US Panel Maker: Too Hard To Compete With China

Steve Leone, Associate Editor, RenewableEnergyWorld.com
August 17, 2011 | 35 Comments

Manufacturing near your market has inherent advantages. But this past week's news shows that other factors can easily trump location.

A day after American solar manufacturer Evergreen Solar filed for bankruptcy protection, German-based Solon announced it was shifting strategies and proactively shifting away from manufacturing in the U.S. in a move that will also eliminate 60 jobs.

The two companies may have faced similar hurdles, but they’ve also taken different paths. For Evergreen, the filing will allow the struggling manufacturer to re-organize and see if it can stay in business.

Solon, meanwhile, sees its decision as a move toward economic reality. Can a 60-megawatt (MW) American manufacturing operation compete with large Chinese panel makers, even when the end market is on U.S. soil? Some companies are clearly saying yes. But for Solon, the answer was no.

The U.S. utility-scale solar pipeline includes about 27 gigawatts (GW) of projects — some under construction but most under development. These projects are getting bigger by the week, and Solon felt that it could not compete with Chinese manufacturers in an industry in which an 8 GW inventory continues to push down prices.

“Right now, prices from China are extremely attractive,” said Ed Wegener, Solon’s Vice President of PV Products for its American division. “There are structural advantages that the Chinese have that will keep a spread between the Chinese and U.S. manufacturers. Oversupply, government policy and scale are really what drives that.”

The scale, said Wegener, may be the biggest factor. As several-hundred MW projects become the norm, smaller American manufacturers struggle to get in the game on their home turf.

“The issue we kept coming back to was scale,” he said. “We’re a small player in a business that is more and more dominated by people that are 10 to 15 times our size. And I couldn’t see a way forward where we had a competitive enough cost structure without investment beyond the resources of our company.”

So, Solon is taking the opportunity to reinvent itself as a developer ahead of the building boom. The company is listed by SEIA as the developer of two utility-scale projects currently under development — 15 MW planned for Fresno, Calif., and 5 MW in Tucson. It also has a 17-MW facility under construction in Gila Bend, Ariz., as well as one existing 2-MW facility in Vacaville, Calif.

“We’re moving ahead with those projects,” he said. “We have a strong pipeline of projects, and we’re not standing still.”

To get there, Solon is shifting existing employees from manufacturing engineering into product development and research as it moves away — quickly — from the business of making solar panels.

“We’re recognizing the realities of the world we live in,” said Wegener. “We have to be more closely aligned with what the market is looking for. There are too many conventional solar panels in the world, and there has to be a better value proposition for the end user. I think we just recognized that competitive reality a little sooner than other people will.”

35 Comments

heb intn
January 12, 2012

The only thing the US is lacking is cheap labor that other countries, China, India, Mexico, etc. have. One of these days labor will get to the point where we can once again be competitive.

stephen christy
September 6, 2011

That's great larryofgalaxy, tell your boss to pay you with rice.

lawrence elliott
September 4, 2011

wrong again

Many,many megawatts have been sold when module prices were at more level pricing

I'm certain those who sold mega watts of these to greenhouse builders in Europe would be surprised that nobody can sell them

Daniel Rivest
September 4, 2011

Well Larry if you think these Solyndra modules are so fabulous, you should obviously bail out the company and start selling Solyndra. Good Luck as nobody else has been successful selling them.

lawrence elliott
September 4, 2011

Wrong again
Have you ever seen how these modules are delivered to a site?

I have shipped more evac tubes than I can ever count.

Yes they can be a problem in shipping

Solyndra?

They are not even in the same class in any way

They ship quite easily and without boxes and cost no more than a regular module to ship

Daniel Rivest
September 4, 2011

Larry, shiping these Solyndra panels would have been probably six times as costly as shipping regular solar panels. I know because we ship Evacuated Tubes and they are very similar to the Solyndra tubes but are used for a totally different reason. I, however, know the problems with shipping tubes and it's a big problem. The shipping could cost more than the system.

lawrence elliott
September 4, 2011

@daniel-rivest17510

Your comments clearly indicate that you have never really been involved at a very high level in the PV industry.

