Oct 4, 2011 — During August, three homegrown photovoltaic (PV) module manufacturers failed and two European manufacturers decommissioned their U.S. production lines. All told, the United States lost 20 percent of its panel manufacturing capacity.

By far, Solyndra’s fall was the loudest. In September 2009, the Fremont, CA-based thin-film manufacturer received a $535 million loan guarantee from the U.S. Department of Energy (DOE) to ramp up to a 450-megawatt (MW) factory. Solyndra’s was the first section 1705 loan guarantee awarded, and the first to backfire. The bankruptcy triggered a congressional investigation into whether the timetable on Solyndra’s loan guarantee application was accelerated. Search warrants were issued, and the FBI raided the spanking-new and shuttered Fab 2 factory and Solyndra executives’ homes.

For a time in September, solar received unprecedented front-page ink. The media storm around Solyndra brought light to dramatic, unforeseen declines in the cost of PV, China’s influence on the market and doubt over the United States’ ability to compete.

Back Story

Solyndra offered a novel product, a cylindrical cadmium-indium-galium-(di)selenide (CIGS)  thin-film panel. The product’s economic viability depended on the price of pure polysilicon —the raw material for competing crystalline-silicon (c-Si) PV technologies. Four years ago, when the cost of polysilicon approached $250 a pound, Solyndra’s silicon-free product was a hot commodity, attracting venture capital connected to Richard Branson, oil baron George Kaiser, the Walton family, and investment bank Goldman Sachs. By late 2007, the Bush Administration DOE had moved to develop a conditional loan guarantee commitment.

By the time Solyndra’s application was approved in March 2009, under the Obama Administration, polysilicon prices had dropped by nearly 85 percent. They never bounced back and global c-Si PV prices fell off, throwing a wrench in the thin-film business model. There is no evidence Solyndra ever sold its panels at cost. According to filings for a cancelled initial public offering, Solyndra was producing its panels for $4.00 a watt and selling them for $3.24 a watt as recently as June 2010. With competing factories moving toward $1.00 a watt PV, a best-case-scenario for the Fremont factory was $2.00 a watt.

Those market conditions set in much faster than expected. Some indices have spot prices for modules down 40 percent since January. “What happened earlier this year is that this massive [module] oversupply situation led to prices plummeting,” said Shayle Kann, managing director of solar for GTM Research. “And we haven’t seen any recovery in prices yet. It’s [a] continued difficulty for every manufacturer globally, but it’s hitting those that can’t compete on price first.”

Kann expected more factory closures, both in the United States and abroad, over the next six months to two years. By and large, the so-called “shakeout” has been attributed to China’s influence on the global market.

Bigger Picture

It’s not that Western manufacturers can’t make competitive, well-made products. The problem is that they can’t get competitive financing. Western investors and banks are simply unwilling, and probably unable, to compete with the Chinese government’s vigorous investment in solar manufacturing. It means that Chinese factories ramp up faster, achieve economies of scale more quickly, and flood the market with cheap, commoditized c-Si. A Sept. 25 Mercom Market Intelligence Report laid out the raw numbers.

Since January 2010, Chinese banks have offered Chinese solar companies a staggering $40.7 billion. For perspective, U.S. solar manufacturers have received $1.4 billion in DOE loan guarantees since 1705’s inception (Solyndra’s allotment was the largest). The Chinese manufacturer Suntech disputed the figures cited by Bloomberg and Mercom, but declined to give an interview for this story.

China’s investments are paying off. GTM Research data shows that China had a 30 percent market share in module production in 2007. In 2010, China’s 11 gigawatts (GW) of production capacity accounted for nearly 60 percent of the total market. Meanwhile, the United States had not breached 2 GW of capacity.

Established companies with market-leading technologies of their own should survive — witness First Solar and SunPower. But startups like Solyndra and mid-market players like Evergreen, SpectraWatt and BP Solar won’t be able to keep pace. It’s a threat that Bryan Ashley, chief marketing officer for Suniva, lives with everyday. “It’s very, very difficult to compete these days — even in the American market — with some of the pricing we’re seeing,” Ashley said. “Talk to Sharp and Solar World and they’ll tell you the same thing.

“You’re not going to see very many U.S.-based PV manufacturers in 18 months. It’s pretty much going to change the whole landscape of the industry,” Ashley added.

China’s front-end approach is not a new phenomenon. In the 1960s and 1970s, Japan invested heavily in consumer electronics and flooded world markets with cheap products that worked well. American factories making televisions, radios and related equipment, including Zenith, RCA and Motorola, eventually closed their U.S. plants and either distributed Asian goods under their own labels, or sold their brands to Asian companies. Japanese manufacturers, of course, were later undercut in turn by Taiwanese, Korean and now mainland-Chinese factories.

