Evergreen Solar moves U.S. production of solar panels to China

Since the recession began in 2007, the United States government has purported to try to stimulate the economy and create new jobs.  Green jobs have been one of the Administration’s focuses, but apparently not enough so.

Last week, Evergreen Solar – the third largest maker of solar panels in the United States – announced that it was closing its main factory here and moving production to China.  The stated reason?  Higher government support there.

Evergreen Solar is entering a joint venture with a Chinese company and laying off about 800 American workers in Devens, Massachusetts by the end of March 2011.  Not surprisingly, the move of the solar panel maker to China has resulted in a political outcry.  Here in the U.S., people are wondering how many more green solar jobs will be lost to China.  And the Obama Administration is investigating whether China has violated free trade rules of the WTO by offering extensive subsidies to manufacturers of solar panels.

Evergreen’s CEO Michael El-Hillow commented that the decision to close the U.S. manufacturing plant was in response to dropping prices for solar panels, down about 2/3 over the past three years.  Chinese manufacturers of solar panels have been able to push prices down because costs to build them are generally lower in China:

“While the United States and other Western industrial economies are beneficiaries of rapidly declining installation costs of solar energy, we expect the United States will continue to be at a disadvantage from a manufacturing standpoint.”

Cheap solar panels produced in China

Consider these facts:

• Chinese solar panel manufacturers made up over 1/2 of the world’s production of PV
• U.S. consumers are purchasing China solar panels at an increasing rate – they make up 23% of the market currently and still rising
• China is also making gains in the wind energy markets, surpassing the U.S. as the world’s largest manufacturer and installer of turbines
• Factory labor in China is especially cheap – workers draw about $300 a month, vs. $5,400 a month for U.S.-based workers
• Government loans in China offer exceptionally low interest rates from state-owned banks

So, what can be done to keep green solar jobs in the U.S.?  More federal support?  Better incentives?

Can we compete with the clean energy policies of China that offer such attractive financing and other assistance to solar panel manufacturers?

The future of solar energy depends on several factors

The future of solar power depends in large part on its cost.  Critics of renewable energy complain in large part that coal and other fossil fuels are much cheaper.  In fact, some utilities even claim that they cannot, in good conscience, raise rates for their customers in order to use solar power because they have a duty to provide the least expensive energy.

I’m wondering…. where do considerations of the planet come into play?  Isn’t that a cost that needs to be considered?

Fortunately, some experts are predicting that grid parity – that is, the point at which solar power is equivalent in monetary cost to coal-based electricity – is about a decade away, and less in some regions.  In addition, the cost of solar power is defrayed, in part, by tax incentives and projected increased property values.  In fact, the time to reach the “break even” point for solar panels has decreased recently:

Grid parity has been achieved in some areas of the world

In a few places worldwide, grid parity has already been achieved.  In California, for example, commercial solar panel rooftop systems are close to 45 cents per kilowatt-hour (kWh), due in part to the policies that set the price of solar power at times when PV technologies work best (middle of the day and during summer).  Italy, too, is poised to get to grid parity for residential PV solar panel systems within a couple of years.

However, world-wide, we may still have to wait until the cost of solar power has dropped substantially enough to be price-competitive with our cheap coal and gas sources.

You may be wondering, as I was, if there is anything we can do to speed up the future of solar power. In other words, how can the relative cost of PV technology be brought in line with the usual fossil fuel resources on which the world relies?

Perhaps we should take a look at the playbook of Greece.  This high-subsidy nation enjoys heavy private investment in solar power, and those that do so are smiling all the way to the bank.  In one blog post, the author notes that investors in Greece are making a healthy profit, as measured by the internal rate of return (IRR):

In fact, in subsidized markets, IRRs can reach well in excess of 10 percent, said Ted Sullivan, senior analyst at Lux Research, and lead author of the report. And that is “actively fueling [new solar] demand,” he added.

But, where solar subsidies are not offered, the industry is unable to get off the ground.

Solar power cost is coming down

Personally, I believe the future of solar power is within our grasp.  That being said, it is still very dependent on solar subsidies.  As governments continue to invest towards a fossil-fuel-free tomorrow, major manufacturers are also making advancements to reduce costs and increase production.

Grid parity is expected to occur in 5-10 years.  We need only be patient and diligent in advancing the ball when it comes to solar panel technology and encouraging people to continue investing – both public and private funds.