Solar Industry Scrambles to React to Technological Innovation and Changing Economic Dynamics

The economic vitality of the solar industry is in question these days.  Two major solar firms tell a tale of a still nascent industry struggling to maintain economic stability amid rapidly changing  innovations in solar technology:  First Solar and Brightsource

Actually things have been going fine until  three things happened:  One, the fracking of natural gas lowered the cost of natural gas below any renewable source.  Two, the Republicans in Congress have completely eroded  tax subsidies for renewables.  Three, China has made solar manufacturing a centerpiece of its economic agenda, sending a tide of cheap photovoltaic panels to American shores dropping the price for panlels by 75%.

First Solar, once among the industry’s biggest and strongest companies just reported a big quarterly loss of $449 million in the first quarter.  In addition they are going through a massive restructuring announced last month that will eliminate 30 percent of the company’s workforce and plan to close their plant in Germany.   First Solar named James Hughes asCEO, replacing interim chief and company founder Mike Ahearn.  Things move quickly in the innovation world and in the previous quarter,  the company earned $115 million, or $1.33 per share.

At issue is that First Solar, along with other makers of solar panels, is struggling to adjust to a dramatic plunge in panel prices. As I wrote a couple of weeks ago, the boom in the construction of solar panel factories, especially in Asia, coincided with lower demand in Europe created a glut of panels and sent prices tumbling. European demand fell because cash-strapped governments there reduced renewable energy subsidies.  Unfortunately for First Solar, their enormous cost advantage over the competition has eroded. First Solar became the biggest solar company in the world, both by market valuation and panel sales, selling solar panels made with a thin film that were far cheaper to produce than those made from crystalline silicon. Though a thin-film panel is less efficient in turning the sun’s rays into electricity than a crystalline silicon panel, a solar farm with thousands of First Solar’s thin-films could produce the same of amount electricity at a lower total cost.  Now, the cost of the raw material for crystalline silicon panels has plummeted, making it easier for these more -efficient panels, mostly made in China, to compete with First Solar’s thin film on price.

Brightsource Energy - an investor in solar thermal energy, a technology that powers homes and businesses around the clock. (Traditional photovoltaic solar panels transmit power only when the sun is shining.) is also having some troubles  Although there still was no solution to make solar thermal power as cheap as wind turbines or photovoltaics, that was OK because Brightsource had major buyer lined up: the state of California, which has passed laws requiring it to cut greenhouse-gas emissions by ambitious amounts. Brightsource, was planning to go public in early April, but cancelled this offering citing adverse market conditions.  The company says they are still in a position of strength and their $2.2 billion plant in California’s Mojave Desert is fully funded, thanks to investments from NRG Energy and Google and a $1.375 billion federal loan guarantee  Still, BrightSource’s future looks much dimmer than it did just a few weeks ago.