"Solyndra made a product that couldn't compete"
Guess what. I have yet to see a Toyota Camry that can directly compete with the Cadillac Escalade or a 1 Ton truck. They compete in different markets but each is competitive in their market.
"Round was good for Columbus but flat is a much better idea for solar PV"
Again you are way off and show a lack of fundamental design knowledge.
The Solyndra product filled a market that no other competitor could. The hundreds of thousands of flat roofed commercial buildings that cannot use your 'ideal' flat module could easily use the Solyndra. That tells me that flat could not compete in that market. Solyndra had problems of poor marketing,weak cost controls,less than competent front office personnel and other issues. Yes their cost per watt is certainly fixed above the costs of a standard module,especially one built in China with high government (in other words Chinese Military which makes up %50 of China's manufacturing,at least behind the scenes)subsidize's,but with a rise of about 80 cents to a dollar a watt in the market Solyndra could still have a viable product that fills a market need that standard modules cannot now fill.

Daniel Rivest
September 4, 2011

Solyndra made a product that couldn't compete. Round was good for Columbus but flat is a much better idea for solar PV. I fault whomever told Obama to invest in this venture. It was not carefully analyzed and was a really bad idea.

stephen christy
August 21, 2011

China will some day be quaratined for overwhelming toxic waste.

lawrence elliott
August 21, 2011

@harry-bryant.
"American labor is too expensive"?
I think what most people miss in this equation is that the amount a person is paid for his labor is only too expensive if the dollars spent don't equal or aren't less than the productivity of his or her output. American productivity is at an all time high. We in this country have built up an entire culture and its infrastructure (including all the debts owed to other countries that will need to be paid back with ever higher payment for labor) on a level of labor compensation far greater than the emerging economies we now compete with. The answer is therefore not in lowering our labor expense's.That will only mean far less disposable income leading to far less consumption which leads to the 2nd Republican/Wall Street Thieves Great Depression we now find ourselves in. If we did not squander over one trillion dollars per year in military waste we would not be in this position. Until we see the military industrial complex for the evil it is we will continue down the path to ruin.

heb intn
August 21, 2011

Gee and Duh... could it possibly be that like many other things American labor is too expensive. Is our labor force blocking us from yet another opportunity?

Janice Schattman
August 21, 2011

This was a timely article. I am working with my financial adviser to create a green portfolio. All of you guys seems to know the industry, even if you fight like cats and dogs. I don't need tax breaks or incentives to buy bonds or participate in public offerings. What are the companies you would recommend as having some staying power for a potential investor. I will check for new comments.

Allen Gerhardt
August 21, 2011

Once again it seems that investors simply will not invest in manufacturing when tax incentives are upside down; giving capital gains tax breaks for speculative activities in commodities, provides less risk than manufacturing investment, so the investment money is not used to create exports and jobs. It appears that federal tax incentives are largely to blame for this condition. Change eligibility for capital gain tax reduction to require domestic manufacturing investment and remove it from commodity speculation, and we should see less bubble creation, less inflationary pressure, and more jobs.

Gregory L Smith
August 20, 2011

Knowledge about the general market area where you set up shop is basically the key factor given that financing and development of quality products are set in motion. Gerald talked about Aluminum support industries to lessen the cost of modules, and in Oklahoma, we have one of the best and largest aluminum extrusion companies in the region in MacLanburg-Duncan, the same company that builds door jams, creates insulation foam, anodizes almost anything, and works quickly with a small staff to churn out lots of orders. The trouble recently has been finding market products that need their help and cooperation. Sadly, East coast companies have adequate funding, but lack the expertise in supporting products, so they try to build their own infrastructure, and can't maintain it for long. It is cost intensive and you can lose income in a down market. But a solar company could easily discover that such a synergetic partnership just might work to their advantage in a price point basis, and also in creating superior products that can test efficiently and without flaws or errors. So, East coasters, take another look at the market here in the southwest. We have the sun, have the supporting industries you need, and now, you just need a plan and a good negotiator to promote your product here, not just to manufacture, but to sell, design applications, and also to promote online. It can be done more reasonably here due to low labor wages in state, low tax rates, and excellent communications pathways and roads for delivery of products. Railway heads and Airport access are also superior...So where are you?

