany Faces Subsidy Cut

Germany, the world’s biggest market for solar cells, is poised to slash its subsidies for solar power by as much as 17 percent, Economy Minister Rainer Bruederle said on Tuesday.

Electricity produced by solar power in Germany is sold at a minimum price guaranteed by the government to help producers compete with firms using fossil fuels and nuclear power that can produce power much more cheaply.

This guaranteed price has already been reduced gradually—the subsidy was already cut by 10 percent from January 1 this year—but pressure has grown on the government to accelerate the process.

Experts say the subsidy fails to spur competition in the industry, which represents less than one percent of the total electricity production in Germany, Europe’s top economy.

The solar sector itself has said it is prepared to accept a cut in the subsidy, but that anything above 10 percent would be intolerable.

After years of dazzling results, Germany’s solar industry has succumbed to the gloom enveloping the broader economy, with competition from Asia also taking the shine off the sector.

The world’s top solar cell maker, Q-Cells, saw its turnover plunge by over 40 percent in the first nine months of 2009.

www.afp.com

Solar Energy CEO’s Sound Off on the State of their Industry

At the recent Solar Power International 2009 show in Anaheim, the CEOs of five solar power companies assembled to discuss the state of their industry and predict how they see their business evolving over the next few years. NBC correspondent Anne Thompson lead the discussion with:

Jerry Wolfe, CEO of groSolar

Ron Kenedi, VP Solar Energy Solutions Group at Sharp Electronics

Tom Wemer, CEO SunPower Corp.

Zhengong Shi, chairman and CEO of Suntech Power and

Freeman Ford, chairman and founder of FAFCO Inc.

Thompson began the discussion with some grim statistics.

Anne Thompson: Lets layout the state of play in the solar industry. Analysts predict losses for perhaps half of the world solar panel manufacturers this year. The installed capacity is expected to decline this year, the first decline in a decade. Half of the panels made this year will not be sold this year, and one analyst says only a handful of companies will survive. That person predicts that in seven years, we’ll only talk about 55 companies.

Freeman, you were in the business in the early 1980s when there was a big solar shakeout. What do you see now that was different from then?

Freeman Ford: The shake out then provides a perspective for what is going on today. The shakeout in the 1980s was somewhat more traumatic. When I founded Fafco in 1969, the history was that my grandfather had a solar system in Pasadena, in 1910 to 1912, so that was a little solar bubble. And then there was a bigger one in the 40s before the war. Then in the 1980s, solar thermal peaked at about $800 million from 400 manufacturers. Then essentially it went to a $20 million market and five manufacturers in about two years. So, that is a tectonic sort of shift. What did the solar thermal folks learn that might apply today? There are two or three central themes. We did not have a coherent energy policy and we could not count on the energy policy even if we understood it. You can’t make investments if you don’t have a consistent energy policy. I’m not sure we have one today, but it has become more consistent and reliable. That is one thing we learned. Another one, and some may not want to hear this, a certain amount of certification and testing turns out to be quite helpful because a lot of products did not work that well. We were learning the industry, and essentially, the end user got abused as we tried to learn the technology. So the industry needs a consistent energy policy, some sort of reasonable energy standards, and then subsidies and incentives with the idea that they would go away. The third point most of us missed in the 1980s was a plan for the post-incentive environment. My company did that and it did survive, but we were a tiny minority that did. Several of my colleagues in the thermal industry did too and the reason we did is that we found applications that made sense and stood on their own.

Thompson: Ron, do you see history being repeated here.

Ron Kenedi: No, I don’t. I’m positive about the future. I know we have gone through a challenging year in 2008 with the economic downturn. But what has continued to increase is the value and amount of demand. As it grows, the supply will grow with it. I know there will be some changes in the supply patterns and of the manufacturers, but I don’t take the dire outlook you started with. I’m positive about the future. What makes it strong is that we are seeing growth in all segments of solar starting in the last few months. We’ve seen growth in the residential sector, and now new ways for projects to be financed. People are getting creative on how they finance projects. Money is coming from different places in the U.S. to finance projects. Utility-scale projects are starting, such as one in Fresno, Calif. And even mainstream solar is starting. Places where you’d see solar on the shelf, in stores, is happening. All segments of solar industry are getting stronger. We are not where we want to be but I do believe the pace will pick up starting in 2010.

Thompson: Dr. Shi, you are about to announce a manufacturing plant in the U.S. That is seen as a sign of optimism about the state of the solar industry in this country. How do you see it?

