BP Solar gives up on solar; farewell to another pioneer

BP, one of the solar industry’s longtime players, says it’s getting out of the business because it’s no longer a money-making business.

December 21, 2011 – BP, one of the solar industry’s longtime players, says it’s getting out of the business because it’s no longer a money-making equation. Reportedly the decision, which involves shutting down the entire unit over several months, was unveiled to employees a week ago (about 100 will be impacted).

BP Solar shuttered its module facility in Maryland earlier this year, the last step in getting out of the PV manufacturing side of the equation entirely to focus only on (nonresidential) project development. BP does have a major solar cell/module JV in India with Tata Power, including one of Asia’s largest module factories (125MW), which is supplying multi-megawatt sites in the region including dozens of MW of projects by the Gujarat government. ( Bloomberg quoted a Tata BP Solar exec saying that it is still in “business as usual” mode.) BP spokesperson Robert Wine is on record (quoted by Bloomberg, The Guardian, and others) that BP Solar will sell its stake in ~158MW of PV projects across Europe and the US. But interestingly, the company apparently is not giving up on renewable energy as a whole — it’s reportedly still committed to its other units including wind and biofuel.

The desire to get out of the increasingly pressured PV manufacturing sector is understandable; it’s not a pretty scene, between capacity cutbacks and equipment demand evaporating, manufacturers forced to (or even willingly) sell below their own costs, and high-profile flameouts via bankruptcy. But BP’s decision to drop its solar project work seems to run counter to what we’ve seen in the past couple of weeks, with others jumping on board the solar PV project train:

– Google and KKR, investing in four California solar farms being built by Recurrent Energy totaling 88MW. It’s the Internet giant’s first grid-connected investment among its $915M investments in renewable energy ($94M alone to this deal).

— Warren Buffett-backed MidAmerican Holdings investing in not one but two massive solar PV projects. It’s taking a 49% stake in NRG’s (originally First Solar’s) $1.8B Agua Caliente project in Arizona’s Yuma County, slated to come online in 2014 with an estimated 290MW (AC) capacity. Days before, it announced it would buy First Solar’s 550MW Topaz Solar Farm in California’s San Luis Obispo County — including, ironically, a statement from MidAmerican CEO Greg Abel that the deal “demonstrates that solar energy is a commercially viable technology without the support of governmental loan guarantees.”

(BP’s decision also stands in contrast to another oil-energy giant’s commitment to solar — back in the spring Total took a 60% ownership in SunPower, valued at around $1.4B. At the time, Total’s Philippe Boisseau, head of its gas/power division, heralded the future of global energy as “a long-term transition in which renewable energies will take their place alongside conventional resources.”)

Note, however, that these recent investments are all well downstream in financing utility-scale systems — that’s an entirely different business model than operating as a module maker/supplier in today’s climate, with eviscerated prices and single-digit gross margins, points out Sam Wilkinson, senior market analyst for IMS Research. In such a climate, any “winners” are likely to be those left standing — and it looks like they are the large pure-play Chinese suppliers who’ve established lower cost structures and maintained highly aggressive pricing to gain share. (Four of the world’s five largest PV module suppliers are Chinese.)

Navigant Consulting’s Paula Mints, while characterizing BP’s move as “a shame” and “shortsighted,” nevertheless cautioned against labels of “winners” and “losers” at such a volatile stage, among whose casualties are true “PV industry pioneers and solar innovators.” BP’s own solar forays included Amoco, Solarex (an Enron unit at one point), a thin-film R&D that was shut down in the early 2000s, and c-Si manufacturing that was ultimately dropped. “The current brutal pricing climate and highly arena competitive for demand […] may well serve as window dressing for a myriad of reasons leading up to this decision,” she noted. Ultimately, though, “what was once a truly innovative company has exited the PV industry,” and “a heartfelt good-bye needs to be said.”
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