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A perfect storm is wreaking havoc on the solar industry.
By Stephen Simko | 07-17-09 | 06:00 AM
After years of breakneck growth, dynamics within the solar industry have rapidly changed. Recently, the demand for solar power has been hurt significantly by both tighter lending to project investors and the introduction of a 500-megawatt cap on Spain’s solar subsidy program (the world’s largest last year) that will shrink the Spanish market by at least 80% in 2009. Although the United States and China offer very attractive long-term stories, both markets remain relatively undeveloped, and it is likely newly announced incentives/subsidies will not materially increase installations until 2010. As a result, we expect growth in global solar installations to decrease for the first time this decade in 2009 (see Chart 1) because there simply is no market than can replace the 2-gigawatt (33% of the 2008 global total) reduction in demand from Spain.
The downturn in demand highlights another serious issue that was clearly emerging last year: The industry presently has far too much supply. During the solar boom of the last few years, demand consistently outstripped supply, and essentially every solar panel produced was sold. Solar companies could increase sales as quickly as they could expand production, all the while at very profitable levels. Not surprisingly, new entrants flooded in, and existing companies expanded rapidly, with the whole industry planning as if high double-digit growth were set to continue indefinitely.
Given the cap in Spain and the lack of financing for new solar projects, such growth is far from the case. For the first time in years, supply exceeds demand in the solar industry. There is evidence of this along the entire solar supply chain–from raw materials (such as silicon and related materials) to solar panels–and selling prices have collapsed during the last nine months at all points. MEMC Electronic Materials (WFR
WFR), a major producer of silicon, is a prime example of a company enduring the havoc that falling average selling prices (ASPs) are wreaking on the solar supply chain: First-quarter sales declined by 50% sequentially, and as a result, operating margins fell from 39% to negative 12%. The travails of silicon producers are not translating into high profits for solar companies further downstream. The ASPs of cell and module makers have fallen anywhere from 20% to 60% during the last nine months because lower raw-material costs are being passed through to try to reignite stagnant end-project demand.
In our opinion, oversupply will last at least a few quarters before a return to any sort of normalcy in the solar industry. Despite many marginal and smaller companies exiting the industry, supply clearly still exceeds demand. Inventory levels have risen significantly within the industry, which we view as a red flag. This week, Q-Cells, Europe’s biggest solar cell company, preannounced that sales will be down 40% sequentially in the second quarter and that inventory levels have risen further from already-inflated levels. We are skeptical industry inventories can return to healthy levels without further double-digit reductions in selling prices. Consequently, we expect industry profitability to remain far below previous levels even as shipments begin to revive this summer.
Given these poor dynamics, we expect a further industry shakeout to ensue, as inefficient, high-cost companies lose market share to the industry’s low-cost manufacturers. The next few quarters will likely be challenging for all companies, but we believe First Solar (FSLRYGE) are well-positioned to weather the storms and survive the current downturn.
First Solar Continues to Outperform the Competition
Our favorite name in the industry, First Solar, is a company we recommend keeping an eye on as a potentially attractive investment. During the last few years, First Solar has grown from obscurity into the world’s largest solar company on account of its unique production process that allows it to manufacture solar panels at costs below its competitors’. Unlike the majority of the industry which produces silicon-based solar panels, First Solar uses cadmium telluride to convert sunlight into electricity. This allows it to employ a simplified production process that is much more fluid and much less labor-intensive than manufacturing silicon-based products.
As the industry’s low-cost producer and a firm which also continues to consistently reduce its costs (see Chart 2), First Solar is the one solar cell/module company that hasn’t seen profitability collapse because of the downturn. In fact, the company’s profitability has actually increased during the last nine months. We believe this outperformance will continue, and we feel at the right price, First Solar remains the industry’s most promising investment.
# By Chuck Squatriglia Email Author
# June 8, 2009 | # 2:36 pm
General Motors took a big step toward its reinvention as the “New G.M.” today when it opened what it calls the largest automotive battery laboratory in the United States, a move the struggling company believes will hasten the development of electric vehicles.
GM invested $25 million in the 33,000-square-foot Global Battery Systems Lab to develop and test the drivetrains underpinning the Chevrolet Volt and other hybrid, battery-electric and hydrogen fuel cell vehicles. The automaker believes the facility, at its sprawling Warren Technical Center campus outside Detroit, will help make it a market leader in battery and EV technology.
“The new global GM battery lab will benefit consumers across America by helping us advance the development of battery technology in the United States and put cleaner, more efficient vehicles on the road more quickly and affordably,” CEO Fritz Henderson said in a statement. “Our new lab improves GM’s competitiveness by speeding the development of our hybrid, plug-in and extended-range electric vehicles.”
The lab’s opening comes one week after General Motors filed for Chapter 11 bankruptcy and vowed to reinvent itself as a leaner, greener company focused on fuel efficiency. It also comes as major automakers align themselves with battery manufacturers to bring cars with cords to market. Volkswagen, for example, recently signed a deal with Chinese auto- and battery-maker BYD, and Daimler bought nearly 10 percent of Tesla Motors last month.
The Global Battery Systems Lab is four times larger than the cramped quarters where engineers had been working on the lithium-ion battery pack used in the Volt. It employs more than 1,000 engineers. The operation features 160 test channels and 42 thermal chambers that subject batteries to real-world driving conditions and temperarture variations. It also has 32 battery cyclers, “treadmills” used to deplete and charge the packs repeatedly.
“This facility is state-of-the-art and represents one of the largest and most capable battery test labs in the world,” said Jim Queen, vp of global engineering. The lab has a maximum power capacity of 6 megawatts.