Zhengong Shi:  In the last 10 years, the solar industry has grown dramatically. In the 1980s, there was not a real solar industry. About 10 years ago, the new industry began rising. At this moment, the industry is still dependent on new government subsidies, which I think are necessary because for any industry or product or technology, initially will need a little help from the government, especially with renewable energy and solar. To be honest, in the beginning, financial progress, late last year or this year, we were worried because many governments were reprioritizing their agendas to survive. Look at all the governments that put renewable energy in a position to tackle climate change in a top agenda.

Look at last year where the Spanish market was almost half of the global market. This year, the Spanish market is capped at a much lower volume, even though we believe this year will be better than last. That means apart from the Spanish market, all other markets grew at 50 to over 100%. That is a positive sign. And we are excited about the U.S. market because we are really committed to it.

The new administration is positive and supports rules for renewable and solar, and there is increased awareness in the general public. We see our market share continue to gain in the U.S. That is one reason for launching a new line of products especially designed for this market. It is a very important market. So with that, we want to show long term commitment and support for this market.

Thompson: Tom, do you think this industry is too dependent on government subsidies? Is that what happened in Spain?

Tom Wemer: The discussion so far, it seems to me, has been slightly defensive. We are in a great industry, in a great spot. My Silicon Valley friends are in software, and they ask me, ‘How do I get into clean technology?’ We’re still a growth industry.

Now to your question on subsidies, look at what other industries get. I’ve only been in solar six years and the perception is we have our hand out. That’s ridiculous. Look at our competition. Our total incentive over the course of the year is about a week of R&D in the coal industry. Yet, there is the negative perception. So it’s just a bunch of bull. The cost of solar today implies we need incentives. Coal has been around 100 years (and it is till subsidized.) Other speakers talk of the need for incentives today that will (eventually) go away. We’ll all drag our costs down so that we’ll sustain ourselves in an economic way. So they are they required? Absolutely, and we should not be embarrasses about it. It’s part and structure of the market. Let thrive in it  and lower costs.

Thompson: Jeff, we have been talking about what is needed. It’s not the technology. You say we have an administration that now supports the technology. What is the missing piece here and what can be done?

Jeff Wolfe: You’re acutally, right. The technology is in place and improving every year. The sales process, the logistics fall in place for other parts of industry so we can do a better job of just executing. But what we find we’re operating at a heady pace. In more states, we are finding that residential and commercial buildings are less expensive (with solar panels) than (if powered only by) a utility. We find that people don’t understand that. They understanding that solar is as real as conventional technology, and its state-of-the-shelf. Our biggest problem is that solar requires a cultural change and acceptance. That is our biggest hurtle. If I could ask for one wish, it would not be for higher subsidies, it would be for cultural change. We know that when Americans want something, it has little to do with values, sometimes. That’s why SUVs are so popular and people pay extra for granite countertops. Solar already has a better payback than both of those. So if we can find the switch on culture, all say solar is the preferred energy source everyone wants, and it’s available for all.

Thompson: Does anyone have an idea on how to flip that switch?

Wolfe: The industry needs to more education in a standard way through schools. Take the case of France and nuclear power. It’s an example on how you educate people to accept new technology. The industry has to issue public statements that solar is good technology that does good. Given the opportunity people will gravitate to it. Solar is its best billboard. If people see solar on roofs, they think it’s a good thing. Our survey proves that 92% want more solar. Imagine what they would say if a coal plant was opening in the neighborhood? I don’t think they’d want that. We must stop apologizing for solar. It’s a fantastic value. Of course it needs incentives.  Consider the incentives the coal industry and Middle East energy sources get. They get incentives and we are still pay for their negative environmental effects.

Wemer: We need a common voice because policy matters, and where they see us, lets not all run off independently. I think we need to satisfy the customer. If penetration rates are going up people will ask each other, “What has your experience been?” And so the industry is going to do a better job of customer satisfaction and then, of course, driving the economics and value proposition. We’ll all bring solar mainstream – sort of demystify it. And the last thing I’d say is that we need to partner with utilities. There is resistance to changing from traditional energy sources. Everyone is comfortable with that model. Traditional sources are hard to change, so to get over the hump, lets find a way to partner with utilities and we both win. And you’re seeing a lot of that today.

Thompson: A PG&E announcement they would increase the percent they buy from homeowners. Is that the kind of thing you need to see from utilities across the country, sort of small scale solar to get more people enlisted?

Wemer: In that regard, let me say thank you Peter Darby and Gov Schwarzeneger, for your leadership. Let the customer choose. Remove the barrier and let the customer choose. Increasingly, customers want to choose their energy sources. Let’s not dictate a utility scale, commercial, or residential. Let the market choose.