It also happened in auto manufacturing. Only the best-established American automakers were able to survive in the face of high-value competition, first from post-war Germany and later from Japan and Korea. GM needed rescue by the federal government. Chrysler needed two federal bailouts, and new ownership by two successive European auto companies. The recent bankruptcies do not mean that the solar business isn’t viable and healthy, any more than the disappearance of Zenith and RCA means that television is a dying swan. It does mean that the Western financial system is seriously challenged by Chinese state capitalism.

Bottom Line

It’s difficult to gauge how many more bankruptcies are in the queue. A number of startups appear to be precariously positioned. SoloPower, another CIGS thin-film manufacturer, is scheduled to open up a 400-MW factory in Portland, Ore., by the end of the year. Like Solyndra, it received a DOE loan guarantee ($197 million). In a September interview with The Oregonian, SoloPower CEO Tim Harris declined to discuss his costs. “We all knew prices would be going down. Clearly they’ve gone down faster than we would have forecast,” Harris told the paper.

At this point, the United States’ module manufacturing struggles are unique. Factoring in all components, we actually run a solar trade surplus — even with China. The Solyndra mayhem, ironically, coincided with the release of a promising GTM Research trade assessment. The report found that the United States exported $5.6 billion in solar goods and equipment in 2010 — good for a $1.9 billion trade surplus. That’s nearly three times 2009’s surplus of $720 million. Our positive balance of trade with China, chief trade partner-and-rival, exceeded imports by something between $250 million and $540 million.

On the downstream side, the flooded market brings us cheap solar equipment and demand for labor to install it. According to a September Lawrence Berkeley National Laboratory report, PV prices fell by 17 percent in 2010. With current market trends, prices are headed for another year of impressive reductions. In its “National Solar Jobs Census 2011,” the Solar Foundation found that the industry added 6,735 workers between August 2010 and August 2011 — a 6.8 percent growth rate. During the same 12-month period, jobs in the overall economy grew by just 0.7 percent.

Is the sorry state of module manufacturing a harbinger, or an outlier? Without political action, it’s in danger of being the former. The success of China’s front-end investment, designed to achieve critical mass and break-even quickly, is making some rethink our national emphasis on end-use incentives. We didn’t build the railroads by rebating transport costs to farmers: we built them with front-end financing. Tennessee and Michigan appear to have figured this out, and have laid out incentives to get factories built, as a priority over forcing utilities and ratepayers to subsidize PV installation. If Solyndra had gotten the investment it needed to ramp up quickly three years ago, it might not be looking for a way to resume operations now.

Solar is obviously a viable business globally. Western governments and businesses need to decide if they’re willing to be sellers as well as buyers of the technology. Do Americans want the manufacturing jobs, or just commissions on the sale of goods made elsewhere? What kind of economy do we want?

Mike Koshmrl is associate editor and Seth Masia is deputy editor of SOLAR TODAY (solartoday.org), the magazine of the American Solar Energy Society.

Photovoltaic (PV) technology produces electricity from sunlight, using solid-state materials with no moving parts. It’s a mature technology, first invented by Alexandre-Edmond Becquerel in 1839 and initially commercialized at Bell Labs in the 1950s.

For residential application, PV falls into two main categories. First is grid-tied, where the home generates its own electricity but can also draw power from the utility company at night. The second is off-grid, where the home is located too far from an electrical utility cable and the home must generate its own power, storing energy in batteries for use at night.

A basic home PV system consists of PV cells connected and packaged together in weather-protected modules, which are fastened side-by-side on a racking system to form an array. The PV modules produce direct current (DC), which in a grid-tied system flows to a grid-interactive inverter. An inverter changes DC voltage to the alternating current (AC) for the household electric circuit powering wall outlets and all AC appliances.

Excess power from the inverter may flow out of the house through the utility company’s electric meter, into the city-wide grid. When this happens, the meter may run backward, and the utility will credit the outflowing electricity against electricity purchased from the grid at other times, like at night. This process is called net-metering.

In an off-grid system, DC power flows from the modules through a charge controller (also called a regulator), which is an electronic device that produces a smooth flow of current at the desired voltage. From the charge controller, the power can go to a set of storage batteries and then on to the inverter, as needed.

Today’s commercially available PV panels come in three versions:

• Single-crystal (or monocrystalline) modules are currently the most efficient — that is, 1 square meter produces the most electric power. They must be mounted in a rigid frame.
• Multicrystalline (or polycrystalline) modules are made of cells cut from multiple crystals, grown together in an ingot. They are slightly less efficient than single-crystal.
• Thin-film modules are made by depositing thin layers of materials on glass, metal or plastic substrates. They’re considerably less efficient so you may need more space to generate the same amount of power, but they’re less expensive and, depending on the substrate, can be very robust and flexible. One practical use is to glue a flexible thin-film module directly to a metal roof.

What are PV cells made of, and how?

