Solar Energy Industry: New Developments in Government Incentives and What They Really Mean

The Obama administration has recently been strengthening efforts to establish the US as a leader in alternative energy, particularly solar power. In a recent statement after a $1.45 billion dollar conditional commitment to Abengoa Solar to build a solar field in Arizona, Energy Secretary Steven Chu said, “supporting this type of innovative renewable energy project is part of our commitment to creating a clean energy future while significantly reducing green house gases”. The US government has also provided other financial support, like a $400 million loan to Abound Solar Manufacturing LLC, to manufacture state-of-the-art thin-film solar panels.

With the recent activity in public and private funding (for instance, Konica Minolta’s $20M investment in Konarka in March), the industry is experiencing significant growth that will create thousands of jobs for Americans, not the least of which will come from increased manufacturing capacity for new thin-film photovoltaic panels.
While the government is pushing money towards solar panel manufacturers and other solar industry related companies, government support isn’t enough to make them successful. One recent example from the New York Times Energy Blog is San Francisco’s Solyndra, which received over $500 million in a federal loan guarantee, yet has been “hemorrhaging cash” and has recently retreated from an IPO to raise funds from additional private investors. Solyndra, while having unique and innovative shaped solar panels, has been challenged to find a solution which can be both profitable for them and affordable for their customers.
Many solar technology companies are still struggling to find the right mix of innovative technology, manufacturing capacity, and price point that will allow them to be successful without outside funding sources. One example is Solasta, even after receiving venture capital and a $2.7 million DOE grant, the Cambridge-based company recently shut down and its equipment and intellectual property has been sold to a Chinese academic institution. With far cheaper production costs, China is emerging as a leader in thin-film technologies. US companies need to move from pilot to commercial production faster to take advantage of this growth and compete on a range of economic and technological factors with offshore companies.
Industry growth in the US can be seen with other US companies operating in related fields moving into solar cell development. For example, Varian Semiconductor is launching a silicon solar cell manufacturing division financed by the already $204 million in revenue earned last quarter from their semiconductor equipment manufacturing business. With the solar industry growing nearly 60% in 2008, and doubling in 2009, demand for affordable and innovative solar panels is growing at a substantial rate. US solar companies need to find ways to become cost competitive with China, not only to stay in the market but to start to approach “grid parity”, the point at which solar generated electricity is as cheap as electricity from the power grid, which usually comes from fossil fuels. Achieving grid parity will be one of the key steps to making solar energy a main stream power source in the US.