Alternative Energy in the Economic Downturn

From the New York Times's Green Inc. blog:

OptiSolar, based in California, is laying off close to half of its workers at what it had hoped would become a huge solar-panel plant near Sacramento.

HelioVolt, a [...] solar manufacturer headquartered in Austin, is also cutting jobs, as reportedly is SunEdison.

Evergreen Solar, a solar manufacturer, announced that it would close down a pilot plant in Massachusetts as a cash-saving measure; it will incur a $25 million charge for writing off equipment.

All of those (hyperlinked) company names are different companies that manufacture solar panels and things like that. And, as you probably noted, they are all suffering right now, during the Financial Crisis.

According to USA Today, there are several reasons why:

Since 2004, solar prices have been propped up by a shortage of capacity to make both silicon — the raw material for solar-power systems — and finished panels. Meantime, the Spanish and German governments have paid system owners hefty subsidies to generate solar power, turbocharging sales in those countries.

Manufacturers responded by building a wave of factories. Then Spain and Germany slashed this year's incentives [ie the subsidies]. In the U.S., the biggest solar investors were banks such as Morgan Stanley that can no longer benefit from tax credits because of insufficient profits.

Prices on solar panels had been pushed artificially high, since 2004. However, the Financial Crisis, last fall, slammed the brakes on everything: no one is buying solar panels and Germany and Spain stopped their subsidies. Even in the U.S. investment capital is slim. This has had two major results:

1. The wave of factory closings mentioned earlier.
2. Prices are much lower on the solar panels that are still being produced.
   • There were so many factories producing as many panels as they could, for the past few years, that there are a ton of panels just lying around right now. Factory owners are more or less trying to get rid of them.
   • At the same time as that high level of supply, there is extremely low demand.

Barry Cinammon, CEO of Akeena Solar, one of the nation's largest installers, estimates that the total cost for consumers buying solar panels has fallen 8%. And representatives from SunPower, one of the largest solar manufacturers, predict that prices may fall by as much as 20%.

The news isn't so bad though, if you're a consumer in the Golden State. From the USA Today article:

In California, which accounts for nearly 70% of the U.S. solar market, a typical 4-kilowatt, $32,000 solar energy system cost a homeowner about $23,000 last year after state and federal incentives [ie more government tax credits]. This year, if prices sink as expected, that system is likely to cost $10,000 to $12,000.

The point here is that if you're thinking about buying solar panels for your roof, the time to do it is now.

But even though the math has been sounding pretty negative for solar companies, there is good news in the long term. According to an article from the Wall Street Journal:

Start-ups across a variety of areas -- solar power, biofuels and energy conservation among them -- are getting increased financing from venture capitalists and lenders at a time when other small companies are cutting back and being turned away by investors. And many are hiring more staff, boosting marketing efforts and expanding geographically.[...]

While the overall volume of venture-capital deals sank last year, investments in clean-technology companies totaled $8.4 billion, up nearly 40% from 2007, according to Cleantech Group. In the third quarter alone, venture capitalists poured $2.6 billion into clean technology, a quarterly record. In the fourth quarter, they invested $1.7 billion.

Even though venture-capital as a whole was declined last year -- no doubt as a result of the Financial Crisis -- it went up by 40% for the Alternative Energy sector. The article goes on to interview owners of alternative energy retailers, manufacturers, and installers who are expecting their business to grow in the next few years.

How does this reconcile with the problems that the solar companies are facing? Solar technology is just one source of alternative energy. The WSJ article deals with everything from Biofuels to Information Technology:

Verdiem Corp. sells software that provides centralized control over power consumption, such as remotely turning off computer monitors left on overnight.

Solar got popular very quickly, but as it turns out, we're going to need more than one solution to the Energy problems that the world faces. It will encompass everything from the cars we drive to how we turn off the lights at night. Just producing the electricity that we consume will take several forms of alternative energy. Remember the Supergrid that I wrote about a while back? It was a plan to power Europe that focused on energy from the Sun, but every part of Europe had to contribute: the windy countries had turbines, the coastal regions contributed Hydro-power. Fortunately, now, U.S. companies are beginning to invest in these many different technologies. We are just taking the first steps on the road to sustainability.