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photo: White House

In Wednesday’s New York Times, I have an exlusive about Silicon Valley solar startup Solyndra’s move to shutter a factory and lay off workers just weeks after it opened a state-of the art plant built with a half-billion-dollar federal loan guarantee:

SAN FRANCISCO — Solyndra, a Silicon Valley solar-panel maker that won half a billion dollars in federal aid to build a state-of-the-art robotic factory, plans to announce on Wednesday that it will shut down an older plant and lay off workers.

The cost-cutting move, which will reduce the company’s previously announced production capacity, is a sign of the notable shift in the prospects for cutting-edge American solar companies, which now face intense price competition from Chinese manufacturers that use more established photovoltaic technologies.

Just seven weeks ago, Solyndra opened Fab 2, a $733 million factory in Fremont, Calif., to make its high-tech solar panels. The new plant was supposed to be the first phase of a rapid expansion of the company.

Instead, Solyndra has decided to shutter the old plant and postpone plans to expand Fab 2, which was built with a $535 million federal loan guarantee.

“Fab 2 is much more efficient and cost-effective than our existing facility,” Brian Harrison, Solyndra’s chief executive, said in an interview. “We’re adjusting our plans to be more in line with where the market is and where our business is at the moment.”

When Solyndra filed for an initial public stock offering in December, it estimated it would have a total production capacity of 610 megawatts by 2013 if its two plants were fully built out. The company now expects it have capacity of 285 to 300 megawatts by 2013.

Solyndra abandoned plans for the stock offering in June, citing market conditions.

The company is the most prominent of a wave of Silicon Valley solar start-ups that hoped to transform the economics of the industry. Gov. Arnold Schwarzenegger of California and Energy Secretary Steven Chu helped break ground on Fab 2 last year, and President Obama made an appearance at the unfinished factory in May to extol Solyndra’s innovative technology.

Mr. Harrison noted that the market had undergone a significant shift since Solyndra filed for the stock offering, with solar module prices plummeting as low-cost Chinese manufacturers like Suntech and Yingli ramped up production.

You can read the rest of the story here.

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photo: Todd Woody

In a follow up to my story in Friday’s New York Times on the beginning of a solar building boom in the desert Southwest, I take a look at California regulators’ approval of the seventh Big Solar farm in two months, the 663.5-megawatt Calico project:

In an article in Friday’s paper, I write about the solar thermal power plant building boom now under way in California’s Mojave Desert. The looming expiration of crucial federal financial support for the multibillion-dollar projects, though, could turn the boom to bust.

But that hasn’t deterred California regulators, who on Thursday approved the seventh large-scale solar thermal farm since late August.

After years of painstaking environmental review, the California Energy Commission has been green-lighting the massive solar power plants at warp speed so developers can break ground before year’s end and qualify for a government cash grant that covers 30 percent of the cost of construction.

The latest approval goes to Tessera Solar’s Calico project, to be built in the San Bernardino County desert in Southern California. Originally proposed to generate 850 megawatts -– at peak output, that’s close to the production of a nuclear power plant -– the project was whittled down to 663.5 megawatts to lessen the impact on wildlife like the desert tortoise and the bighorn sheep.

It’s difficult to appreciate the sheer scale of even the smaller version of the Calico project until you’ve seen Tessera’s Suncatcher solar dishes on the ground. A few years ago I had the opportunity to visit a prototype six-dish Suncatcher solar farm at the Sandia National Laboratories in New Mexico.

Resembling a giant mirrored satellite receiver, each Suncatcher stands 40 feet tall and 38 feet wide with a Stirling engine suspended on an arm over the center of the dish. As the dish tracks the sun, its mirrors concentrate sunlight on the hydrogen gas-filled heat engine. As the superheated gas expands, it drives pistons, which generates 25 kilowatts of electricity.

Now imagine planting 26,540 Suncatchers on 4,613 acres of federal land for the Calico project. Tessera, based in Houston, has also received approval for a 709-megawatt solar power plant to be built in California near the Mexico border. That will require the installation of 28,360 Suncatchers.

