Can solar-power startup Solyndra harness the sun's power and beat China at its own game?

Trade and job creation
Dec. 16 2010 10:23 AM

Solyndra

Can a California company harness the sun's power and beat China at its own game?

(Continued from Page 1)

Ben Bierman, executive vice president for operations and engineering at Solyndra, says the new factory and its high-tech robots will go a long way toward lowering costs by increasing the speed of production. The new building was essentially constructed around Solyndra's production line, so everything is configured for the greatest efficiency. They've also got the space to plan ahead by, for example, storing spare parts near the more temperamental machines so they can be fixed quickly if they break down, avoiding bottlenecks.

Over the next few years, Solyndra predicts the dollar value of its exports will continue to rise to roughly $250 million by 2013, but the percentage of revenue from exports will go down to about 50 percent from the 75 percent it's at today. Europe is considered a more mature market for solar energy, whereas the United States has barely been tapped. Shayle Kann, managing director for solar research at GTM Research, says America's percentage of the global market is only 6.5 percent; as a result, Solyndra and other domestic solar manufacturers are primarily exporters right now.

The main reason demand is so strong in regions like Europe is that several national governments have offered generous incentives for adding solar capacity to the electrical grid. Solyndra's Bierman also says that Europe's strict land-use rules make its rooftop-mounted systems an easier sell. By comparison, the United States offers a tax credit to businesses that install solar systems, a much less appealing incentive. (If your business took a hit in the recession and hasn't turned a profit, your tax burden will have vanished, which makes a credit worthless. An alternate incentive that let companies apply for a grant instead of a credit expires at the end of this year.) Incentives at home and abroad have strict cutoffs and deadlines. This gives Solyndra another advantage, since a customer racing the clock to claim a credit or grant can have its system up and running much faster than a conventional solar system could be installed.

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There was plenty of debate about Solyndra's huge loan guarantee, which dovetailed in the media and among policymakers into the question of whether the government should offer support to solar manufacturers in general. In the long run, the answer to that question is almost certainly yes. For the moment, solar products are a viable export, and the United States is a net exporter, shipping $723 million overseas last year. We even benefit when solar panels are made in other countries, since the United States is a leading producer and exporter of polysilicon, a solar panel "building block" that's also a core element in the manufacture of semiconductors. The United States' potential to become a solar manufacturing powerhouse is even greater further into the future, at which point domestic demand is expected to rise sharply. According to a new report issued by the Solar Energy Industries Association, about half of the cost of a solar-power system comes from the installation, wiring, and other on-site tasks—in other words, jobs that can't be outsourced. A solar manufacturing sector that grows in an export-led market will be well-placed to satisfy domestic demand at reasonable costs, keeping American homes and businesses from turning to Chinese-made panels.

As for Solyndra, "The big question is can they drive their cost down quick enough to scale," says GTM Research's Kann. Although Solyndra's budget-slashing goals are aggressive, manufacturers of conventional solar panels—especially in China—are also reducing their costs in order to cut prices even further. "It's a moving target," he says

Harrison promises that Solyndra is moving fast enough to catch up to competitors, hopefully with the help of some additional support from the government in the way of incentives to get homes, businesses, and utilities to install solar systems. He ticks off a list of possibilities—tax credits for investing in and using renewable energy that don't expire after only a few years, feed-in tariffs, financing for renewable energy projects—but he says Solyndra is also prepared to fight it out on the strength of its product alone if necessary.

Harrison believes American manufacturers like Solyndra can still compete by focusing on design and technological superiority instead of just on price. The key, he says, is "innovation, creativity, and differentiation, not purely commodity.

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