The Financial Times recently published an article (paid subscription or metered view required) concluding that global competition and overcapacity within the solar industry make consolidation highly likely.  Just a year ago, there were signs of a strong demand from regions such as Europe, China and North America, and analysts were predicting robust multi-year growth.  The article observes that over the last six months, cuts in government subsidies combined with large overinvestments in production capacity have now sparked a large downturn in demand and prices.  Unstated is the fact that the U.S. has not been able to develop any comprehensive alternative energy plan, thus leaving the free market to dictate the fate of U.S. producers. Analysts now predict that the industry has reached a watershed moment of excess production capacity that will forsee industry consolidation while vertically integrated Chinese manufacturers pull away from the pack. China and Taiwan combined represent the majority of global production of solar panels.

That fact was brought home to reality for those of us residing in the New England area with the announcement this week that Evergreen Solar Inc., a once high flying U.S. producer with innovative technology, has filed for bankruptcy. The Massachusetts company filed for Chapter 11 to carry out a corporate re-organization plan hoping to stay in some form of business.  The re-organization includes the possibility of selling-off its core polysilicon technology.  Evergreen has suffered mounting losses and corporate missteps, including the opening of a perceived expensive manufacturing facility in Devens Massachusetts, outside of Boston.  It took advantage of $58 million in subsidies and tax breaks offered by the Commonwealth of Massachusetts to build this facility. Earlier this year, Supply Chain Matters noted in a commentary the contrasting news of Evergreen’s decision to close its $430 million Devens facility with a loss of up to 800 jobs, opting instead to rely on a volume manufacturing partner in Wuhan China.  The news came as Chinese provider Suntech Power Holdings was actually investing in additional capacity in Goodyear Arizona to take better advantage of Buy America guidelines.

Ucilia Wang notes in article published on Renewable Energy World that silicon solar prices have fallen by more than 50 percent in the past two years with the pressure to cut costs continuing to rise as supply outstrips demand. Also noted are companies such as SunPower and Ascent Solar Technologies turning to French and Chinese investors to remain competitive. With demand from Europe and China becoming the focus of existing global players, First Solar and SunPower have become the de-facto  go-to market for U.S. demand.  According to the Wall Street Journal,  SunPower has already moved its high volume production operations to the Philippines while First Solar has sourced production within Malaysia.

It was not too long ago when Al Gore was traveling throughout the globe sounding the warning for the effects of global warming.  Alternative energy industries are the hope not only for our environment, but for strategic growth. Industry events however now point to China and Taiwan as possibly being the global dominants for this industry, as cost-cutting becomes the dominant industry force.

As some politicians in the U.S. continue to make hay of out-of-control government spending, countries like China continue to provide aggressive subsidies to strategic industries such as solar panel development and production. China and other select countries also continue to build-out the expertise of their high-tech supplier networks, also sourced regionally, which can be leveraged for other alternative energy products.  That strategy may pay-off as consolidation of the solar panel industry continues.

Bob Ferrari