'09 Panel Prices Could Remain Flat

Part 2 of a two-part projection

Yesterday's post gave projections of two solar stock analysts on PV panel pricing in 2009. Their reasoning included the most common market drivers of oversupply of polysilicon, oil below $60 a barrel and the credit crunch. This blogger contends many other factors could very possibly keep panel pricing flat next year. Confused? Then, let's lay it out.

1) Polysilicon glut: Granted, there are many more players making silicon wafers than just three years ago but oversupply could be short lived next year. When the federal solar investment tax credit was extended in the Wall Street bailout, it also dropped the $2000 cap on the residential tax credit allowing a full 30% credit (like commercial projects) of a PV system's installed price. A 5kW residential system at around $37,000 will fetch an $11,100 credit instead of a measly $2000 before.

Furthermore, private (taxable) utilities are no longer exempted from the tax credit. Utility-scale PV installations by nature can be huge. The very smallest are one megawatt (MW) and as large as 40MW (and getting bigger). Using an average 200-watt panel on a 1MW project is 5000 panels. Power utilities (as opposed to water utilities) are being pushed by state mandates to use more renewable sources. If utilities line up--and there appears to be a lot of action in the Southwest--panels could be eaten up like corn at a turkey farm.

2) Oil is rarely used as an energy source for producing electricity but it's the primary source of energy for transportation. Coal, natural gas and nuclear power are the primary energy sources for electricity production. Just because we pay about half as much for a tankful of gas now than we paid in June doesn't mean our electricity bills are going down, either. They're not. In fact, there have been three rate hikes alone since spring with San Diego Gas & Electric. So it doesn't follow that falling gas prices will lessen the demand for solar power.

3) Credit squeeze. This doesn't apply very much to large commercial solar projects as most of them are financed through power purchase agreements (PPAs). This is the financial instrument that got WalMart and Safeway stores on the solar bandwagon. A PPA firm is composed of private investors with the need to mitigate their tax burdens. PPA investors actually assume ownership of large, multi-million dollar PV projects to take advantage of the 30% federal tax credit along with any state or local incentive. The host customer (like Walmart) agrees to pay the PPA firm say 15 cents per kilowatt-hour for the 15, 20 or 25 year life of the PPA agreement. Thus no up-front cash by the end-user is required; the system is owned and maintained by the PPA group; and the customer gets the benefit of lowering its carbon footprint and lots of good PR.

4) A blowback in wind. Wind is a clean, renewable source of energy but windfarms are usually a long way from the urban areas that need their power. In Texas, transmission lines are already maxed out and upgrading to a larger infrastructure will cost billions. (Maybe that's a reason T. Boone Pickens curtailed his "Plan" for the time being.) Another issue with wind is that it produces power best when the power is less needed, in spring and fall, not during the dog days of summer. Finally, wind turbines--though they're getting better all the time--are mechanical and require shutdown for maintenance. Solar panels crank from June through September when air conditioning loads are highest.

5) Greenhouse Gases and Jobs. In the widely viewed "60 Minutes" interview of Barack Obama on Nov. 16, the president-elect appears locked into promoting clean energy technologies.

Interviewer Steve Kroft asked whether cutting oil imports was less important now that the price of oil has plummeted from $147 a barrel earlier this year to under $60.

Obama: It's more important. It may be a little harder politically, but it's more important.

Kroft: Why?

Obama: Well, because this has been our pattern. We go from shock to trance. You know, oil prices go up, gas prices at the pump go up, everybody goes into a flurry of activity. And then the prices go back down and suddenly we act like it's not important, and we start, you know filling up our SUVs again.

And, as a consequence, we never make any progress. It's part of the addiction, all right. That has to be broken. Now is the time to break it.

