Two young solar companies--DayStar Technologies and OptiSolar--have indicated that they're on shaky financial footing, signs that a shake-out among solar power companies has begun.
On Friday, DayStar Technologies said that it has issued a "going concern" statement as part of its annual filing with the Securities and Exchange Commission. The Halfmoon, N.Y.-based company had a net loss of $26 million in 2008.
"Our commercialization plans require additional capital to be raised," William Steckel, DayStar's chief financial officer, said in a statement. He added that the company engaged J.P. Morgan Securities to explore "select strategic transactions."
DayStar was one of the first companies to be formed to make solar cells from CIGS (copper, indium, gallium, and selenide), an alternative material to silicon.
Meanwhile, Hayward, Calif.-based OptiSolar said last week that it has closed its solar cell manufacturing plant and is laying off 200 employees, according to reports. Late last year, it cut its staff in half and warned that it would need more capital to continue operating.
That leaves fewer than 100 employees on OptiSolar's payroll, the San Francisco Chronicle reported.
OptiSolar, too, has developed an alternative solar technology, making thin-film cells from amorphous silicon. Last month, it sold its pipeline of projects to First Solar.
Both events point to the financing challenges that green-tech companies face, particularly in the solar sector.
Faced with both the economic slowdown and conservative lending, development-stage green-tech companies have had trouble getting the large amount of capital needed to expand.
Venture capitalists had poured millions of dollars into dozens of new solar companies, a situation that many people expected would lead to failed companies.
Meanwhile, an anticipated drop in silicon prices is expected to push the cost-per-watt of solar power lower, creating brutal price competition among cell and panel providers.
The situation could lead to consolidation among solar companies, say analysts. OptiSolar has been looking for a buyer but hasn't been able to find one, a company representative told the San Francisco Chronicle.
That's not to say that all solar start-ups are in a perilous position financially. Solar start-up Solyndra on Friday said that it expects to receive a $535 million loan from the Department of Energy to build a cell manufacturing plant.
Solar panel maker First Solar said on Monday that it has acquired the rights to develop utility-scale solar projects that rival OptiSolar has been unable to complete.
The deal, valued at $400 million, is a sign of how the seized-up financial markets are derailing large renewable energy projects and forcing solar companies to change their business strategies. Because of the tough economic conditions, analysts expect there to be consolidation among solar providers this year and next.
(Credit:
First Solar)
OptiSolar laid off half of its staff late last year and idled its Sacramento, Calif., factory because it was unable to raise additional capital. Developing utility-scale projects requires raising tens or hundreds of millions of dollars in financing, but the credit crisis has made borrowing far more difficult than a year ago.
Through the transaction, First Solar gains the rights to develop a 550-megawatt project to deliver solar-derived electricity for Pacific Gas & Electric, scheduled to begin construction in 2010.
It also acquired a pipeline of 1,300 megawatts' worth of projects with other utilities in the western U.S. and enough land rights to generate 19 gigawatts of utilty-scale solar projects. Significantly, these projects are already partially developed, allowing First Solar to short-cut a multi-year project-approval process.
The transaction is a big boost for First Solar's utility business. It comes on the heels of the company announcing that it has broken the long-pursued industry mark of producing solar panels at under $1 per watt. The company manufactures thin-film solar cells from cadmium telluride.
The OptiSolar projects will likely yield $70 million in revenue for First Solar in 2009, company CEO Michael Ahern said during a conference call on Monday.
Lazard Capital Markets analyst Sanjay Shrestha called the deal "a watershed event for the industry as it effectively takes solar industry into the mainstream" and noted that it more than doubles First Solar's project pipeline.
Like OptiSolar, other solar technology companies are making changes to their business models in reaction to the economy.
eSolar and Ausra are two concentrating solar companies which had originally planned to build and operate their own utility-scale solar power plants. Both, though, have adjusted their business models to focus instead on selling equipment--the gear that generates electricity--to utilities or power generation project developers.
A look at the numbers driving the solar-panel industry leads to one conclusion: prices are falling fast.
Photon Consulting, which advises solar companies, this week released a summary of a study that predicts that a number of solar companies will hit a long-pursued industry target of $1 per watt by 2012.
That race toward a $1 per watt manufacturing cost is leading to brutal price competition and a potential shakeout among solar suppliers, according to analysts.
For consumers and businesses, though, the race means that within a few years solar photovoltaic modules, or panels, will be able to generate electricity cheaper than the grid in many regions of the world.
"With $1/W for modules and $1/W for BOS (balance of system), solar electricity in sunnier areas will be (less than) $0.10/kWh by 2012, creating a large addressable market that is the grand prize in solar's race to $1/W," according to the report summary.
The average retail price for electricity in the United States over the 12 months ending in November was 11.26 cents per kilowatt-hour for consumers and 10.24 cents per kilowatt-hour for businesses, according to the U.S. Energy Information Agency. Prices vary significantly within the country, ranging from below 5 cents per kilowatt-hour in Idaho to 15 cents per kilowatt-hour in New York, for example.
Costs of solar electricity are falling through a combination of factors including better cell efficiency and improvements in solar manufacturing. Also, financing contracts where customers, usually a business, purchase electricity generated by rooftop panels over 20 or 25 years can result in a predictable and lower cost, according to analysts.
Photon Consulting in another study calculates that solar power is poised for far greater adoption because of falling costs. "Grid parity," or meeting the cost of electricity from traditional sources of power generation, is close for many places but Photon Consulting did note that there are economy-related risks to hitting that mark.
"Even at $0.15/kWh, the cost of solar power will be below grid parity for more than half of residential customers and 10% of commercial customers in the OECD (Organization for Economic Development countries), as long as grid electricity prices do not decrease through 2010. The other key risk to this view is significantly higher interest rates," Photon Consulting said in its report.
In the financial industry bailout package last year, the 30 percent tax credit for solar-electric investments was extended for eight years and the $2,000 federal tax credit cap was lifted. There are also a handful of companies offering financing options, such as leases, which lower the upfront cost of installing panels significantly.
Solar companies "in peril"
Although the falling equipment prices make solar power more attractive for buyers, it spells real challenges for solar manufacturers.
Lux Research, a firm that does emerging technology research including green technologies, last week released a report that predicted a bruising economic environment for solar companies in 2009.
The prices of silicon--the most commonly used solar cell material--were relatively high in the past few years because the supply did not keep pace with demand. But that dynamic has been reversed, with a silicon glut pushing the prices of panels down, according to Lux Research.
"Starting in the fourth quarter of 2008, the global solar boom has sharply, and with little warning, peaked and turned into a global solar shakeout, as an oversupply of solar modules and a drying up of project financing has led to a drop in prices and a build-up of inventories, placing many firms in peril," according to the Lux Research report summary.
In addition, the difficulty in getting venture capital could derail large-scale production of low-cost thin-film solar cells.
Photon Consulting identified First Solar, REC Q-Cells, SolarWorld, SunPower, and Suntech as companies who are leaders in electricity costs.
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