Last Updated Aug 16, 2011 4:50 PM EDT
This week Solon announced it will close its Tucson solar module factory, Evergreen Solar filed for Chapter 11 bankruptcy and Ascent staved off its demise by agreeing to sell a stake in the company and license its technology to China's TFG Radiant Group.
This particularly dicey problem has been created by a convergence of policy and competition from China. Critical markets in Europe have cut solar subsidies, which has led to a supply glut. The excess inventory and competition from low-cost Chinese manufacturers has pushed solar-module prices down 30 percent to about $1.40 a watt from the end of last year, according to Bloomberg New Energy Finance.
Throw in a few niggling side issues like lack of financing, policy uncertainty in the U.S. and competition from low natural gas prices, and you've got yourself a recipe for consolidation in the solar manufacturing industry.
Of course, falling prices aren't all bad. A whole new set of consumers, who were previously priced out of the market, can now afford to buy solar panels for their homes and businesses. As the number of residential solar installations increase, the reliance on fossil fuel-based energy sources like coal will fall -- along with greenhouse gas emissions.
Solar manufacturers are coping with the current market conditions in a variety of ways -- some more drastic than others. But all are hurting to some degree. For example. First Solar's second-quarter net income fell more than 61 percent to $61.1 million compared with the same period last year. Meanwhile, SunPower actually managed to grow second-quarter revenues by 54 percent compared with the same year-earlier period, but ended up reporting a $147.9 million loss.
Not every module maker will go the way of Evergreen Solar. Still, jarring adjustments within the industry will continue. I expect many to follow Ascent Solar Technologies' path and make technology licensing agreements with Chinese companies as a trade off for survival. Factory closings in the U.S. are possible as well unless manufacturers can find a way to compete with their low-cost rivals overseas. State and federal subsidies for U.S.-based manufacturers could help soften the blow. However, any relief would be short-lived. As the industry consolidates, prices will likely fall further.
Photo from Flickr user Living off the Grid, CC 2.0