As already mentioned, oil is most important for transportation and less for electricity production but the point is still clear. Solar (and wind):

--reduces dependence of fossil fuels thus
--cuts greenhouse gas emissions that
--mitigates global warming while it
--creates thousands of non-exportable jobs by
--establishes a long-term solar power infrastructure

Some administrations have relied on wartime economies, tax cuts or unusually low home loan rates to stimulate money flow. All of these, to one or another extent, have been utilized during the past eight years while a free-wheeling financial sector was left to "self regulate." Solar power could be the Magic Bullet of the next administration in that it could turn the economy around while achieving so many ancillary benefits. (And conservatives won't attack it as a give-away.) Like the space program during the 60s, the commitment to clean, renewable energy will take a strong political will. Even more so, it will take moral and ethical will.

--

The analysts covered in yesterday's blog overlooked my five counterpoints and maybe that's because this blogger is closer to the industry. So, will solar panel prices drop in 2009? Maybe, but not by much.

Analysts See '09 Panel Prices Dropping

Part 1 of a two-part projection

There has been a lot reported about solar panel pricing for 2009. Some analysts see panels dropping others, like me, see them holding. Very few see panels rising in cost but that cannot be discounted either. Let's review.

The Information Network market research firm contends solar will continue to grow about 40% and key growth drivers such as the price of oil, polysilicon shortage and government subsidies will have a lesser effect on panel pricing (Michael McManus, Digitimes 11/19/08). Considering solar still cannot compete with conventional energy sources, an oversupply of panels can be seen short-term.

"The Information Network noted that utilization rates at solar plants are only 56% and its analysis of 103 solar manufacturers showed that panel production capacity in 2009 will be 15GW whereas only 8.3GW will be sold."

After next year, says the Network report, players in the solar market will still face varying market dynamics even as the solar industry grows. (Editor: Really? Isn't change the only constant in life?)

"High oil prices have been driving demand for solar panels but with oil prices dropping to $60 a barrel, there will be a lot less interest in alternative energy. While this may be a short-sighted view by companies, the economic realities of the global economy--highlighted by the credit crunch--mean that even those companies that want to build solar plants may have difficulty finding funding."

The Information Network report said the past shortage of polysilicon for standard panels led to a surge in thin-film panel demand. However, a counter-surge in polysilicon plants has increased production and likely will reduce demand for amorphous silicon thin-film PV with efficiencies below 8%. This will impact equipment companies like Applied Materials and Oerlikon.

The Wall Street Journal's Market Watch reported that polysilicon pricing is not only "pressured by a coming supply glut" but that the current credit crisis will drive down demand for solar panels, the biggest users of silicon ("Polysilicon prices fall to earth", Laura Mandaro, Nov. 22, 2008)

Global warming concerns and high energy costs charged up the demand for solar panels in the recent past, the article said. Stocks of solar panel makers and silicon suppliers sold off sharply recently on concerns the credit crunch is causing solar power projects to be postponed if not actually shelved. In fact, Suntech, China's premier panel maker, slashed its fourth-quarter revenue forecast. In the process, panel pricing could continue to fall.

Some 60 new companies have joined the polysilicon market during the past two years; 90% of prior manufacturing had been handled by just seven suppliers, the Market Watch article reported. Global supply of polysilicon will double in 2009, likely outpacing demand growth of 34%.

This blogger contends other factors--not considered by these analysts--could hold panel pricing flat during the new year. Part 2 will explain.

Free Greenhouse Gas Calculator, Webinar

President-Elect Barack Obama said he pledged to begin "a new chapter in America's leadership on climate change." He was speaking in a prepared video Nov. 18 at the Global Climate Summit in Los Angeles.

Obama reaffirmed a campaign commitment he made to reduce greenhouse gas emissions (GHG) 80% by 2050 with a national cap and trade initiative. This program would run concurrently with his pledged $15 billion annual investment "to catalyze private sector efforts to build a clean energy future."

So, it looks like our country will finally get serious about CO2 emissions but we can do more than just hope we're not too late.

Sun Microsystems offers a free GHG calculator

Sun Microsystems just launched OpenEco.org, an online community assisting organizations calculate, compare and reduce GHG emission. The only cost is in sharing date, transparently or anonymously, with other participants.

