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Home » Business» Energy Loading… Published: 12/4/2011 – Updated: 1 week ago BY JON CHAVEZBLADE BUSINESS WRITER
A?year after a U.S. senator said northwest Ohio’s solar-panel industry was helping the state to become known as “the Silicon Valley of clean energy,” industry experts predict the global industry will undergo a major shakeout that will break all but a handful of solar panel producers worldwide.
The bold forecast raises questions about the future of the Toledo area’s three panel makers, with one more coming next year.
Each of the firms with local operations — First Solar inc., Xunlight Corp., Willard & Kelsey Group LLC, and, building a plant in Napoleon, Isofoton North America — contends it makes a particular type of panel that is in demand and is competitively priced, so it will survive any industry consolidation.
The chief executive of China’s Trina Solar Ltd., the world’s fifth-largest solar panel maker, predicted recently that by 2015 two-thirds of the industry’s solar-related companies will face mergers, acquisitions, or bankruptcy.
And by 2020, Jifan Gao said, just 15 solar firms will be left — five each in of three major segments: photovoltaic (solar) panels, solar energy-absorbing wafers and ingots, and production of raw materials such as polysilicon, the most commonly used material in solar panel manufacturing.
Jeffrey Pichel, an industry analyst at Jefferies & Co., has forecast a consolidation of the industry for three years.
“It’s not so revolutionary an idea,” he said. Already, three large U.S. solar companies — Solyndra LLC, Evergreen Solar, and SpectraWatt — have gone bankrupt. A fourth, BP Solar, halted manufacturing in the spring.
Fitch Ratings Ltd. said recently that solar power companies are likely to encounter tough conditions for their public stock, and First Solar, the world’s largest maker of thin-film panels, said competitors are “desperate” to sell inventory after adding too much factory capacity, leading to a supply glut.
Bloomberg News reported last month that First Solar executive James Brown said at a conference in India, “Not everyone who is playing today is going to be around in two to three years.”
Mike Cicak, chief executive of Willard & Kelsey, said every industry goes through consolidation. “The key is whoever’s going to be the lowest cost producers are going to survive. That’s the long and the short of it. And we think we’re one of the lowest-cost producers.”
He said he expects the industry to grow, with many homes using solar panels as the cheapest form of providing electricity.
Still, he added, “Those who say there’ll be a shakeout, they’re’ not wrong. There’s going to be a big shakeout.”
The biggest presence in the Toledo area is a 1,200-employee plant in Perrysburg Township that is owned by Toledo-born First Solar, which is now based in Tempe, Ariz. A large portion of its panel production is exported.
Xunlight, based in Toledo, has a panel-making factory with 60 employees.
Willard & Kelsey, a start-up still not in full production, has 100 employees in Perrysburg.
And Isofoton is building a plant in Napoleon that it plans to open in 2012 and plans eventually to create 330 jobs.
Industry pressures
Industry pressures have affected the existing three. First Solar has cut its sales and margin forecasts to reflect slower demand growth and stiffer competition.
Xunlight laid off 30 employees in may after an Italian firm delayed payment on a panel order.
Willard & Kelsey planned to have two production lines and 250 workers by now, but an executive said the poor economy and slow demand have hindered financing for a second line.
Xunming Deng, chief executive at Xunlight, said, “We will be one of those survivors. our products are unique and different and we’re starting at a much more premium price.”
Tom Kimbis, vice president of strategy and external affairs for the Solar Energy Industries Association, which has 1,100 member companies, said intense competition will produce failures, mergers, acquisitions, and bankruptcies.
Still, there will be newcomers to the industry, he said, adding, “The Internet didn’t shut down because Netscape disappeared.”
The strongest companies with the best business models that adapt to growing global market conditions will thrive and survive, he said.
A big problem is a loss of subsidies to finance large solar projects.
Germany and Italy, two large solar users, have all but curtailed subsidies for new projects, causing a glut of solar panels that has depressed panel prices.
Micheal Ahearn, First Solar chairman and interim chief executive officer, said in a recent earnings report that the subsidy cuts are troubling. “Going forward, our goal is not just to survive the current environment but to transcend it by creating and expanding markets worldwide that do not depend on today’s subsidy programs,” he said.
Plans for survivial
He told analysts that his firm plans to survive by pursuing new markets, improving its technology and adapting it to customer needs, forming better relationships with policy makers and regulators to promote large-scale solar deployment, and pricing its panels to drive demand without the need for subsidies.
Analysts say that of the Toledo area companies, First Solar is the best positioned to survive a shakeout.
Alan Bernheimer, a First Solar spokesman, said the company “is arguably the strongest in the PV [photovoltaic] industry.” it expects sales of more than $3 billion for 2011, and for the most recent quarter had a profit of $195 million.