Gerry Wootton
August 19, 2011

It's all about scale. Scale drives the supply chain. Any guy holding an order for 200 MW of cells is going to get much more respect, priority and a better price than the guy with a 50 MW order. Ditto, glass, framing, encapsulant, etc.

One can certainly build a module factory in the order of 250 MW/y or so that is totally hands free. It's a big investment which can only be predicated on a large and consistent market for product - you not only need volume, you need certain volume for 10+ years in order to fully depreciate the capital investment. Otherwise, you go with a less automated / more labor intensive approach and then low cost labor markets start looking attractive. Don't underestimate the effect of policy on these decisions.

This has nothing to do with toxic waste. Module assembly produces very little waste nevermind the toxic kind. That's a bunk argument.

The US has a few structural disadvantages beyond policy and market. US investors are only in it for the short haul and they are notably adverse to investing in the renewable energy sector. Lacking volume, the supply chain is insufficient. The US could create a local advantage if they developed local commodity supply, particularly learn how to make glass and aluminum framing in quantity taking advantage of relatively low energy costs. Stop sending purified silicon to Asia to be turned into cells which are then shipped back to make modules - an area where silicon valley is mostly riding the pine. Finally, see fit to work to standards that are synonymous with the rest of the world - US voltage standards alone ensure that solar farms are at a disadvantage in the US and that made in the USA product may not always be exportable without design modification.

It's also not about sunlight: Germany is a dank and dark place compared to any of the continental US. The best insolation in the US is more than twice that in Germany - this should be a huge advantage!

Only one missing ingredient - wanna.

Steven Reeves
August 19, 2011

The sad truth about Evergreen Solar is that their technology is just not good enough anymore. Being a sub-contractor for ASE Americas back in the 90's, I helped build much of the equipment and saw the technology first hand - and it's limits. The Evergreen group's technology is the same idea, just not grown in multi-sided hollow telephone pole size sections (which got laser cut into solar cells at ASE). EFG (Edge-Defined Film Growth) will always have lower efficiencies and many other technical issues beyond the audience here. What Solon and Evergreen have in common mostly are 'me too panels', and yes it is hard to compete with commodity product. I am engaged in bringing PV module manufacturing to the US and labor prices start at about 10% and go down to half that in five years with 5x growth. That is starting with a semi-automated line and going to more automation in the first few years. That is with good pay too: $40k -$50k a year and benefits. As the price for the raw materials (which we source all of on the west coast) goes down, shipping prices from China will make their profits tighter and then we can expand just as fast and be competitive. The Chinese quality issues come from hand soldering and lack of quality testing (EL imaging, etc.) found in automation systems. These quality crushing, warranty recall, black-eye on the industry issues will come back to haunt us all. Give us time and some investors and we will be able to bring manufacturing jobs to the US. If you are out there trying to start a company, you know that investors are not giving up money for manufacturing in the US and that is the REAL problem. Once you have a sales pipeline, experienced team, materials pipeline, and put in the time, you are just left with needing the capital to start. Come on investors! Get with the game.

Anthony Rawson
August 19, 2011

One must give credit to China for engaging in some very strategic decisions. Then again their leadership seems to realize that if they expect even a small fraction of their 1.3 billion citizens to have a reasonable standard of living they must do it in a much more energy efficient way than the western nations have up to this point.

Vasuki Nag
August 19, 2011

There was a time, when USA was the leader in renewable solar and wind energy. Under President Carter, USA did pioneering work in developing solar energy and improving energy efficiency, even when global warming was not even prominent in the public debate. But short sighted President Reagan dismantled those measures. Imagine what the situation would have been, if America had continued on the path towards renewable energy for the last 30 years, instead of denying climate change and other scientific facts!

Switch to 21st century, China was not even a major player in solar energy till quite recently. However, China took some strategic decisions to promote solar and wind energy in a large way. Now, Chinese companies control more than 50% of the market share. US Government could also provide support for fledgling solar manufacturers to establish strong solar manufacturing industry in America. Instead, GOP is singing climate change denial mantra. Hope people would put pressure on our leaders to promote renewable energy industries which would keep America economically strong in 21st century.

ANONYMOUS
August 19, 2011

More smarter?