“These desert solar projects will provide clean power for our schools, homes, and businesses while reducing fossil fuel consumption, creating local jobs, and reducing the greenhouse gas emissions that threaten California’s economy and environment,” Anthony Eggert, a member of the California Energy Commission, said in a statement on Thursday.

The cost to build the two projects will exceed $4.6 billion, according to Tessera, and it’s highly unlikely that they’ll go online unless the company receives federal loan guarantees that allow developers to borrow up to 80 percent of construction costs on favorable terms. That program expires next September, and Tessera needs to start putting steel into the ground by the end of the year to qualify for the cash grant program.

You can read the rest of the story here.

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photo: Todd Woody

In Friday’s New York Times, I write about the beginning of the long-awaited solar boom in the Mojave Desert and how it may well be short-lived if crucial federal incentives for renewable energy are allowed to expire in the coming months:

NIPTON, Calif. — The long-promised solar building boom in the desert Southwest is finally under way. Here in the Mojave Desert, a dice throw away from the Nevada border, giant road graders and a small army of laborers began turning the dirt for BrightSource Energy’s $2 billion Ivanpah project, the first large-scale solar thermal power plant to be built in the United States in two decades.

The Ivanpah plant is the first of nine multibillion-dollar solar farms in California and Arizona that are expected to begin construction before the end of the year as developers race to qualify for tens of billions of dollars in federal grants and loan guarantees that are about to expire. The new plants will generate nearly 4,000 megawatts of electricity if built — enough to power three million homes.

But this first wave may very well be the last for a long time, according to industry executives. Without continued government incentives that vastly reduce the risks to investors, solar companies planning another dozen or so plants say they may not be able to raise enough capital to proceed.

“I think we’re going to see a burst of projects over the next two months and then you’re going to hear the sounds of silence for quite a while,” said David Crane, chief executive of NRG Energy, on Wednesday after he announced that his company would invest $300 million in the Ivanpah plant.

Solar developers depend on two federal programs to make their projects financially viable. The most crucial is a loan guarantee program, expiring next September, that allows them to borrow money on favorable terms to finance up to 80 percent of construction costs.

The other is the option to take a 30 percent tax credit in the form of a cash payment once a project is built. Although the tax credit does not expire until the end of 2016, the option to take it as a cash payment disappears this year, making it far less valuable to a start-up company that is just beginning to generate revenue.

With both Democrats and Republicans promising to rein in the federal budget, it is unclear whether lawmakers will extend the programs in any form. “That could stall a number of projects and even lead to the failure of some,” said Ted Sullivan, an analyst with Lux Research, a consulting firm in New York.

Yet no one in the desert here wants to think too much about those looming clouds.

“Ivanpah represents a transformational moment in our energy equation,” said John Woolard, BrightSource’s chief executive, who was joined Wednesday by Gov. Arnold Schwarzenegger of California and Interior Secretary Ken Salazar at Ivanpah’s groundbreaking ceremony. “It demonstrates that the U.S. can lead in the drive for renewable energy at scale by building the largest solar plant in the world with new technology.”

The eight California projects that are expected to break ground this year will turn 46 square miles of the desert into a futuristic landscape of mirrors, towers and solar dishes. State officials estimate the plants will create 8,000 jobs in a state with a 12.4 percent unemployment rate.

During its three years of construction, Ivanpah will employ as many as 1,000 laborers in a recession-scarred region.

“In the last year, I haven’t worked,” said Basilio Yniguez, a 36-year-old pipefitter and father of seven, as he helped build a holding pen last week for threatened desert tortoises on the Ivanpah site. “Thanks to the green thing going up, I’m working.”

The state is supporting the industry in part by mandating that California utilities get a third of their electricity from renewable sources by 2020.

“When you look at the raw number of kilowatt-hours we need, I don’t see how you get there without large central station solar projects,” said Pedro Pizarro, a top executive with Southern California Edison, one of the state’s largest utilities.