The company’s largest plant is in Malaysia, where labor costs are low.
The consensus growth estimate for the global solar panel market is 11 percent through 2013, Mr. Bernheimer said.
First Solar plans to target new growth markets such as the United States, India, Australia, North Africa, and the Middle East.
Michael Peck, chairman of Isofoton North America, said he expects “more than five players standing when the dust settles” among solar panel makers, and it might not be only the largest firms.
” … Casualties will be those companies who have not introduced new technologies in a timely manner, whose cost structures are not competitive, and who have taken on too much debt to finance past performance due to sector challenges,” he said.
Isofoton will be a survivor, and its move into Napoleon will help allow it to increase production capacity near its customer base, he said.
The Spanish company wanted to come to the Toledo area because of its solar cluster of firms and the research under way at University of Toledo, Mr. Peck said.
“Isofoton has dedicated three years on its own dime to developing our all-Ohio approach based on deep-seeded relationships with utilities, universities, economic development groups, local supply chain providers, leading local and national solar energy developers, and state government agencies,” he said.
Different technology
Existing Toledo area solar firms differ from others globally by technology.
First Solar, Xunlight, and Willard & Kelsey all make thin-film solar panels, a relatively small segment of the overall industry.
In thin-film production, solar energy-absorbing coatings are applied directly onto a glass panel.
Conventional panels, which dominate the industry, use energy-absorbing wafers that are attached to a panel, making them heavier than thin-film modules.
Xunlight’s modules are flexible. Mr. Deng, the CEO, said last week that his company had a setback this year but it is still selling product and just received a payment up front from a European buyer for 100 kilowatts of panels.
“We are enjoying the premium price on the flexible process we use … and that is why we believe we have a bright future,” he said.
Willard & Kelsey’s Mr. Cicak said solar is “going to be the cheapest form of electricity, and it’s going to continue to get lower in cost.”
The goal for his suburban Toledo firm, he said, “is to get very, very low on cost and see what happens.”
The industry in the United States is somewhat in disarray with the bankruptcy of Solyndra and other companies that had received massive government subsidies and with a pending complaint by U.S. companies that China is dumping low-cost panels into this country.
The complaint, filed with the U.S. Commerce Department and the U.S. International Trade Commission, is based on the crystalline-polysilicon and not the thin-film panel makers.
It alleges that the panels from China are exported to the United States at a price less than it cost to manufacture and distribute them.
Chinese firms have denied the allegations.
Ruling by commission
The trade commission ruled Friday that solar-equipment makers are being harmed by imports from China.
The commission will now proceed with a full investigation, which could result in imposing added tariffs on those imports.
First Solar and Willard & Kelsey use in their panels cadmium telluride, a cheaper conducting element than crystalline polysilicon.
Xunlight uses amorphous silicon for its panels. Isofoton uses crystalline polysilicon.
Thin-film panels convert less sunlight into energy than do polysilicon modules.
This distinction formerly was unimportant because polysilicon was higher-priced.
But the price has come down 80 percent in the last three years, making it more competitive with thin-film manufacturing.
Mr. Bermheiner said First Solar’s module manufacturing cost is the lowest in the industry at 74 cents per watt as of last quarter.
Mr. Pichel, the analyst, said that thin-film, on a per watt basis, has a cost advantage compared to crystalline polysilicon companies. but that advantage is disappearing.
“Generally First Solar panels have to price at a discount compared to silicon panels because of the lower efficiency.”
For First Solar to avoid being a victim of industry consolidation, Mr. Pichel said, “it all comes down to how they can improve their efficiency.”
First Solar panels now average 11.7 percent efficiency, meaning they convert 11.7 percent of the sun’s energy to electricity.
The company recently broke a record for cadmium telluride with a laboratory panel that achieved 17.3 percent efficiency.
“Seventeen percent is great, but is that 17 percent commercialize-able? That is, they can make it in the lab, but can they produce it on a commercial scale?” Mr. Pichel said.
The biggest expense in a solar project is interest on financing, he added, so given First Solar’s excellent balance sheet, the company is in good shape to finance projects in the future.
Mr. Kimbis, of the trade association, said crystalline polysilicon now dominates the marketplace, but technological innovation could change that.
“If you look at cell phones, five years ago you would have thought that the ideal phone now would be the size of a credit card. but look what’s happened with the advance of the iPhone,” he said.
“It turns out size wasn’t the key, it was functionality.”
He added: “There’s been a really strong emphasis on production costs, the cost of labor and raw material. but that’s not necessarily the future of solar when you look at the long term.”
Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.
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