Sun contends GHG analysis is increasingly done with home-grown or proprietary tools that can may require major internal resources or pricey consultants. Using the new site, Sun hopes to see carbon accounting data--which usually remains private information--will be shared using the site's GHG tools. The program lets organization benchmark against each other; set reduction goals and share best practices to meet them. Already Ceres and Natural Logic are participating.

"Working together drives progress faster than working alone," said Dave Douglas, Vice President of Eco Responsibility at Sun Microsystems. "Sun was built on the philosophy of openness and building communities to solve problems, which we're now applying to the environment. When we share, sustainable business can be more attainable - and prosperous - for everyone."

A video demo of OpenEco V. 2 is at:
http://www.environmentalleader.com/
2008/11/16/openecoorg-20-launched-by-sun/

Free Webinar on GHGs Dec. 9

How do you manage GHG emissions in a complex regulatory environment? If you want to feel more confident in the data you are collecting--reporting GHG emissions to shareholders, regulators and other external organizations, here's a free web seminar called "GHG Data Confidence: How Do You Stack Up."

This December 9 seminar will cover:

 GHG and Sustainability market trends
 How and why companies are managing GHG today
 Plans for managing GHG in the next few years
 What you need to get started on your GHG program
 How to simplify GHG reporting complexity

Hurry, registration is limited: http://www.enviance.com/registration/landing4.aspx

Lower-Priced Silicon Cutting Panel Costs

Finally, something new in crystal silicon technology. Well, it's not actually new so much as it was passed over for purer silicon chips. Now upgraded metallurgical grade (UMG) silicon is one answer to lowering panel costs possibly stealing some fire from various thin-film products.

Blue Square Energy of North East, Maryland announced Nov. 5 that it has produced a 14.6% efficient solar cell with its patent-pending Bright Point technology. It's one of the highest efficiency UMG cells in the world and verified by the National Renewable Energy Laboratory (NREL).

"What we've been able to accomplish is a major milestone towards achieving our goal of creating low-cost solar energy for homes and businesses," said Joseph Babin, CEO of BSE. "This proves that inexpensive silicon typically considered unsuited for the solar industry can be utilized to create solar energy that is price accessible for most Americans. Solar modules made with our Bright Point technology will soon be the best choice for those who care about our environment and their wallets -- and want to save both."

Most UMG silicon is slightly less in purity than the 99.9999+% seen in high-grade silicon panels today. UMG silicon contains either boron, phosphorus or iron reducing purity to 99.7% to 98%. This slight difference means significantly reduced cost for silicon panels because lower-grade silica becomes acceptable and less cost is incurred refining it. High-grade silicon runs about $200 per kilogram; UMG silicon can range between $20-$50.

Other developer/manufacturers of UMG panels are Q-Cells AG (Germany), LDK Solar (producing UMG silicon for Q-Cells in China), Hemlock Semiconductor Corporation (Michigan), REC Solar (California) and Evergreen Solar (Massachusetts).

(Special thanks to John Perlin for his input on this article.)

Perlin: 'Clean Coal is like Perfumed Garbage'

An Exclusive Interview

John Perlin, noteworthy author of From Space to Earth: The Story of Solar Electricity, was in San Diego last week for a meeting commemorating the fiftieth anniversary of the first practical use of photovoltaics by Bell Laboratories (see "Two Must-Have Solar Books" posted Sept. 20). This blogger was able to interview him over dinner on Thursday.

Asked about the upcoming Obama Administration in relation to renewable energy Perlin had this to say:

"Obama stressed renewable energy over 'drill, baby, drill.' The fact that he so craftily used the Internet to win the election shows he embraces new technology. McCain evidently doesn't even use a computer."

Perlin , who resides in Santa Barbara, is wary however of Obama's interest in "clean coal" and nuclear power expressed during the campaign.

"Clean coal is like perfumed garbage," he said. "There has not been any sizable sequestration of CO2 from coal-burning power plants." Besides, he says, CO2 leakage is likely from natural venting of the Earth's crust as with volcanoes or tectonic plate shifts. Then there is nuclear power.