Unlike the photovoltaic panel systems found on rooftops, most of the new solar plants will use thousands of large mirrors to heat liquids to generate steam that drives conventional electricity-generating turbines.

“Without the Department of Energy coming in to assume a lot of the risk, you might not find lenders willing to lend, particularly if you’re a start-up with untried technology,” said Nathaniel Bullard, a solar analyst at Bloomberg New Energy Finance.

Other hurdles also stand in the way of the solar expansion. For some plants, multibillion-dollar transmission lines must be built to carry electricity from the desert to cities. Some environmentalists continue to oppose the projects’ impact on imperiled wildlife, such as the desert tortoise, and may sue to stop construction.

The competitiveness of large-scale solar thermal plants in California also depends on the cost of natural gas, the state’s dominant source of electricity. According to Mr. Bullard, gas-fueled plants can produce electricity for about 10 cents a kilowatt-hour. After including the government subsidies, solar thermal plants are expected to generate power at 13 to 17 cents a kilowatt-hour, which the industry says is close enough in price to be competitive.

So far, Ivanpah is the only California solar thermal project to win a government loan guarantee, although other projects have applied and are awaiting decisions from the Energy Department.

“We are sensitive to the deadlines and are doing everything we can so that these projects can move forward,” said Jonathan Silver, the executive director of the department’s loan program. “There’s a significant demand for these funds.”

The uncertainty has left even some of the licensed solar projects in limbo.

You can read the rest of the story here.

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I wrote this story for Grist, where it first appeared.

Installation of new wind power capacity in the United States is expected to decline 39 percent this year, according to a report released Thursday.

Now that would be a brutal blow for any industry battered by a vicious recession. But it’s particularly bad news for the American wind industry, which had defied the downturn by installing a record 10,000 megawatts of new capacity in 2009. New wind capacity had grown an average 39 percent annually over the previous five years and represented 39 percent of all new electrical generation that came online last year.

China, meanwhile, has become the world wind leader and is projected to install 14,000 megawatts of new capacity this year, a 25 percent spike from 2009, according to Bloomberg New Energy Finance, a renewable power research and consulting firm.

“Approximately one in two wind turbines to go online in 2010 will be in China,” the Bloomberg report states. “The U.S. market continues to be challenged by fallout from the financial crisis, low power prices and an uncertain medium-to-long term policy environment.”

In other words, the inability of the United States to enact federal climate change legislation or a national renewable energy standard and its Lucy-Charlie-Brown-and-the-football approach to financial incentives for wind power — no, really I won’t yank those tax breaks away this time, come on kick the ball — has made investing in multibillion-dollar wind projects a gamble.

China, on the other hand, has poured billions into its domestic wind industry with the avowed goal of becoming a global leader in the industry. It’s largely because of Chinese demand that new worldwide capacity only declined an estimated 2 percent in 2010.

“The emergence of China as the world’s leading wind market in the last two years is driving a fundamental rebalancing of industrial focus,” William Young, Bloomberg New Energy Finance’s chief of wind industry research, said in a statement. “Chinese turbine manufacturers have muscled their way onto the top table.”

So is the U.S. just tilting at turbines?

In the U.S., plummeting natural gas prices may be just as a big a culprit as a dysfunctional political system. When natural gas-fired electricity is dirt cheap, utilities think twice about signing contracts to buy much more expensive wind power — especially if they’re located in a state without a strong mandate to purchase renewable energy.

On Wednesday, I happened to be talking to Stuart Hemphill, senior vice president of power procurement at utility Southern California Edison, about the impact of low natural gas prices on the competitiveness of renewable energy projects.

Hemphill noted that over the past couple of years, natural gas prices have plunged from $14 per million BTU to $2 per million BTU.

“Natural gas as fuel has become extraordinarily competitive,” he said, noting that the boom in shale gas production is contributing to the downward pressure on prices.

There was some good news in the Bloomberg New Energy Finance report: The industry should bounce back in 2011. The question, of course, is just where that bounce back will happen.

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photo: Todd Woody

I wrote this story for Grist, where it first appeared.

