The tough life of solar companies in the developed world
From The New York Times:
A few years ago, Silicon Valley start-ups like Solyndra, Nanosolar and MiaSolé dreamed of transforming the economics of solar power by reinventing the technology used to make solar panels and deeply cutting the cost of production.I don't think the developed world can compete against China when it comes to solar power. The economies of scale of Chinese manufacturers, along with the large subsidies by the government, pretty much means the end of solar companies in America, Germany, and elsewhere. Some people on the left want governments to fund solar energy development but I am against my tax dollars going into them (there is little interest in funding solar power in Canada but a lot of money is going into wind power, which I'm ok with).
Founded by veterans of the Valley’s chip and hard-drive industries, these companies attracted billions of dollars in venture capital investment on the hope that their advanced “thin film” technology would make them the Intels and Apples of the global solar industry.
But as the companies finally begin mass production — Solyndra just flipped the switch on a $733 million factory here last month — they are finding that the economics of the industry have already been transformed, by the Chinese. Chinese manufacturers, heavily subsidized by their own government and relying on vast economies of scale, have helped send the price of conventional solar panels plunging and grabbed market share far more quickly than anyone anticipated.
As a result, the California companies, once so confident that they could outmaneuver the competition, are scrambling to retool their strategies and find niches in which they can thrive.
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The paucity of capital and the sheer size of Chinese solar panel makers have proved particularly problematic for companies like Solyndra and MiaSolé, which make photovoltaic cells using a material called copper indium gallium selenide, or CIGS.
Unlike conventional solar cells, made from silicon wafers, CIGS cells can be deposited on glass or flexible materials, much as ink is printed on rolls of newspaper. Though the technology is less efficient at converting sunlight into electricity, the promise of “thin film” solar cells was that they could be made cheaply. But producing CIGS cells on a mass scale has turned out to be a formidable technological challenge, requiring the invention of specialized manufacturing equipment.
While Silicon Valley companies were working on the problem, silicon prices fell and Chinese companies like JA Solar, Suntech and Yingli Green Energy rapidly expanded production of conventional solar panels, supported by tens of billions of dollars in inexpensive credit from the Chinese government as well as other subsidies like cheap land.
Arno Harris, chief executive of Recurrent Energy, a San Francisco solar developer acquired by Sharp last month, said he chose to sign a supply deal with Yingli because the Chinese company offered low prices, quality products and financing.
“We realized that would enable us to bid competitive power prices from projects that could also be efficiently financed,” Mr. Harris said in an e-mail.
Chinese solar panel makers now supply about 40 percent of the California market, the largest in the United States, and the bulk of the European market, according to Bloomberg New Energy Finance, a research and consulting firm.
The problem isn't much about economies of scale of Chinese manufacturers or gov subsidies. It's about betting on the wrong technology. Just imagine the Silicon Valley companies and the Chinese companies switched side: Chinese companies (with their gov funding) invested into CIGS while US companies (with their VC funding) invested into conventional panels. How would the story be unfolded instead? I bet that the conventional panel side would still win. Incremental evolution usually wins revolution. This reminds me the competition between conventional Bayer image sensors and the supposedly groundbreaking Foveon sensor by, well, Silicon Valley startup Foveon. When Foveon was working hard to hammer out technological challenges in their design, the Bayer camp simply improved gradually the performance of their sensors to a point Foveon's theoretical advantages became irrelevant.
ReplyDeletep.s. The notion that they wanted to be "the Intels and Apples of the global solar industry" is completely misguided. The network effect in the IT industry doesn't exist in the energy industry. I suppose it's just the journalist making up a catchy phrase, not that those startups actually believed in this.
I don't think the problem is developed countries vs developing countries. Denmark and the Danish government have heavily invested in alternate energy, and it has paid off handsomely for them. The question is, what industries does the government deem "critical" and subsidies?
ReplyDeletePersonally, I'm very happy that the Chinese government is subsidizing green technology. It makes perfect sense for them and the rest of the world will benefit. Just like I benefit from the Japanese subsidizing the auto industry in Japan. I love my 10 year old Honda that resulted from it.
What makes the modern world great is that every government doesn't have to do everything. France invested in Nuclear Energy, the US in Finance and technology (if anyone doesn't think think the US gov, through the defense department, didn't subsidize technology, they need to think again about DARPA Net...sorry the internet, chip development, sorry Intel and stop using their GPS... sorry Garmin).
That China, with massively growing energy demands heavily underwrites green technology is a smart decision for them that benefits the rest of the world in the process. The invisible hand is still at work.