"I see three problems with nuclear power. First, we haven't learned from our experiences with accidents; the Chernobyl and Three Mile Island incidents were strong warnings. Secondly, the very presence of nuclear plants gives terrorists the nuclear threat (if they forcibly take one over) without even having to invest in it. And finally, nuclear waste--and there's a lot of it--can be used to make dirty bombs by either terrorist cells or rogue governments.

"Furthermore, nuclear power requires copious amounts of water for making steam and for cooling spent rods. Solar power uses no water and this is important as the world's supply of fresh water sources is drying up," explained Perlin.

He sees two types of solar power: smart and stupid.

Smart solar he sees as incorporating energy efficiency in all new architecture, including passive and active solar methods.

"Housing placement should be planned so it can act as both a solar collector and deflector," Perlin continues. This is done with proper window placement with low-E panes; sufficient eaves and other shading on the south and west sides; and light-colored roofs for less heat retention, among other low-tech options like improved insulation.

"Stupid solar is not planning for it in the architecture and then adding a PV system to a bad design, sort of as an afterthought," Perlin concluded. He thinks feed-in tariffs for solar power would accelerate growth of the industry in the U.S. as it has already in Europe and that many of the existing rules of solar installations are too strict, bordering on obstructive.

Let the Sunshine In!

When sitting down to write this post that old classic Aquarius, performed so well by the Fifth Dimension, just popped into mind. I kept hearing the ending chorus, "Let the sunshine... Let the sunshine in..."

Change in America is in full swing. The very image of Barack Obama, soon to be our political leader and commander-in-chief, is Bigtime Change in itself. It's change that's rejuvenating our politics; regenerating our culture; and restoring our good reputation abroad. Call me corny but I never left my idealism at college 36 years ago. I also served an Army hitch, so I've earned the right to be a little out there. Is this the real dawning of the Age of Aquarius?

Harmony and understanding
Sympathy and trust abounding
No more falsehoods or derisions
Golden living dreams of visions
Mystic crystal revelation
And the mind's true liberation
Aquarius!
Aquarius!

Yes, this change also will be good for solar power and all other truly renewable sources of energy. We still need to impress on President Obama that there really isn't such a thing as clean coal. Those words will always be mutually exclusive. Nuclear power needs to be fazed out, too, and our dependence on natural gas for producing electricity needs to be shown the door by 2050, if not sooner. Speaking historically, we have more knowledge and experience in clean energy solutions than we had in 1961 when we challenged ourselves to land on the moon. We did that in just eight years.

Props 7 & 10 Go Down

California voters were surprisingly discerning on Tuesday about the two big energy related propositions on the state ballot. Proposition 7, a so-called renewable energy generation initiative, blew a lot of smoke but CA voters saw threw it (see Commentary below). The measure was roundly defeated statewide by 64.9% to 35.1% of those voting. Similarly, Proposition 10, the alternative fuel vehicles and renewable energy initiative that T. Boone Pickens was behind, was defeated by nearly 20 points, 59.8% to 40.2%.

These two defeats come as a result of two factors. Californians remember being figuratively raped by outside power sharks during the energy crisis of 2000-2001. Poorly written state deregulation coupled with greedy players --Enron, Duke Energy, El Paso Corporation, Reliant Energy and Sempra Energy (parent of SDG&E)--made ratepayers like wolves being shot from airplanes. This writer sold several PV systems solely on the "backlash" effect of this travesty.

The other reason is that Californians have been at this renewable energy thing for awhile. CA residents and businesses enjoyed both a solar/wind rebate program and a state income tax credit for solar installations from 1998-2005. Although the state tax credit ended, the federal solar tax credit came into effect in January 2007 when the new California Solar Initiative (the "other" CSI) was also instituted. Whether with active participation or by osmosis, citizens in the Golden State can tell the difference between a fair, deliberate approach to energy problems and some private entities' blatant grab for cash at the public's expense.