The United States is on the verge of a solar boom that could provide 4.3 percent of the nation’s electricity by 2020, according to a new report from Bloomberg New Energy Finance.

There’s just a 12-figure catch: Investors need to put $100 billion into the solar industry to keep the generation of solar electricity growing by 42 percent a year for the next decade to expand capacity from the current 1.4 gigawatts to 44 gigawatts.

“Policy measures such as tax credits, capital expenditure grants, generation incentives and renewable electricity credits will remain a key driver of solar uptake in the U.S. for at least the next three years,” according to the report from Bloomberg New Energy Finance, a research and consulting firm. “The current drop in solar costs is taking place just as such policies are being implemented by the federal and various state governments, which is expected to lead to rapid growth in commercial, utility and residential solar power.”

Over the past two years, solar module prices have plunged by 50 percent as low-cost Chinese manufacturers expanded production and entered the U.S. market.

“Policy, rather than sunshine, will remain the U.S.’s greatest solar resource for the next few years,” Milo Sjardin, Bloomberg New Energy Finance’s head of U.S. research, said in a statement. “By the middle of this decade, however, the U.S. retail solar market will be driven by fundamental, unsubsidized competition, which should transform the U.S. into one of the world’s most dynamic solar markets.”

Exhibit A for such a phenomenon is Germany. With about as much sunshine as Maine, the European nation became the world’s solar stronghold through policies that rewarded homeowners, businesses, and farmers for generating their own electricity.

Such policies are needed in the U.S., according to the report, given that solar electricity remains four times as expensive to generate than coal-fired power.

Of course, the failure of Congress to pass national climate change legislation and the current attempt to kill California’s global warming law shows that progress on green energy issues is not guaranteed in the U.S. And Congress’ habit of offering short-lived tax incentives for renewable energy and then dithering about extending them when they expire has played havoc with the industry and investors.

Bloomberg New Energy Finance predicts photovoltaic panels will account for 30 gigawatts of the 44 gigawatts of solar electricity generation by 2020, with 14 gigawatts coming from solar thermal power plants. Solar thermal farms deploy huge arrays of mirrors to heat liquids to create steam that drives electricity-generating turbines.

That might be a conservative estimate, if the California and federal officials’ rush to green light big solar projects in recent weeks is any indication. On Monday, for instance, Interior Secretary Ken Salazar approved a 1,000-megawatt solar thermal power plant to be built in the Southern California desert.

By year’s end, nearly four gigawatts of solar thermal projects are expected to be licensed. Just 10 gigawatts to go until 2020.

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photo: Todd Woody

In The New York Times Green blog on Wednesday, I follow up on my print story about the impact of low-cost Chinese solar manufacturers on high-tech Silicon Valley startups:

In an article in Wednesday’s paper, I write about how high-tech Silicon Valley solar companies are retooling their strategies to compete with low-cost Chinese manufacturers.

Over the last two years, Chinese solar panel makers like Suntech and Yingli Green Energy have moved aggressively into the United States and now supply about 40 percent of the California market, according to Bloomberg New Energy Finance, a research firm.

China’s growing dominance of the global solar market has been on display in Los Angeles this week at the Solar Power International conference, one of the industry’s biggest annual get-togethers. In a vast exhibition hall, the booth of one Silicon Valley start-up, Solyndra, is surrounded by a sea of Chinese solar companies offering their wares.

As prices for conventional silicon-based solar panels plummet, pressure has increased on Silicon Valley start-ups like Solyndra that make a type of photovoltaic cell called copper indium gallium selenide, or CIGS. Though less efficient at converting sunlight into electricity, the promise of the technology was that it could be made cheaply – at least until the cost of conventional solar module prices fell 40 percent over the past year.

That led Solyndra to start production two months ahead of schedule at its new $733 million factory in Fremont, Calif., and to speed up development of its next-generation solar panel.

“It definitely puts more pressure on us to bring our costs down as quickly as possible by ramping up volume,” said Ben Bierman, Solyndra’s executive vice president for operations and engineering, as driverless carts shuttled stacks of photovoltaic parts to large orange robots at Fab 1, the company’s original factory.

