Steve Leone, Associate Editor, RenewableEnergyWorld.com
June 29, 2012 | 46 Comments
New Hampshire, USA -- Thursday's back-to-back closure announcements came out of Colorado and Germany. The reverberations, though, will be felt heavily in places like Albuquerque, N.M., and Tipton, Ind. That's where hundreds of manufacturing jobs will be lost, and where hundreds more will never be made.
The day’s news left a trail of unemployment and unmet expectations. And the negative headlines generated by Abound Solar and Schott Solar also served to heighten the conversation about America’s resolve and ability to build a solar manufacturing industry that can compete with China.
On Thursday, The Department of Energy announced that one of its star companies, Abound Solar, would close its doors because the thin-film maker couldn’t compete with low-cost Chinese crystalline silicon panels. The company later said that with the pending bankruptcy, it would eliminate about 125 jobs.
The company’s real ambitions, and its stated future, were in rural Indiana, where the company allocated a significant portion of its $400 million DOE loan guarantee to take over an abandoned auto industry manufacturing plant. Abound was going to reinvigorate the struggling community — which has faced unemployment of more than 10 percent — with about 1,000 high paying manufacturing jobs.
Now, that community — formerly dependent on the health of the auto industry — has another empty manufacturing facility to fill and a likely deepening skepticism that America can compete with the Chinese in solar manufacturing.
More than 1,000 miles away in Albuquerque, about 200 employees at Schott’s American flagship manufacturing operation received word that they would be losing their jobs as well.
The two closures are different in many respects. Abound produced cadmium telluride panels that it hoped would be able to compete directly with American company First Solar. But unlike the established thin-film leader, it would make the product solely in the U.S. That was the driving reason why the company received a DOE loan guarantee almost as large as the one received by now-bankrupt Solyndra.
Schott, meanwhile, represented another avenue to building a large-scale base in the U.S., and that was to lure established international players that could take advantage of a facility’s location near the end market. That has made the Southwest prime territory to attract these types of companies.
The American wind industry has built a formidable manufacturing base on this premise. But the mammoth components that go into wind turbines translate into high shipping costs. The relatively lightweight components in solar mean reduced shipping costs don’t cut enough off the final price to be able to compete with Chinese panels, even after accounting for the new dumping tariffs.
Abound started to pull back on its ambitious plans just as Solyndra bankruptcy and ensuing House investigation was starting to unfold. Abound drew down $70 million of the $400 loan guarantee — all for the expansion of its Colorado facility — and the DOE estimates taxpayers will ultimately be on the hook for about $30 million once assets are sold.
The bankruptcy will surely increase pressure on the only two remaining DOE loan guarantee recipients that received backing specifically to boost American solar manufacturing. One is 1366 Technologies, a Boston-area company that promises to significantly cut solar costs through its innovative wafer and cell manufacturing processes. The DOE closed on a $150 loan guarantee with the company in September.
The other is SoloPower, an Oregon-based thin-film manufacturer currently building a new plant that will help it ramp up productions of its lightweight, flexible CIGS panels. The company expects the plant to have 100 employees by the end of the year, and ultimately as many as 450 workers once it reaches 400-megawatt (MW) capacity within the next few years. But CIGS technology, while promising, has failed to gain much of the market, and analysts predict that only a handful of companies will be able to survive.
That has many within the industry questioning the legacy of the loan guarantee program. Much of DOE’s $35 billion commitment went to help solar generation projects grow to utility-scale. To do this, it bet on giant developments like Agua Caliente, a 290-MW facility currently under construction in Arizona. But these large projects came with power purchase agreements, which made them relatively safe bets for the DOE.
Moving Beyond Manufacturing Loans
The DOE’s production gambles made under the loan guarantee program, meanwhile, will certainly not be looked on as favorably, and they are certain to become campaign fodder during the coming general election.
Political leaders and the industry as a whole must start to grapple with the uncomfortable reality that if America is to really turn the tide and wrestle solar manufacturing dominance away from China, it will have to move beyond strong rhetoric, sweeping tariffs and selective investments. It’s becoming clear that the combined strategy isn’t capable of overcoming powerful market forces either in America or in the more established markets of Europe.
Rather, the current administration — or future administrations — need to look long-term if they’re hoping to build a sustainable manufacturing base. That means less big ticket funding to build manufacturing operations for single companies, and much more research and development funding. Independent research groups and government programs like the SunShot Initiative, which also comes out of the DOE, spread the wealth to promote promising technologies, not necessarily companies. This allows businesses to grow naturally and to avoid the types of rapid scale-ups that can lead to the large-scale layoffs we’ve seen with Solyndra and now Abound.
The benefits won’t necessarily be apparent within one presidential term. But a more robust commitment to invest in R&D is the only way America can build a bottom-up manufacturing chain that can beat foreign competitors on both cost and quality and attract the long-term confidence of investors and taxpayers.