Sunny days for solar-energy firms
Incentives drive growth despite shortage of silicon
The sun-gods of the market have shone brightly on solar equipment makers lately. The industry as a whole grew by more than 30 percent each of the last six years. And it’s probably getting bigger.
The reason? Strong demand amplified by rising oil prices and concerns about reliance on energy supplies from the troubled Middle East.Several local companies stand to gain from the trend. Evergreen Solar Inc. in Marlboro, which makes solar modules, recently signed contracts valued at $380 million to produce solar equipment. To help meet its growing overseas demand, the company is in the midst of a joint venture called EverQ with Norwegian-based silicon supplier Renewable Energy Corp. and German solar cell maker Q-Cells.
Another group, Boston-based SatCon Technology Corp., which has factories in Worcester and Marlboro, makes power conversion equipment for solar and other alternative energies. Earlier this year, the company launched a high efficiency 500kW inverter, the largest device of its kind produced in North America, the company says. Inverters change the DC electricity produced by solar cells into the AC used by home appliances.
Other Bay State companies outside of Central Mass. have ridden the solar wave to log increases in sales. Spire Corp., a Bedford-based company that supplies Evergreen and other solar power makers with manufacturing equipment, saw its sales rise nearly 300 percent last year and marked six consecutive years of revenue growth.
Subsidies and incentives
Government rebates for installing and using solar power are boosting the industry’s growth, says J. Terry Bailey, senior VP of marketing at Evergreen. Underlying those rebates are not only western fears over rising oil prices and national security concerns but also the environmental worries that shaped early green movement idealists who first installed solar panels, Bailey says.
Japan, which relies heavily on imported energy, was the first to offer significant rebates for solar power. Quickly a market formed, spawning large solar manufacturing segments at companies like Sharp and Sanyo.
Germany was next, passing in 2001 its Renewable Energies Law (EEG) that created 20-year subsidies for renewable energy generators. A similar rush to fill that market followed, and Germany is now the world’s largest market for solar.
California and NJ lead the American solar rebates effort. The Golden State earlier this year pledged $3.2 billion in rebates over the next decade for solar array installations. In the Garden State, solar producers get rebates up to $4.35 per kilowatt for energy put into the grid there.
And local governments are supporting the effort, too. One example is the city of Brockton, which just last month signed a $3 million contract to install the largest solar array in New England. It will generate enough energy to power its City Hall and some of its police station.
Those rebates and incentives are crucial: They create calculable revenues and expenses, allow investors to fix rates of return and reduce their risks, thereby encouraging investment. As more governments adopt them, the more the industry will grow, says Bailey of Evergreen.
Stretching the silicon supply
But the solar industry does face hurdles, the largest of which is a shortage of silicon.
In the last year alone, prices on long-term silicon contracts grew 25 percent, according to CA-based solar consultants Solarbuzz. In that time, supply grew 12 percent. As solar makers compete increasingly with the semiconductor industry for silicon, Solarbuzz expects the solar industry’s growth — measured in megawatts installed – to narrow from 34 percent last year to 10 percent in 2006. Most analysts predict solar equipment makers will eclipse chipmakers as the largest consumers of silicon within a few years.
Evergreen became a victim of the supply shortage earlier this year when its sole silicon supplier, MEMC Electronic Material in MO, declined to fill two contracts signed last year for delivery of 100 metric tons. When it cancelled those contracts, approximately 53 metric tons had yet to be delivered.
Evergreen was forced to rely on chunk silicon supplied by its EverQ partner REC. Although they must further crush that silicon before it can be used in Evergreen’s manufacturing process, the company does not expect the change to alter its 2006 cost estimates, Bailey says.
In fact, the company believes its patented "String Ribbon" technology will help it weather the supply storm. With this process, Evergreen makes wafers by pulling high temperature strings through a bath of molten silicon, spreading the element thinly between them. Once crystallized, the thin panes of silicon are cut to make wafers. Traditional methods of silicon making rely on cutting slices from bigger blocks with a wire saw, wasting as much as 40 percent of the silicon to sawdust, according to Evergreen.
Industry-wide, the shortage may not last long, Bailey says. Supplying to two separate industries — semiconductors and solar — may stabilize revenue for silicon producers and encourage them to grow.
Staff Writer Kenneth J. St. Onge can be reached at kstonge@wbjournal.com
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