IN DEPTH: US solar success story

Workers at the California Valley Solar Ranch

Workers at the California Valley Solar Ranch

Republican presidential hopeful Mitt Romney stood outside Solyndra's empty factory on the outskirts of California’s Silicon Valley in May 2012.

His makeshift podium was arranged artfully so that photographers would be sure to capture the knee-high weeds and other signs of creeping dereliction behind him.

Almost exactly two years earlier, President Barack Obama had made an ill-advised visit to the same factory — then an ostensible hive of activity — “to tout this building and this business as a symbol of the success of his [clean-energy] stimulus”, Romney said.

“Well,” the Republican added, struggling to contain the smugness in his voice, “you can see that it’s a symbol of something very different today.”

The impact of Solyndra’s 2011 downfall has been significant — in human, political and financial terms — and remains the defining chapter in the US solar story for many Americans.

Yet beyond the headline-grabbing solar chaos of the past few years — the bankruptcies, the shift of manufacturing to China, the shale-gas boom — the US has quietly managed to rear an imposingly broad-shouldered PV sector, and one that is arguably the most forward-thinking in the world.

Challenges remain — international competition is fierce, and there is no guarantee that the sector will be spared more bankruptcies. But as the global PV business edges closer to a period of greater stability, it is clear that a number of US companies are poised to play a major part in the roll-out of PV around the world.

Unfortunately for the

broader US solar industry (and for Obama), the aspect of the PV business that looms largest in the public consciousness is module manufacturing — and this is the one segment that has largely failed to live up to expectations.

Solyndra may be the most prominent example of the struggles of US module manufacturers, but there is no shortage of other flops for renewables-bashing politicians to flag up, including Evergreen Solar (bankrupt in August 2011) and Abound Solar (June 2012).

And those are just the high-profile examples. A veritable zoo of smaller firms, many of them backed by venture capital and nurturing promising but early-stage thin-film technologies, were wiped out when the market was flooded by cheap Chinese crystalline silicon modules. In nearly all cases, the tariffs that Washington imposed on Chinese cells last year would have made little difference.

Even the successful, well-established American module suppliers hardly represent an uplifting example for domestic manufacturing. The two US module makers in the global top ten last year, First Solar (second) and SunPower (eighth) do much of their manufacturing in Malaysia and the Philippines, respectively.

There are also worrying signs for the PV sectors where US manufacturers have done unambiguously well in recent years — polysilicon and production equipment.

The US advantage in these areas “has been slowly eroding over time”, says Shayle Kann, an analyst for market researcher GTM. “And now, with the possibility of a tariff on US polysilicon in China, it’s even harder to make the case that that sector will be a clear winner for the US going forward.”

Yet challenges in the upstream sector exist around the world, from Germany to China, and the picture for the US is rosier than it initially appears.

For starters, the US continues to punch well above its weight in less-visible areas of the solar chain, such as inverters. Satcon may have gone bust last autumn, but other US players continue to show vast promise, including Power-One (the world’s number-two supplier, recently bought by ABB), Enphase and Advanced Energy Industries.

DuPont, 3M and Dow Corning remain major suppliers of chemicals and other behind-the-scenes products consumed voraciously by PV manufacturers around the world.

US polysilicon suppliers (such as Hemlock Semiconductor and MEMC) and PV toolmakers (like Applied Materials and GT Advanced) face growing international competition, but they still hold entrenched positions of global leadership and are likely to play major industry roles in the years to come.

Even in modules, the US has done comparatively well in recent years, given the head-spinning rise of China’s PV industry.

Although the US added just 5.1GW of PV capacity over the past two years. it managed to land two companies on the list of the world’s top ten module suppliers. By contrast, Europe, which added 40GW in the same period, had only one company on the list (Norway’s REC, which makes its modules in Singapore).

First Solar remains an exceptional story within the global PV industry, and not just because it remains the only large manufacturer whose modules use cadmium-telluride thin-film technology.

In addition to shippin

g 1.8GW of modules last year, First Solar was the world’s largest solar engineering, procurement and construction (EPC) player — with MEMC-owned SunEdison taking the number-two slot.

Meanwhile, rival module maker SunPower remains a force to be reckoned with globally — not least since French oil giant Total purchased a majority stake in 2011. “As long as Total remains committed to the success of SunPower, they’ll have a huge advantage,” says Kann.

Over the past decade, US manufacturers established production facilities abroad out of economic necessity. But the long-term trend will be towards bringing production jobs home, says Rhone Resch, chief executive of the Solar Energy Industries Association (SEIA) trade body.

“Low-cost, lower-efficiency [PV kit] will continue to be mass-produced in other countries,” he says. “But the US is well placed to attract the next generation of manufacturing.”

If there is reason for cautious optimism about the future of PV manufacturing in the US, then further downstream there is reason for breaking out the champagne — or at least a nice bottle of prosecco.

In 2010, the US accounted for just 5% of the global PV market — compared to Germany’s 41% and Italy’s 21%. But today, as European PV companies scramble to diversify away from the stagnant (or disappearing) markets in their own backyards, American firms are enjoying a powerful tailwind at home.

The US added 3.3GW of PV last year — up 76% on 2011. Some analysts believe the market could reach 9GW by 2016, the year a key federal solar incentive is due to expire.

Critically, the domestic market is spread broadly across different segments, offering various types of companies the chance to grow and innovate. Venture capital that would have been poured into PV technology or manufacturing three years ago is today being directed downstream.

Led by companies such as SolarCity and Sungevity, the so-called “solar lease” model is transforming the residential US market, with more than 90% of new systems being installed under the third-party ownership model in some states.

In other cases, companies from entirely different industries — such as Vivint, a home-security system specialist — are entering the residential PV space, with fascinating potential consequences for the future.

Meanwhile, after years of hype and build-up, the first wave of giant utility-scale PV projects is now coming on line in the US. Eight of the country’s largest completed arrays were commissioned in 2012.

A number of European countries have encouraged large ground-mounted projects in the past, and countries such as China, Saudi Arabia and South Africa have huge ambitions for the future.

But with projects like the 632MW Topaz currently under construction in California — along with more than 2.5GW of other utility-scale arrays across the country — the US is in a league of its own.

This new market has not only allowed PV manufacturers such as MEMC, First Solar and SunPower to transform themselves into some of the world’s largest and most aggressive solar developers (with important consequences as they push into new geographies like Latin America). It has also brought huge US-based EPC players, such as Bechtel and Fluor, into the solar fold.

Bechtel — which is performing EPC work at SunPower’s 287MW California Valley Solar Ranch — intends to expand its renewables work internationally, “especially in the Middle East and Africa as large-scale opportunities develop there”, says Toby Seay, president of the company’s communications, renewables and transmission business line.

The US solar industry may appear to be a profound disappointment, if judged on the past few years’ newspaper headlines alone. But in reality, the ghost of Solyndra is far closer to being laid to rest than most Americans — and their politicians — realise.

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