Wednesday, January 6, 2010

Recession Hits Solar Industry

The recession is having a glaring impact on America's solar power industry.

Demand for solar products has dropped globally, prices have plummeted. Complicating efforts to expand, the industry in the United States faces intense competition from foreign governments making massive investments in what many see as the future of energy.

Facing the difficult economic reality of competing on the world stage, Massachusetts based Evergreen Solar, Inc is turning to China. Lauded as a leader among green energy businesses in the state, the company is taking advantage of the subsidies, cheap labor and production costs offered in Asia.

It's a simple matter of dollars and sense.

"You have low labor costs and low overhead costs in China but, you also get enormous help from the government and so it's difficult to compete in the United States if you have to contend with higher labor costs and lower government assistance," said Rick Feldt, the CEO of Evergreen Solar.

The move comes a little more than a year after the opening of the company's state of the art facility in Devens where hundreds of workers will continue to make some components, while panel assembly will largely shift to China. The state of Massachusetts backed the building of the facility with a $58 million dollar incentive package made up of loans, grants, lease and tax breaks- including roughly 20 million in cash grants.

"That was very helpful but, if I put it in perspective, it's a 430 million dollar facility- 20 million dollars is about 5 percent," Feldt explains.

Compared to the incentives other countries offer, Feldt believes the United States is lagging. Case in point- Evergreen Solar's other facilities overseas have seen much greater government backing.

"We built our joint venture factories in Germany because it's federal help, not just state help. We got 45% on the first factory- not five- and we got 30% on the next two factories. As we go to China, we're getting low interest loans on 65% of the factory and equipment. So although the state has been very progressive and helpful, as compared to the types of help you can get by other countries, the U.S. really lags considerably," Feldt said.

The down economy is further frustrating the company's continued growth.

"When we started the facility, we broke ground a couple of years ago- we thought we'd be selling panels today- this quarter- at 3 dollars and 25 cents or 3 dollars and 50 cents a watt. We announced in the third quarter that we're selling panels at 2 dollars and 41 cents a watt- 45% decline in prices from where that were a year and a half ago," said Feldt. "That has been devastating."

Still Evergreen Solar is optimistic and focused on long-term growth.

The company promised 350 new jobs as part of the bargain when excepting funds from Massachusetts- an expectation that was far exceeded when initial hiring brought in 800 workers.

It's unclear exactly how many of the new jobs will be lost due to the expansion plans but Massachusetts will remain the company's innovative hub, where their unique silicon wafer and cell technology will continue to be produced. Hundreds of jobs will be retained.

"We plan to be in the state for a long time," assures Feldt.

Governor Deval Patrick, who has vowed to make Massachusetts a leader in green energy, repeatedly praised Evergreen Solar during the company's growth and worked diligently to support expansion.

He expressed disappointment with the decision to send some manufacturing business to China but officials within the Massachusetts Executive Office of Energy and Environmental Affairs say Evergreen Solar is more than upholding it's end of the bargain.

"They've told us they have every intention, even if they do move some of their operations to China, that they're going to maintain that commitment they made to the state. I think we made a good investment, a good bet," said Ian Bowles, Secretary of Energy and Environmental Affairs. "It's very hard to find any other companies that created four or five-hundred new jobs in our state in the last couple years."

Massachusetts boasts 250 companies that provide some type of solar related product or service and, according the the Executive Office for Energy and Environmental Affairs, jobs in the industry have more than doubled in recent years.

Still, state leaders say the federal government must make a bigger investment in clean energy if the United States is to remain competitive in this growing field.

"We have an industry that's going to boom in the future. You'll see trillions of dollars on energy infrastructure roll-over and be reinvested in the next generation and getting a big slice of the jobs that are created from that as we make a transition to a low carbon economy is the opportunity and the challenge for the United States as a country," Bowles said. "Are we going to get into that game or are we going to cling to the past and watch China and Europe move ahead aggressively? That's the dynamic currently."


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