Shi: I think there are two issues here. The first question is the cost issue. We already see real parity (with other energy sources) in couple years, so the cost issue will phase out. And the second issue is for solar to be massive (a large industry). The community will like it and the consumer will like it. Solar can be massive in next 5 to 10 years. That should be the direction of the industry.
Freeman Ford: There is also a public awareness issue. Again speaking from the solar thermal standpoint, 80% of the market is China, 15% is Europe, and 2 or 3% is in the U.S., yet we are supposed to be the largest market, at least potentially, in the world. Why are we so far behind? I think one answer is public perception. When Tom talks of speaking with a common voice, we need to do that, because solar, well, to say the wind is at our back is an understatement. We must match the technology to the application, and at the end of day, at least in the distributed sense, we are on the roofs. People will talk and the market will grow geometrically. But there is an awareness problem.

Thompson: Do you think we should take a page from the coal industry? They just had this successful campaign for clean coal, even though there is no such thing. So does the industry need to do what the coal industry did and do something similar?

Kenedi: We don’t need to mislead the public. The missing piece in the discussion, the missing piece of information is that you have to give the public what will help them make a better choice, and that is to talk about the true cost of the other forms of energy. We don’t talk about that. Solar, we risk it all at the beginning. But what is the true cost of a coal plant? People get outraged about deficit spending on certain programs, but they don’t get outraged about deficit spending in their energy choices, and it is time that information is made public and compared to what we do with it.

Wolfe:  I think we have the right economics to make solar go mainstream. I talk to many utilitites in the U.S. and ask them: What new generation have come online in the next five year? Coal? No. Nuclear? No. It’s all renewables. So its coming our way and I’m not so worried about the message or how to fight coal. What we have to do is turn coal miners into solar miners. Employ the coal miners.

Thompson: That’s a tough sell. The Kerry-Boxer bill is before the U.S. senate committee today. And the president of the Ohio coal association is telling the committee that green jobs are a myth, and real jobs are in coal country. How do you combat that?

Wolfe: In Vermont where I come from, we passed the first state wide feed in tariff in May and got it regulated in September. We had applications for 15 MW, which is 4.5% power in Vermont, for a 2-MW feed in tariff program. We had over 200 MW of applications on the first day. 12 MW were set aside for solar, and 174 MW of applications on the first day – in Vermont. That is half of what the U.S. did in 1980. We need programs with policy we can now show that creates a lot of green jobs, a lot of blue collar jobs, and a lot of white collar jobs. The right policy in a few states like Vermont can spread to states like California. There is nothing like proof in the jobs to get politicians attention.

Wemer: Remember that Thomas Watson said, a former CEO at IBM, a mainframe company at the time. He predicted the market for personal computers to be about six. When you ask the incumbent technology, ‘Will you be displaced by new technology?’ what would you expect that industry to say? So I think they are avoiding the facts. Our company employs over 1,000 people. Negative responses from competing technology are just wrong.

Shi: I think the solar community needs to put in more effort to educate the government about the importance of solar in every country, especially in the U.S. Listen to what the coal industry says about itself and you see why we need to work harder educating people.

Ford: We are also talking about the bureaucracy Government Richardson mentioned (He spoke previous to the CEO panel). We have almost 5,000 utilities in 50 states, and one federal government. All of them are trying to articulate into a consistent procurement energy policy. It’s extremely difficult. I would almost rather be in China because we could then move a little faster than we can now.

Thompson: Tom, you met the President earlier this week when he announced a $3.4 billion in stimulus funds for modernization of the grid and smart-grid technology. What does do for the solar industry? Is there a boom from that?

Wemer:  Absolutely. Think about the tone from the top. We get the backing of the president of the United States, the marketing department for the entire world. The thing about his talk was not some canned speech saying, ‘Solar is good’. He put together smart grid transmission, centralized resources, renewable green-tech jobs, the whole picture. The whole country is listening to that. So that is phenomenal influence. If that does not convince you this is going to happen, I don’t know what will. It’s incredibly important. He gets connection to jobs. Anything he is doing is about the next innovation cycle, and this is what America is good at, and he could not be more right.

Thompson: Is there more the administration could be doing?

Kenedi: I think the administration is doing a good job but I would like to see more leadership by example. I would like to see more solar panels on government buildings. I know there will be but I’d like to speed that up.

Thompson: Would you like to see solar panes back on the White House?

Kenedi: Yes, absolutely. People need to see it. One of the most import things about solar is that seeing it creates interest in it.

Thompson: Chinese President Hue made an incredible statement in October at the U.N. saying China is looking for a 15% of its energy from renewable and nuclear. What kind of doors does that open for manufacturers around the world?