Gregory L Smith
August 19, 2011

Obviously, the economy that develops a solar based infrastructure will be the strongest for the obvious key reason...you aren't renting fuels. Even Hydrogen technology will provide great value, since solar can help develop/mitigate the energy transfer costs of spliting water into Hydrogen and oxygen. Fuel cell technology will become further integrated into applications once those that profit from solar, have the capacity to also invest in newer technologies as their costs for living go down rapidly. If it is the USA that decides this idea is worth pursuing, we will be the leaders, however, if it is China or Germany, those jobs in manufacturing will stay where they are best rewarded, which means, where the needs are greatest. China has been given a pass in pollution, because they are not worried about the health of their long term population. Their life expectancy is very low for their level of development, but it is improving, since costs can be internally controlled by who decides on who lives, who dies, and also, they do not have companies capable of raising those costs beyond their own survival levels in China. Their profit is what China decides their profit is...sort of a Super Socialist/Communist/Quasi-Capitalism. Their 5 year plan is not fluke, but just like the many 5 year plans of the old Soviet Union, the goals are set, but how to get to the goals is not, so party members figure out quickly how to cut corners to meet the National Learder's goals, without costing them so much, so they cut wages/hours worked/speed up/make lower qualities/ or create economies within classes, by making the most expensive, or the best sellers in such a way as to extend their overall profits as a company. It works, because the company is in total control of the goals, but allow their machinery of workers to determine how to reach their final goals of the year/quarter/or period. Solar in the USA can cost avoid so many expenses, it is nonsense not to use it rapidy and expansively.

Roy Browning
August 19, 2011

A recent expose on Chinese television exposed a solar panel manufacturer who "donated" 6 million in panels to a "charity" The charity then sold the panels at 30% of the retail value to a customer in the USA.

It turns out that the panel maker took a write off on the panels and with the 17% VAT rebate and write off, actually made substantially more profit that if he had sold on the open market. It also turns out that the "charity was a company operated by the same CEO and management as the solar panel manufacturer. The sale of the panels was "under the table so no profit went on the books of the "charity"

Now how do you fight this kind of government sponsored corruption? Import duties of our own equal to China's special tax on imports.

Ralph Perez
August 19, 2011

China recently adopting an FIT will hurt these companies even more. Having a 5 year plan allows them the advantage of aggressively pursuing any technology advancements. We are stuck in a political system that kneels to the whim of the almighty dollar.
The Chinese will dramatically lower the cost to match their consumer demand. Having solar on their rooftops will insure that their economy pulls as many free KW's from the sun as possible. Their citizens can use the money they would have spent on power, to stimulate other parts of their economy. Their air pollution will decrease health costs associated with clean air. Their electric vehicle production will scale up once their citizens realize that the 'fuel' consumed is basically free. They have the advantage of making the vehicle for a physically smaller population. Swappable batteries will be easier if based on a lighter cargo load. Yes, I know, the regenerative braking will suffer a bit, and no, I don't want to move to China.

But, these are just a few of the many reasons why the US needs to take heed to what is happening. Is our military still using a 'US made only' policy.

Tim Dolan
August 18, 2011

I keep reading people saying that we lost the innovative edge or we can't compete any more.

The only area where we have lost the edge is in long-term thinking. We collectively are only thinking about short-term profits. How does it benefit us.

We need to go back to the older thinking which worked, which was how do I make it pay off even better in the long-term and what can I do to make life better for future generations.

Both the environment, solar especially, and our economy are tied to short-term thinking instead of long-term thinking.

Gregory L Smith
August 18, 2011

Oklahoma has what is ailing Evergreen Solar. What is it exactly that they did wrong in New Hampshire? They considered a location that has a poor return on investment profile, since the sun is not as prominent in the sky in New Hampshire. My suggestion is clear...move your operation to Oklahoma, and sell you current building complex, if you can. Why Oklahoma? It is a giant undeveloped market, has knowledgable people needing long term jobs, has an educational system that can grow your workforce at a bargain value, and has lower taxes and better advantages for new businesses looking to build a HQ system here. Your sales department won't have far to go to find all the customers you could want, provided your product meets the requirements and anticipated value targets customers are seeking. The sun is twice as productive in Oklahoma's region, and the market will only grow south and west if you start here. Our highway routing is efficient and the options for transport are amazing. The local airport is world class and yet, seldom has delays or cancellations, mainly due to weather condition. Utility Solar in Oklahoma will expand significantly if coupled with Hydrogen producing Electrolysis systems and Fuel Cell electricity plants. The advantages are so huge, Oklahoma already has two manufacturers that have offices in Tulsa and Oklahoma City. The Brand name EverGreen is good for our state...potential sales? Up to $1 Billion in 5 years, $3-8 Billion by 2025.

