Even Thin Solar Can't Weather Silicon Glut - Barron's

Last year Barron's warned silicon producers would take a hit as a supply glut hit the market, but predicted thin film solar panels produced by First Solar (FSLR) and Energy Conversion Devices (ENER) - which use 97% less silicon - would remain solid.

Not any longer, author Bill Alpert says. The glut is far worse than most anyone expected, driving silicon prices from $450/kilo one year ago to about $100.

First Solar panels convert 11% of the sun's energy to electricity, vs. 20% for comparable non-thin panels. But the firm admits that its competitive advantage evaporates the closer silicon feedstock drops toward $50/kilo. FSLR will also have to bear the loss of a massive Spanish subsidy under which it was able to install 2.4 gigawatts at a 75% markup. A subsidy plan announced last week by China won't fill the gap, Alpert says. Some analysts say shares ($147) should rebound to at least $175, but this may prove too optimistic if the silicon glut continues to eat away at its margins.

Energy Conversion is even less fit than FSLR to deal with cheap silicon; its $3/watt electricity seemed cheap when the rest of the industry was at $3.50 - but now they're at $2.80. Two weeks ago, ENER shocked investors by pulling its guidance and suspending production expansion. Another factor impacting profits is ENER's liberal policy of recognizing sales as soon as panels are ready to be shipped - in an environment where contracts and price agreements are under heavy barrage.

The good news? Supply may outstrip demand by 50% this year and 75% in 2010 - which will help bring solar prices in line with fossil-fuel powered electricity. What's bad for the solar firms may be a coup for the environment.

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Zachary Scheidt thinks the markets underestimated last week's China announcement:

When you begin to understand the magnitude of this announcement, its actually only surprising that these solar companies didn’t jump more than 45%. In the coming weeks I expect that markets will continue to absorb this news and as a result solar stocks will move higher... much higher!

Meanwhile WSJ's Heard on the Street says the short-term excitement belies some key long-term risks:

The rush of companies entering panel production is reminiscent of the now oversupplied flat-panel and semiconductor markets. Companies in those sectors are losing money faster than they can raise it.

Comments

[Repsonsible...:]

We'll It simple , Solar produced electrcity is still 28 times the cost of Coal electricty . Even with tax credits , goverment subsidies it still comes out to about 22 tmes the current cost , in this economy 97% of America simply cant afford solar even if they wanted to . My Electric company offered me 20% of my Electric to be generated by there Solar division my monthly bill would have gone up from around $100 to $400 I said NO Thank You! And thats Just 20% solar cost , at that rate 100% would be OVER $2000 a month . Someday Solar will come down maybe to say 3 times the cost of coal , then in a better economy I'm sure most people could be convinced or shamed into going All solar but for now and into the forseeable future Solar will be a great idea thats just NOT practical for the vast majority of people.

Mar 29 02:52 PM

[anarchist:]

I live in sunny Baja Sur (Mexico) and even with 350 days of sun solar is still not competitive. Solar sales are made mostly to people who live out of town where there is no power. I just can't see how solar will ever deliver a significant amount of power in the U.S. and certainly not here in Mexico unless it is heavily subsidized.

Mar 29 03:33 PM

[tc1:]

Dear Responsible Citizen

Where i live (Santa Barbara, CA), the private company SolarCity arranges leases with residents. Here's how it works (and maybe you have SolarCity or a similar leasing company operating in your vicinity): SolarCity installs FirstSolar's panels on your roof or somewhere on your property. You pay Solar City a lease, which, COMBINED WITH whatever electricity you may still be paying for from your electric power utility, is still usually about 20% LESS THAN YOUR MONTHLY ELECTRIC BILL. You have various lease options-- you can pay zero upfront, or $1k upfront, or $9k upfront to get even better terms on the lease. After 15 years, SolarCity offers you the option of re-negotiating the lease, getting upgraded solar panels, etc.

In other words, you can very quickly be getting solar power for 60%-90% of your needs, pay LESS each month on your utility bill, and live with a clear conscience that you've just radically reduced your carbon footprint on this precious planet.

It's a win-win-win situation all the way around --for you, your local utility (which likely has a mandate to utilize more green energy), for the leasing company and for companies like FirstSolar.

Incidentally, SolarCity offers a lucrative incentive program: for every customer you bring to them, you get $300 in your pocket.

Mar 29 03:54 PM

[tessant:]

hi SA,
great article - would i be able to publish it on my site - solarfeeds.com ? i will link back and give all credits, etc....please let me know...

Mar 29 04:08 PM

[Hal Briggs:]

Something is not clear in regards to the ENER comments by the author. A lot of companies are temporary pulling the plug on overhead until the economy picks up. With that said it is only good business sense to lay off workers for now.

Their new building almost done and work continues to finish it. Installing the production equipment in the new plant is on hold for now, again this seems like good business sense until the economy starts moving. Almost every sector of the economy is taking a hit. This is just might be a pot of gold for those who get in while it's down.

I am not too sure what he meant by "pulling its guidance".

Thin flexible solar has markets that the solid/ridged versions do not have.