Nathaniel Bullard, a solar analyst with Bloomberg New Energy Finance in San Francisco, said that success for high-tech Silicon Valley solar companies may depend on finding a big market niche they can dominate.

Solyndra, for instance, makes lightweight solar panels that snap together like Legos and can be installed on large commercial rooftops unable to support heavier conventional panels. On the roof of the company’s headquarters, Mr. Bierman recently gave me an advance look at its new solar panel, which is more powerful but requires far less labor to install.

“We really took a lot of the cost out and accelerated development in response to the Chinese,” Mr. Bierman said.

China presents different challenges for SunPower, which was founded in 1985 and is the granddaddy of Silicon Valley solar companies.

SunPower makes conventional solar panels but has also pursued a high-technology strategy and says it produces the world’s most efficient photovoltaic modules. (Architects and fashion-forward homeowners also favor the company’s sleek jet-black panels.)

In recent years SunPower has increasingly focused on building big photovoltaic power plants to supply electricity to utilities that put a premium on technological performance, reliability and a company’s ability to manage complex projects.

You can read the rest of the story here.

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photo: The White House

In The New York Times on Wednesday, I take a look at how the rapid rise of low-cost Chinese solar panel companies have forced Silicon Valley’s high-tech solar startups to retool for a global market they had not anticipated:

FREMONT, Calif. — 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.

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.

“The solar market has changed so much it’s almost enough to make you want to cry,” said Joseph Laia, chief executive of MiaSolé. “We have spent a lot more time and energy focusing on costs a year or two before we thought we had to.”

The challenges come despite extensive public and private support for the Silicon Valley companies. Solyndra, one of the biggest firms, has raised more than $1 billion from investors. The federal government provided a $535 million loan guarantee for the company’s new robot-run, 300,000-square-foot solar panel factory, known as Fab 2.

“The true engine of economic growth will always be companies like Solyndra,” President Obama said in May during an appearance at the then-unfinished factory.

But during the year that Solyndra’s plant was under construction, competition from the Chinese helped drive the price of solar modules down 40 percent. Solyndra rushed to start cranking out panels on Sept. 13, two months ahead of schedule, and it has increased marketing efforts to make the case to customers that Solyndra’s more expensive panels are cost-effective when installation charges are factored in.

“It definitely puts more pressure on us to bring our costs down as quickly as possible by ramping up volume,” said Ben Bierman, Solyndra’s executive vice president for operations and engineering, as driverless carts shuttled stacks of photovoltaic parts to large orange robots at Fab 1, the company’s original factory.

To be sure, Silicon Valley companies like Solyndra, Nanosolar and MiaSolé continue to receive hundreds of millions of dollars in customer orders and some plan to expand local manufacturing. But the rapid rise of low-cost Chinese manufacturers has made investors — who once envisioned the region’s future as Solar Valley — skittish about backing new capital-intensive start-ups.

“I don’t see another Solyndra being done,” said Anup Jacob, whose private equity firm, Virgin Green Fund, has invested significantly in Solyndra. “It’s very difficult today to show a business plan to investors and say, ‘I need hundreds of millions to a billion dollars to get to scale.’ ”

In the third quarter of 2010, venture capital investment in solar companies plummeted to $144 million from $451 million in the year-ago quarter, according to the Cleantech Group, a San Francisco research firm.

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, which are 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.

However, 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. “It may seem obvious to state it this simply, but declining prices are the key to driving the next era of demand for solar.”

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.

“We grow every year with double revenue and almost double capacity,” said Fang Peng, the chief executive of JA Solar, in a telephone interview from the company’s Shanghai headquarters. “At end of the year, we will have 1.8 gigawatts of capacity and will have grown from 4,000 employees at the beginning of this year to more than 11,000.”

By comparison, Solyndra expects to have a total production capacity of 300 megawatts by the end of 2011.

The competition from the Chinese has prompted some Silicon Valley companies, like AQT Solar, to pursue new strategies to survive.

You can read the rest of the story here.

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