Shi: It is really encouraging to see the Chinese government make a commitment to promote applications in China. And actually, most people heard the announcement from First Solar. That shows that the Chinese market is open to all technologies, all manufacturers. The first MW heating project was not won by a Chinese company. It was won by a combination European-Chinese company. So there is great opportunity for all manufacturers. I recently had lunch with Henry Kissinger. I asked him, what is the role China should play in combating climate change?  His answer was that China has to show leadership for the rest of the world. So, together, then show leadership and the rest of the world will follow. And now we have a chance (to show that leadership).

Thompson: How does it work in the Chinese market? Is potential there for American manufacturers to get a piece of the market? Or will it have to partner with a Chinese company?

Wemer: It’s a huge energy market, therefore a huge opportunity. Understanding the market is always an advantage. We’re for a California company. We believe in understanding the market is an advantage for us, so working with a Chinese company would be a distinct advantage. So I look forward to seeing Dr Shi in the next few months for assistance.

Thompson: Let’s take questions from the audience now. (She reads:) Do you think winners in solar will be vertically integrated companies or otherwise?

Wolfe: The solar industry is so small now. This is a fantastic conference, one of the largest in the U.S., but we are still a small industry. So I hate to pick a final winner. But absolutely, vertical companies will have a fantastic power play, as will nonvertically aligned companies. There are many markets in the U.S. so anyone with a good business plan can profit.

Freeman: Our process is highly vertically integrated and for a good reason. We don’t start with natural gas, but with polypropylene and resin, converting them to make solar panels. Which raises a question: What would you rather do: Burn natural gas or another fossil fuel to pollute the atmosphere, or convert it to drugs and resins that can heat water? For us, vertical integration is the only way to control the entire process and that has been critical, starting with chemistry and raw processing through getting solar panels out the door.

Thompson: How can the solar industry avoid commoditization?

Wemer: Satisfy the customer in a way that Apple Computer does. Think about the MP3 player. You download the design go to a contract manufacturer and build one with your name on it. Apple satisfies the customer. It’s incredibly easy to use their products and they are innovative. There are real opportunities to make solar more main stream and much easier to access all its positive attributes, such as no fuel and it’s easy to understand. Of course, innovate. We are still at early stages. We as a company have been able to produce high-efficiency products but there is a lot to be done. Think about the experience of buying solar today. It’s really complicated. If building a new house, people come out and it has to be recoded. The whole process is archaic in a way. There are a lot of folks in the audience improving that (process). There is a lot of innovation here.

Shi: The solar industry is young, far from mature. I believe that innovation and listening to the customer needs are key to differentiating our products. For example, look at the U.S. residential market. People will require cost competitive and high-performance panels. It’s scary. Make sure you can use solar quickly and efficiently. If a company can drop installation time from 3 hr to 20 minutes, that will push the cost down to add value. I think if you do things like that, you would differentiate your company from others.

Wolfe: What’s wrong with commoditization? Sorry guys. We are pushing for our own pro solar plans. We don’t sell grants, so we push values, convenience, service. And commoditization helps drive costs down.

Ford: If we don’t drive solar to a commodities state through efficient distribution and innovation and really cover manufacturing, ultimately we will fail. My dream is that one could push a cart down some big-box store aisle, three or four years from now, take a box of panels, put it in your cart, take it home and install it. That is commodity, and it’s really efficient. But we are not there yet.

Ron: I think the question is meant, can it be popular? We build different products for different markets. We focus crystalline modules for certain markets and just released thin film modules for utility-scale markets. We build shingles for rooftops, we build single-color modules for residential rooftops and they find values with those customer bases, and they also work with company’s like Jeff’s to create unique products for different customer bases. We all have to get better at that process to build margin back into the product.

Thompson: Here’s a last question for each of you. Does there have to be an (international) agreement (on global warming or carbon policy) in Copenhagen in December 2009 for the solar industry to move forward?

Ford: I certainly hope so, but if we don’t make it, then next year for sure, because the world needs solar. The U.S. needs solar. As was thoroughly expressed by this panel, I’m optimistic that two years from now its in the bag.

Shi: We should continue to push forward no matter what is agreed on.

Wemer: The horse is out of the barn. There will be a carbon policy, it will be from Copenhagen and later. We need to make sure solar gets credit for carbon reduction. Seize the day, solar participants, we are in a great spot.

Kenedi: The short answer is no. We will continue to grow but would sure like to see an agreement happen.

Wolfe: I’ll be in Copenhagen during the meeting and will like to see an agreement. But solar will dominate (renewable energy discussions). An agreement will make it easier. Copenhagen or beyond, an international agreement will happen.

Editor’s note: I made an effort to transcribe the ideas and thoughts of the speakers as accurately as possible. Comments were edited as necessary for clarity and brevity. Garbled remarks and applause were omitted. Any errors are mine alone.