Mar 29 04:28 PM

[Douglas Hvi...:]

HOOORAY for Solar City. However, there is another route to solar - through heat. Search on "evacuated tube collector," "annualized geo solar," and Solarwall. The latter is very interesting - we are looking into using it on our south roof to feed a heat pump using annualized geo solar seasonal heat storage. Now we are digging down for the heat transfer tubes - that is the most heavy work part of this and is simple enough so I can do it myself.

Maybe by the time we are prepared, PV will be low enough so it will be practical to add the PV option in spite of the low electricity costs in the Dakotas. In any case, that can be added later.

Mar 30 07:53 AM

[baird:]

Responsible,

With respect, go to West Virginia and look at the mining operations or any forest on the east coast, try to eat the fish, check mercury levels in your body, co2 emissions, etc, then tell me coal is cheaper. This has always been the problem with coal, the market simply doesn't price the externalized costs. BTW your other numbers in favor of coal are off too by about an order of magnitude.


On Mar 29 02:52 PM Repsonsible Citizen wrote:

> We'll It simple , Solar produced electrcity is still 28 times the
> cost of Coal electricty . Even with tax credits , goverment subsidies
> it still comes out to about 22 tmes the current cost , in this economy
> 97% of America simply cant afford solar even if they wanted to .
> My Electric company offered me 20% of my Electric to be generated
> by there Solar division my monthly bill would have gone up from
> around $100 to $400 I said NO Thank You! And thats Just 20% solar
> cost , at that rate 100% would be OVER $2000 a month . Someday Solar
> will come down maybe to say 3 times the cost of coal , then in a
> better economy I'm sure most people could be convinced or shamed
> into going All solar but for now and into the forseeable future
> Solar will be a great idea thats just NOT practical for the vast
> majority of people.

Mar 30 10:38 AM

[jmmx:]

@ tc1
Now here is something I do not comprehend. Someone (as of right now) has marked a "thumbs down" on your post.

This makes no sense to me at all. All you are doing is reporting factual information about a service in your area. I can see someone disagreeing with another's opinion in terms of overall costs or viability or need for solar, but this is not opinion. It is merely a note of a real program that exists.

Is someone so fanatically anti-Solar that they will mark down a simple listing of fact? Strange.

Personally, I frequently give points to people I disagree with, when their post is well written and not full of errors.

Mar 30 11:20 AM

[billp37:]

First Solar is reported to construct one of the continent's largest solar power plants in the US in New Mexico.

www.prosefights.org/pn...

This apparently is for Tri-State Generation and Transmission which supplies electricity to four states, most notably Arizona.

PNM is apparently in the proposal solicitation phase of a solar trough project with storage.

Money appears to be made in the construction phase of such projects. Let's hope that money can be made producing and selling electricity from these projects as well.

Eclipse Aviation in Albuquerque spent ten years developing a small jet. One billion dollars per year of investors money culiminated with Eclipse bankruptcy.

Let's hope we don't have a repeat with solar energy.

Mar 30 11:51 AM

[searcher:]

Rarely rate a post and have not here. The leasing options sound too good to be true; they might be, however, and that is a good thing. It seems that such an arrangement would pencil out using a substantial retained (appreciated?) value at the termination of the lease. Whatever the facts, if to 'second' the assertion or to deny it, SloarCity would be the initial (obviously not the only) source for the due diligence required.

Mar 30 12:02 PM

[oaksleeksbeans:]

I run a solar electric program in a medium sized state. Last year we cofunded about 870 kW of installed systems. This month we got in about 200 kW of applications. This is before the stimulus money hits. This year may surprise the forecasters.

Mar 30 09:53 PM

[frflyer:]

Responsible Citizen

The other comments are right, you have a negatively distorted view of solar's prospects and costs.
Go to the (NRL) National Renewable Energy website, where you will find
nrel-costs-graph-02 showing how far and fast solar prices have fallen over the last 20 years and how far and fast they are expected to fall up to 2020.

Solar electricity prices are already at grid parity in higher priced markets, especially sunny ones.
Solar produces when power is needed during the day at peak demand prices. This is particularly true in the hotter areas where air conditioning is used heavily. Prices are projected to reach grid parity over about 40% of the country in four to five years and everywhere in ten years or less.

Your comparison of solar and coal prices is also distorted for two reasons.

One, you are not counting the externalized costs of fossil fuels. environmental, health etc.
These are real costs even though they don't show up in fuel prices or electricity prices. And they are huge.

Two, you are criticizing solar for needing subsidies, when oil has been subsidized for 90 years and gets more than all the renewables put together, at $39 billion a year. Coal gets $8 billion a year, plus additional money now for carbon capture research. Gas is also subsidized, and nuclear as well. Fossil fuels total $49 billion/year.

The railroads, the internet and telecommunications, electrification of the country, and many other things were heavily subsidized.

Large companies are putting solar on rooftops etc. because it makes business sense, saving them money.
This isn't just greenwashing.

Utility scale solar will also be as inexpensive as coal and gas in the near future. Concentrating solar and solar arrays.

www.nrel.gov/csp/

Read the NREL report on (CSP) concentrating solar at their website.

Mar 31 01:11 AM