Insiders at First Solar Disagree on Firm’s Prospects

It is billed as the world’s largest factory for making solar energy panels and could put metro Toledo on the high-tech map with its promise of making production of electricity from sunlight as economical as from other sources.

But nearly a year and a half after investors such as Wal-Mart, Inc., heir John Walton spent $16 million to build the plant in Perrysburg’s Cedar Business Center, no panels have been sold. And insiders of Perrysburg-based First Solar LLC disagree about the likelihood the firm will reach its lofty goal. Toledo inventor and philanthropist Harold McMaster, who founded the firm in 1986 and helped design its manufacturing equipment, is not happy with the plant’s progress. “I can’t say I’m optimistic it will be up and operating,” said Mr. McMaster, an 85-year-old glass industry pioneer. “They do not have the right leadership,” added Mr. McMaster, a partial owner of First Solar and member of the firm’s board of managers. Company President Michael Ahearn, after first stating that Mr. McMaster “doesn’t participate in operations or in setting policy and direction,” conceded that the factory has encountered unexpected problems. Investors in the $16 million plant in Perrysburg’s Cedar Business Center include Wal-Mart heir John Walton. THE BLADE/DON SIMMONS But Mr. Ahearn, who is based at the firm’s marketing offices in Scottsdale, Ariz., disagreed with the founder’s assessment of First Solar’s outlook and difficulties. First Solar moved too quickly to build a production plant without first ironing out problems with the manufacturing process, he said. “We realized that we had gotten ahead of ourselves. … We have a lot more development work to do.” He added, however: “We haven’t learned anything to dampen our optimism” about the company’s prospects. Mr. Walton didn’t return a telephone call seeking comment. Events in Toledo are being closely monitored in the solar electricity industry, where firms, including England’s BP PLC and Germany’s Siemens AG, are in a race to develop methods of mass production that would cut the cost of solar panels to $1 a watt – the point at which energy from the sun would become as cheap as energy from more traditional sources. At present, the cost of producing electricity from the sun is 22 to 40 cents a kilowatt hour, according to the U.S. Energy Department. The average U.S. electricity customer pays 6.9 cents a kilowatt hour. First Solar, then known as Solar Cells, Inc., boasted for a dozen years that it would slice production costs with machinery developed by founder Mr. McMaster for making chemically coated glass panels. Local officials rushed in with aid for the exciting project. Harold McMaster, left, and Mike Cicak in 1996, the year the company received $5.8 million in government grants. THE BLADE In 1988, Massachusetts Gov. Michael Dukakis, then the Democratic Party’s nominee for president, tried to lure a planned manufacturing facility to his state. By 1996, the Toledo firm had received $5.8 million in government grants for research, development, and a pilot plant on the campus of the University of Toledo. The U.S. Energy Department’s National Renewable Energy Laboratory in Golden, Colo., would continue to provide the firm with $1 million a year in financing. In all, the government and private investors pumped in $50 million to $65 million, according to various estimates. Yet by 1999 – 12 years after Mr. McMaster had revealed plans for a factory in Toledo to mass-produce solar panels – the facility remained an unrealized dream and few panels had been sold. That year the firm got an infusion of cash when Mr. McMaster sold slightly more than half of Solar Cells to True North Partners, LLC., of Scottsdale, Ariz. The investment company, which included the Wal-Mart heir, took over management of the Toledo firm, changed the name to First Solar, and soon broke ground for the Perrysburg plant. The plant caused a stir in the solar industry because it was to be capable of producing an unheard-of 100 megawatts of chemically coated solar panels yearly. The capacity would equal the entire world production in 1999 and would make the local plant the largest such facility on earth. Most important, the large volume would allow the plant to achieve long-sought economies of scale. As envisioned by owners, the plant would supply solar panels not only for traditional uses such as highway signs and navigational beacons, but also for use in making electricity to run factories and to light cities. In February of last year, with completion of the plant two months away, company officials remained excited about the 75,000-square-foot factory’s prospects. It would operate at 20 percent of capacity in 2000, with full production in 2001, they said. So far, however, the plant has produced only a limited number of panels for testing purposes, and executives now indicate that commercial sales won’t begin until next year. Ken Zweibel, administrator of the National Renewable Energy Laboratory and a longtime supporter of the local project, isn’t concerned about the delays. “What they are doing has never been done,” Mr. Zweibel said in a telephone interview from his office in Golden, Colo. “Historically, it has taken an unbelievably long time from building to the point of truly large-scale production. Often, three to four years. They are within that window.” But others are skeptical. “It would seem to me they would have optimized their machinery by now,” said an executive of a competing firm who spoke on the condition he not be identified. Added Robert Birkmire, director of the Institute of Energy Conversion at the University of Delaware in Newark: “The bottom line is that there hasn’t been anything come out of that program to any great extent.” The firm, he said, appears to be having difficulty achieving sufficient yields and quality from machinery – all of which is custom-designed and largely