First Solar and Fotowatio Reap the Recession's Benefits

The beginning of 2009 is proving an active and not at all disappointing period for solar power, with changes will no doubt shape the industry's future. This Monday, that meant the takeover of swathes of the utility-scale market for solar panels by First Solar and the Spanish company Fotowatio.

The companies managed to pick off the assets of two smaller outfits, Optisolar and MMA Renewables, who without the recession would likely have been healthy and capable of continuing on their own.

More interesting between the two acquisitions is the Optisolar asset sale. The company, based in Hayward, Calif., has long been one of the most secretive firms in the solar industry. While receiving hundreds of millions of dollars in financing from an unknown large backer, it quietly grew its manufacturing capacity, and led the way in forming agreements across North America to place solar panels in giant installations.

At its core a manufacturer, Optisolar's strategy seems to have revolved mainly around shipping massive volumes of panels out of its Hayward plant, a behemoth facility in an old Air Force base. Although the specific numbers have not been disclosed, it's likely the efficiency of an Optisolar panel is well under 10 percent, but the cost of their manufacture must also be quite low.

The plan was audacious even during good economic times. While Optisolar's initial agreements had it building plants in Ontario, a Canadian province with a whopping 42 cent per kilowatt-hour feed-in tariff, the company later agreed to develop 550 megawatts of power in California -- an unheard-of amount for solar panels.

Such a titanic undertaking could have boosted Optisolar to become one of the top companies making thin-film solar panels. But alas, whoever the company's backers were, they appear to have been struck by the recession, and First Solar has picked up all the projects (and Optisolar's CEO) for $400 million dollars, leaving the smaller company with only its manufacturing plans. And although it will benefit from First Solar's money, it will also have that company, a proven expert at making cheap, high-quality thin-film, as an ever stronger long-term competitor.

MMA Renewables, similarly, had a backer, or rather a parent, Municipal Mortgage and Equity. As one might imagine from the name, that company is suffering now, and MMA will become a subsidiary of Fotowatio.

The deeper meaning to these changes may be the concentration of utility-scale solar panel development in the hands of a relatively small number of strong players, which at the moment means only those who can find financing. Utilities are flocking to solar with the advent of new government tax credits, and other large companies are similarly eager. Smaller companies want in, but may find the state of the market locks them out. By the time that circumstance changes, they may have lost their chance.