Crystalline PV cells use silicon, a little bit of boron and phosphorus along with anti-reflection materials and a screen printing of electrically conductive grid lines on the top and a coating of aluminum on the bottom to collect the electrons. The cells are made by liquefying the silicon (derived from pure sand) at high temperatures, and then slowly cooling the material in a way that makes large crystals. For single crystals, a cylindrical boule is very slowly pulled from the molten silicon. Polycrystals are cooled in a block formed by quartz glass, making grains of crystals as large as possible. The solid materials are sawed into very thin wafers, to produce the individual cells.

Thin-film modules are made from very thin layers deposited on an electrical conducting surface. These materials may originate as silane gas for amorphous silicon, cadmium and tellurium for CdTe, or copper, indium, gallium and selenium for CIGS. The deposition techniques may include sputtering, co-evaporation in a vacuum, electro-deposition, sintering or other techniques. Many variations of thin-film materials are being investigated for low-cost manufacturing and higher solar-to-electrical efficiencies.

Installation Location

Location is critical to PV performance. The array should face the sun. This usually means due south, though if you have a heavy air-conditioning load in the late afternoon you may want to point the array southwest. The array should not be shaded during any part of its productive day. The array should be tilted upward at the correct angle to optimize seasonal exposure — typically at the angle of your latitude so it gets sunlight at a right angle at the spring and fall equinoxes. Some arrays can be made adjustable for varying the angle at different seasons. If the array needs to be elevated above the roof surface, it places additional uplifting loads on the roof structure during wind storms. If the roof doesn’t offer a suitable structural surface, consider a ground-mount array in the yard, or a solar pergola like the one at right.

Microinverters

Some newer grid-tied systems replace a large central inverter with several microinverters, individually attached to the back of each PV module. Power coming off the module/inverter combination is 230 volts AC and can tie directly to the household service panel. A major advantage is that if one module is shaded or broken, performance of the rest of the system is unaffected. You can monitor the performance of each individual panel, on a home computer or your smart phone. DC to DC optimizers are also now available, which help to optimize the power from a string of PV modules, but do not convert to AC as inverters do.

Match System Components

A 3-kilowatt (kW) inverter can’t handle the power produced by a 5-kW DC array. If you install a 3-kWarray, you may consider putting in a 5-kW inverter to allow for expansion of the array in the future. Also be aware of economies of scale. Labor costs may be lower, per unit, for a large system. If a 5-kW system can be installed in a day, you won’t save labor costs by buying a 3-kWsystem, which may also take a day.

Electric power is measured in watts. A kilowatt (kW) is 1,000 watts, and a megawatt (MW) is 1 million watts. You buy electricity in kilowatt-hours (kWh), which is energy (as opposed to power). For instance, if you run a 100-watt light bulb for an hour, you’ve used 100 watt-hours of energy. If you run it for 10 hours, you’ve used 1 kWh, for which the average household would be billed 11 cents (at $0.11/kWh). A1-kWPVarray can produce 1 kW in direct sun. If sunlight falls on it five hours a day, it may produce 5 kWh that day.

Know Your Load

If your family uses 600 kWh of electricity each month, that works out to about 20 kWh per day. If you get an average of five hours of direct sunlight daily, you’d balance your electric use with about 4 kW of net-metered PV power. A 2-kW system would offset about 50 percent of your bill.

A web-based monitoring system tells you how much power you’re making from each individual module, moment to moment and logged hourly, daily, weekly, monthly and annually. It can tell you precisely how much your system saves on the power bill.

Maintenance

Modules are tough, and usually carry a 20- to 25-year warranty. They need to be cleaned occasionally, which is usually a matter of hosing off dust and leaves. If appropriate, consider how you’ll clear snow off the modules. The inverter needs to be mounted in a cool, shaded place, such as the north side of the house. Inverter life expectancy can vary 10 to 15 years.

Off the Grid

If you live far from the main road, it may be too expensive to run a power line in from a utility pole. In that case you’ll need to generate your own solar electricity and store it in a bank of batteries for use at night. Off-grid homes use heavy-duty deep-cycle batteries, similar to the batteries used in fork-lift trucks.

Batteries are charged with DC from a charge controller, which can take power directly from a PV array. Power taken off the battery goes to the inverter for household use.

If you live on the grid, a battery storage system is usually unnecessary. It can, however, substitute for a backup generator, assuring you’ll have power during any utility company outages. That means your small business can have reliable refrigeration in hot-weather brown-outs, and you can operate a fan-driven natural gas furnace when an ice storm takes out electrical power lines.

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This article is adapted from the Solar Energy Resource Guide 2008, published by the NorCal Solar Energy Association, a chapter of the American Solar Energy Society. Joseph McCabe, P.E., is an ASES Fellow and Lifetime ASES member. Contact him at energyideas@gmail.com .

Illustration by Kurt Struve. Photo courtesy of Dan Williams, Powerfully Green.