untested for large-scale production. “I think they’re serious,” Mr. Birkmire said. “But I think the problems they are trying to solve are somewhat formidable.” Competitors have begun production, although on a far smaller scale. The United States alone has at least five other plants employing newer technologies, similar to that at the Perrysburg plant, which are believed to hold the greatest promise for reducing production costs to the point where solar will become competitive with other energy sources. All have experienced problems and none is attempting such large-scale production as First Solar, said the official from the National Renewable Energy Laboratory. Energy Conversion Devices, Inc., which operates a plant in Troy, Mich., attracted attention recently from a joint venture with Texaco, Inc., to use solar energy to power steam generators needed for oil-drilling. Solar panels, which have been produced for 30 years, helped power the nation’s space program. But those panels are different from the ones made by Energy Conversion Devices, First Solar, and their competitors. Traditional panels use the chemical compound crystalline silicon as part of the process of converting sunlight into electricity. They are more efficient than the newer entrants and continue to represent 85 percent of solar panel production. They are more complicated to produce, however. First Solar is among firms experimenting with newer, so-called “thin-film” technologies that use fewer raw materials and are simpler to make. For all of their promise, however, they haven’t achieved the hoped-for cost reductions, said Ajeet Rohatgi, a solar energy expert at the Georgia Institute of Technology in Atlanta. “They are no cheaper,” said Mr. Rohatgi, director of the college’s Photovoltaic Center of Excellence. “They hold great promise, but the traditional technology is still the industry workhorse.” The particular thin-film technology being used at First Solar employs the chemical compound cadmium telluride that is in use at only two plants in the nation, experts said. The lack of experience with the process could be contributing to delays, experts said. Still, Mr. McMaster, who also founded the successful Toledo firm Glasstech, Inc., believes it is the industry’s best hope of reaching the long coveted $1-a-watt solar panels. He maintained that First Solar’s Perrysburg plant isn’t taking full advantage of manufacturing technology he helped design and fears the firm won’t be able to sell solar panels cheaply enough to compete with traditional methods of making electricity. He contended that the Perrysburg plant will be able to cut the cost to only $3.50 per watt. “It has got to be under $2,” Mr. McMaster added. Part of the problem, he said, is that the firm won’t be able to achieve high volumes because it has purchased machines for just 25 percent capacity. Installing additional finishing machinery would not be difficult, if warranted, executives reply. “We’ve intentionally not built up to capacity,” said Mr. Ahearn, First Solar president. “We are in a development mode trying to get manufacturing to the point where we can consistently produce good-quality product.” He conceded that the situation is unusual given that Solar Cells for several years operated a pilot plant, where kinks are supposed to be worked out. “Some of the product made on the pilot line worked out. Some didn’t. The process never got screwed down to a tight definition.” The problems were compounded by design changes made when the company went to a full-scale production facility. Although First Solar’s web site continues to describe the Perrysburg plant as a 100-megawatt facility, the company president said: “We’re collecting information É that will tell us pretty quickly what our capability” will be. The company president wouldn’t talk about the firm’s costs for making solar panels. “We’re doing field tests,” he said. “We’re trying to get the product to the point where it will work acceptably. Until we get to that point, we can’t say what the price will be.” As for Mr. McMaster’s contention that the cost will be $3.50 a watt, First Solar’s president replied: “I don’t know where he got that information.” In the past, Mr. Ahearn said, “The company put out facts, figures, and numbers without the data to support them.” Early on, Solar Cells may have boosted expectations too high, he said. “Solar Cells made a breakthrough. … There was a gap in time where there was little progress, if any. Externally, the communication continued along an optimistic fashion. There wasn’t a lot of data to support anything.” One test of First Solar panels is under way at the Mesa campus of Arizona State University. No results are available yet, said Govindasamy Tamizhmani, di|rector of the college’s photovoltaic test laboratory. The two-month-old test includes 600 First Solar panels capable of making enough electricity to meet the energy needs of eight average Arizona households. First Solar has asked the university not only for an evaluation of how the panels hold up under harsh Arizona weather conditions but also for information on their performance when connected to an electrical grid. Michael Cicak, a First Solar board member and former Solar Cells president, believes the tests will go well. “The system looks very, very good,” he said. “The product is going to start rolling off the assembly line in two to three months and they’re going to blow everybody away.” Industry insiders are taking a wait-and-see attitude. “There is a good chance they’ll be successful,” said Mr. Birkmire, of the University of Delaware. Yet, he said, skepticism is understandable. For three decades, First Solar and other proponents of thin-film technology have made promises and claims about its ability to lower prices. Yet their pronouncements have often been premature. “It’s been oversold,” Mr. Birkmire said of the technology.
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