The lab also features a thermal shaker table for testing the structural integrity of each pack and a battery tear-down workshop for failure analysis and reverse-engineering competitors’ batteries.
The Global Battery Systems Lab is the crown jewel in GM’s battery program, which includes labs in Mainz-Kastel, Germany and Honeoye Falls, N.Y. General Motors is working with LG Chem on the battery that will provide the Volt with an all-electric range of 40 miles, and it has a joint deal with Compact Power and LG Chem to continue developing the technology. GM also has joined the University of Michigan in creating a battery-specific engineering curriculum and a battery lab in Ann Arbor.
GM filed for Chapter 11 bankruptcy protection last week and is radically scaling back its operations, but work on the battery lab started in December 2007 shortly after GM started developing the Volt. Construction started in August and engineers started testing batteries there in January.
The company plans to open a factory somewhere in Michigan to begin producing batteries by the end of 2010, at which point the Volt is slated to start rolling off an assembly line at the Detroit-Hamtramck Assembly factory.
Photos: General Motors
Source: http://www.wired.com/autopia/2009/06/general-motors-3/
By Chuck Squatriglia Email Author
July 17, 2009 | 1:40 pm
General Motors plans to open a $43 million battery factory near Detroit to build batteries for the Chevrolet Volt using cells the automaker is buying from Korea.
It’s another big investment in fuel efficient vehicles for G.M. The company opened a $25 million battery R&D laboratory last month and promised to spend as much as $800 million retooling its Orion Township plant to build a new small car. The battery plant in Brownstown Township, Mich., is a key part of its plan to build cleaner, greener vehicles, according to The Detroit News.
The News, citing “sources familiar with the negotiations,” said Brownstown Township promised G.M. a 50 percent tax break on new machinery and equipment for 12 years, a deal that could be worth several million. The state already approved $167 million in tax credits if G.M. builds the plant in Michigan.
The plant will sit on a 375-acre site in an industrial park near two airports, where the lithium-ion cells would arrive from Korea. The cells will be assembled into the 400-pound T-shaped pack that will power the Volt, then sent up Interstate 75 to the Detroit-Hamtramck Assembly Plant where the range-extended electric car will be built.
G.M. officials would not confirm the News report, saying, “We are still working on the business case.”
Via The Detroit News
Photo: General Motors
Source: http://www.wired.com/autopia/2009/07/gm-battery-factory/
By Ayesha Rascoe Ayesha Rascoe – Thu Jul 16, 12:42 pm ET
WASHINGTON (Reuters) – U.S. lawmakers on Thursday clashed over what impact climate change legislation would have on U.S. employment and American consumers.
With the economy struggling, Democratic lawmakers have touted legislation establishing a system to cap greenhouse gas emissions as a way to bolster the economy.
“When we unleash the American innovative spirit, we will drive economic growth and create jobs and whole new industries here at home,” Senate Environment and Public Works Chairman Barbara Boxer said at a hearing.
Republicans, however, have strongly contested these claims, characterizing so called “cap and trade” bills as a threat to economic recovery that would push companies to other countries and force consumers to pay more to use energy.
“My fear is that what the recession and faulty management decisions did to the auto industry, the U.S. Congress will do intentionally to the rest of Midwest manufacturing — kill U.S. jobs and drive many of them overseas to China,” said Republican Senator Kit Bond of Missouri.
The House of Representatives narrowly passed a climate change bill last month that aims to lower carbon emissions 17 percent below 2005 levels by 2020.
Democratic leaders in the Senate have pushed back the timeline for introducing a similar bill in the chamber until September.
Senator Tom Carper of Delaware, a Democrat, said the extra time will give lawmakers more time to craft a better bill.
“We have this extra two months, it’s been almost a gift. We need to put it to good use,” Carper said.
He said Democrats could possibly attract more support from moderate Republicans by doing more to promote nuclear power in the legislation.
“I think it’s important for us to remember that nuclear energy is carbon free and that there is an expanded role for nuclear,” Carper said.
(Reporting by Ayesha Rascoe; editing by Jim Marshall)
Source: http://news.yahoo.com/s/nm/20090716/pl_nm/us_usa_climate_2;_ylt=Aq2HMXWDniD9fRvMQx9NST5llpd4;_ylu=X3oDMTE2dWtwZTc2BHBvcwMyBHNlYwN5bi1yLWItbGVmdARzbGsDZXYtdS5zLmxhd21h
Sat Jul 18, 12:42 am ET
LONDON (AFP) – The government has launched a probe into reports several British companies have been involved in dumping hazardous waste in Brazilian ports, reports said Saturday.
Environment Secretary Hilary Benn told The Times he had ordered the investigation after reports that shipping containers carrying tonnes of syringes, condoms, bags of blood and other waste had turned up in Brazil.
Benn said he could consider tightening rules on transporting waste.
“If, having looked into this particular case, there are lessons that need to be learnt about enforcement, then we will do that,” he said.
Some 90 shipping containers have been discovered on three docks in Brazil containing hazardous material in recent months, with local inspectors finding waste electronic equipment as well as medical byproducts, newspapers here said.
The waste has been linked to two British companies, and sent from Felixstowe in eastern England to docks at Brazil’s Santos, near Sao Paulo, and two other ports in the southern state of Rio Grande do Sul, the Independent said.
The companies in Brazil that received the waste claimed to have been expecting recyclable plastic, The Times said.
Plastics, paper and other goods are shipped between countries around the world for recycling including for scrap metal.
The UN-administered Basel Convention, which came into force in 1992, bans shipments of toxic waste from industrialised countries.
Source: http://news.yahoo.com/s/afp/20090718/wl_uk_afp/britainbrazilshippingenvironmentwaste
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