In Wake of California Solar Plan, Industry Prepares for Expansion

Earlier in the day, The California Public Utilities Commission passed the California Solar Initiative (CSI), an historic plan that allots USD $3.2 billion for solar energy rebates in the state for the next 11 years, providing for the installation of approximately 3000 MW of solar energy.

"Of all the numbers in this plan, it's the 11 number that's most important," said Mark Farber, co-founder and Vice President, Strategic Planning of Evergreen Solar, a photovoltaic manufacturer. "The most important significance to this plan is that it takes long term commitments to grow the industry. Manufacturers are contemplating major investments because of this. As well as for many installers and distributors, they need the long term commitment too."

Evergreen Solar will "absolutely" increase capacity as result of this, said Farber. Already, the company has been in the process of expanding its manufacturing facilities threefold in Germany, thanks partly to the country's supportive policies for solar. Now California, where roughly 80 percent of the U.S. solar market has been centered, has its own long-term rebate plan.

"It has been a bit embarrassing for us as Americans to not play as strong a role as Germany," Farber said. "This is clearly changing this."

Gordon Handelsman, Sr. Director of Marketing and Sales for Shell Solar, also a solar PV manufacturer, echoed Farber's thoughts.

"I see the market as a tripod between Japan, Germany and now the U.S.," Handelsman said. "The U.S. has been the lagging piece of the stool, this will address that."

Marc Roper, Vice President of sales and marketing for the U.S. division of solar manufacturer Schott Solar, added that propping up that U.S. leg of the global solar market also helps reduce the global risk for the industry and its current and future investors by diversifying the demand portfolio. This is similar to the basic mantra of diversifying investments: the more markets open up, he says, especially ones with long-term policies, the more that mainstream financial institutions will feel comfortable getting involved.

And, Roper also now expects Schott to strongly consider opening a new manufacturing facility somewhere in the NAFTA zone to meet the expected demand for solar in California.

"Yes we'll increase capacity. This plan is the kind of thing that can really grow markets," Roper said. "The next move for expansion is to locate manufacturing in the strong markets."

A key point playing into the industry's growth, and how the CSI might affect it, is the current bottleneck in the supply chain for silicon, needed for roughly 90 percent of solar panels built around the world. Robust global demand has led to a shortage of this critical raw material, and that situation is predicted to continue to hamper the market, at least within the next year or more.

"In the short term we probably are not going to see enormous growth," Roper said in reference to what the CSI plan could do to boost the market. "But this gives us, as an industry, confidence to work with silicon producers to expand capacity. This enables us to secure the feedstock."

Long-term investments in solar silicon feedstock are critical to long-term investments in overall manufacturing, said Chris O'Brien, Vice President of Strategy and Government Relations for Sharp Solar, currently the largest solar PV producer globally.

Just as it takes some lead time to ramp up solar manufacturing facilities, it takes lead time for silicon suppliers to ramp up their production. One of the first items O'Brien sees from the California's new long-term policy on solar is a new atmosphere of security where companies can make long-term deals for the feedstock supply.

However the industry embraces this plan, there was a resounding satisfaction that the public utilities commissioners, led by its President Michael Peevey, took a bold and progressive step this week with a policy that sends a strong message about the future of solar.

"We can begin to grow again in California," said Kari Smith, Regulatory Affairs for PowerLight, a solar systems project integrator. "The PUC effort, led by Commissioner Peevey, showed real leadership. In the end, it's individuals who show real leadership and that's what makes things happen."