lawrence elliott
August 18, 2011

Yes trawson how true. Funny how GATT and NAFTA legislation was rubber stamped and approved by both parties. Voters and leaders ( calling Reagan,Bush 1 Clinton and Bush 2 and now OBummer leaders is a joke) alike. I don't remember mobs in the street protesting this crap.Just like the real estate scam and so many others a 3 year old could see it coming. Just like the slaughter of all the innocents based on treasury theft in both Iraq and Afghanistan generated barely a whimper from the
Sheeple. I won't even mention the staged 911 incident.As it all comes crashing down just remember who you voted for and just what you allowed to happen. And yes we all screamed about the lack of environmental standards in China (remember they are a communist country all you John Bircher RepubliDemocrats. You all made this bed now sleep in it.I wonder just how cheap the product will have to be before that guy (with two college degrees)down the street living in a Chinese cardboard box will be able to afford to buy it. Maybe sell a kidney? Foolish Foolish people.

ANONYMOUS
August 18, 2011

Mr Trawson - let us not forget the late 60's, early 70's, at the height of the industrial boom, when US industries engaged in such illegal dumping practises, with adverse health outcomes. In this day of internet and other social media, Foreign Governments, pressed by environmental groups, are clamping down on toxic dumping activties. Such measures, may not be very evident sitting 10,000 miles away. I have done a fair bit of offshore travel and have seen proactive anti-dumping measures being enacted and enforced. Having said this, ultimately mass production is going to be the key to bringing costs down. Public companies in the US need to bite their (thirst) bullet for immediate profits by setting up shop, rolling out products (in vast quantities) that cost compete with offshore imported material, without looking out for double and triple digit margins. The need to look long term in business planning is more important than the quarterly type of performance expectations that Wall Street blokes call for. Once there is enough traction and quality products are produced indigeneously, importation will be a non-issue and manufacturing can sustain. Maybe companies should be privately owned and not public entities (aligned with Wall Street money mongers and politicians).

Anthony Rawson
August 18, 2011

This isn't all about labor costs. When a company is able to dump its toxic wastes into the local environment without penalty and the totalitarian state is directly involved in propping up these companies as well, they have a lot more cost advantages going for them than just cheap labor.

lawrence elliott
August 18, 2011

Solyndra is a far more complicated assembly than a standard module (I have been all through their facility) Your telling me that placing a frame on a lamination is labor intensive?

lawrence elliott
August 18, 2011

All I will say about trade regulations and controls is to read Alexander Hamilton's REPORT ON MANUFACTURES.This country thrived because of tariffs and not in spite of them. Don't be fooled by all this free trade nonsense. As I stated capital has no borders or allegiance. Capital drives everything we do.Control the capital and then source from the least cost labor pool and like magic you have a starving serf class and a massively rich Economic Royalist environment. No amount of our constantly diminishing skill sets in the US will save us now. Just hang on and keep a look out for the mobs amassing.

Gerry Wootton
August 18, 2011

Capacity is a big issue and no - module assembly is not mostly done by robots.

Module assembly can be highly automated - been there, done that. The fact is that many back-end module assembly operations when automated max out at more than 100 MW/y capacity so you can't get the best ROI on a smaller scale. Typical single lane production streams are aiming at 4500 cells per hour (up from 3600 in the recent past) which comes out to something in the neighborhood of 125 MW/y after allowing for defects and breakage. Practically, it is not wise to base production on a single lane strategy. Big is definitely better. Even pure module manufacturers have to respect this as cell manufacturers want/need large volume supply contracts to stay competitive. Unfortunately, it is hard to sustain an appropriate volume based on the US market - if you want a healthy manufaturing industry you need to have a large domestic market. In reality, you don't even have a consistent government policy.

As far as shipping weight goes, it is no secret that producers of large volumes of high quality solar glass predominate in the far east. The majority of North American module manufacturing must rely on imported glass as there is just not enough domestic supply.

ANONYMOUS
August 18, 2011

Larryofgalaxy - you were on track with your comments about US fat cats usurping and hijacking the economy, but took off on a tangent, when you advocated putting trade regulations and other controls to make manufacturing viable in the USofA. Your argument essentially implies that a capitalistic economy like the US, which has always touted free market approaches, has no backbone to innovate to take on other countries, without predatory measures. That does not speak highly, anymore, of the capabilities of this country. Where are the US strategists and the tacticians who derailed a lot of other economies?? They must be busy working for Thin Tank groups and planning more wars and killing innocent people and wasting their energies on destructive endeavors!!!! Your trashing of China and India for their fortitude and vigorously taking on the Goliath is tototally misplaced. It is indeed an admission that they are more smarter, which is probably the case I agree that fat cats hiding in gated communities (and conservative talking heads and blabber mouths up and down the radio dial who incidentally are the most unproductive and spread hate) should be subject to the Guillotine. I empathize with your frustrations, but let us take the neo-conservatives to task. They talk through both sides of their mouth and are dragging this country down.

lawrence elliott
August 18, 2011

I find the argument of 'capacity' driving this closure of US companies to be a bit hard to swallow.Yes a boutique panel manufacturer is not going to compete with a very large plant,but since panels are almost exclusively produced with robots the cost difference has to be minimal between a China plant and one here.At most labor is %10 or below. That won't cover the cost of ocean transport. I think the open secret is there is a move afoot to drive the US labor costs into the floor so that they are on parity with China. Yes! Kill the New Deal and replace it with the new Conservative Raw Deal.Remember capital knows no borders.Has no allegiance to any country. Only rational and sane trade regulation and currency manipulation controls can save this former manufacturing giant known as the USA. All the fluff and fantasy talk of us being a successful service economy is just cover for the rampant theft and transfer of wealth from the bottom to the top.There is not a single economy of our size anywhere on the planet that is successful without manufacturing. I for one make every effort to purchase as little Chinese trash as possible. Now I hear a leading inverter manufacturer in the US is talking of moving to India. Well good luck on that one. I'll not purchase a single unit once that happens. There is no wall around any gated 'community' housing the Economic Royalist's that will save them once the unemployed rabble get inside.I just read where a real working Guillotine was set up in a square in Israel when citizens protested their rush to the bottom. Anyone remember Marie Antoinette's famous "let them eat cake"? So let the heads roll on.

Daniel Allouche
August 18, 2011

dlwilsondotcom.Ford may have wiped out a few small car makers but was still contributing to the US economy.it would make more sense to move PV manufacturing to a depressed state or province if only to keep the industry on north american soil.Made in Canada and Made in U.S. still adds value to any product.Chinese good are inferior and only enrich the the owners and shareholders.I for one refuse to buy ANYTHING made in China.how would you feel if you lost your job to someone less expensive?

Dave Wilson
August 18, 2011

I see this differently. This is a success story of the PV industry, in that the market has grown to surpass a "mere" 60MW manufacturer, wherever it's located. There are still companies increasing their capacity in the US but it needs to be done at much larger scale. How would you look back on a story from a hundred years ago about a company that closed its 100 car per year manufacturing plant because it couldn't compete with Ford?

Anthony Rawson
August 17, 2011

Yet another reminder that until our trade and tarrif policies are re-examined and changed for the benefit or our citizens instead of the rampant greed of multinational corporations, the manufacturing base will continue to erode in the US.

We need fair trade, not the treasonous 'free' trade continuously promoted by CEOs and their bought and paid for politicians.

The current practice of pitting US workers directly against the wage slaves of developing nations does nothing but undermine and destroy our once great nation.

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Steve Leone

Steve Leone has been a journalist for more than 15 years and has worked for news organizations in Rhode Island, Maine, New Hampshire, Virginia and California.