GE To Close Its Solar-Panel Manufacturing Plant In Delaware
By Yuliya Chernova, Of DOW JONES CLEAN TECHNOLOGY INSIGHT
NEW YORK -(Dow Jones)- General Electric Co. (GE) plans to shut down its only
solar-panel manufacturing facility, as it found that prices for panels fell
below production costs, Clean Technology Insight has learned.
"On October 23 we announced the restructuring of our solar business to
employees and our intent to close the Newark [Del.] facility," said Milissa
Rocker, spokeswoman for the company, in an interview.
GE's production facility is a victim of a rapidly evolving solar market, where
older U.S. plants are shutting down, reducing production, or outsourcing abroad,
even as some foreign manufacturers, like those from China, plan to open new
manufacturing in the U.S.
The decision to shut down production was "mainly due to the challenges in the
solar industry, including overcapacity levels that are twice demand and industry
pricing that's below the cost of producing the panels," said Rocker.
GE plans to stop manufacturing crystalline silicon panels on Jan. 1, 2010. It
will close the plant by the end of June of next year, she said.
The plant currently employs 82 people. All will be laid off, receiving
severance and benefits packages, she said.
GE is also "exploring other alternatives" for the plant, she said.
The plant has capacity to produce 34 megawatts of panels annually, according
to a document aimed at potential investors that was seen by Clean Technology
Insight. Rocker declined to discuss capacity. According to the document, the
facility could be expanded to 68 MW.
It could generate annual revenue of about $75 million at 50 megawatts of
capacity, assuming $1.50 per watt module pricing, the document says. "Overall
profitability is highly dependent on input material costs," the document says.
The document says that GE wants to sell 100% of the facility for cash by the
end of the year.
Still, Rocker said that "GE continues to believe in the long-term success of
solar--we are shifting from crystalline silicon toward the development of new
products, that is thin-film technology and inverters."
The company is a majority holder in PrimeStar Solar Inc., which is still
developing its thin-film, non-crystalline silicon, technology and not
manufacturing products yet.
GE is also "starting to sell" inverters to the solar business, that it
modified from those that the company makes for the wind industry, said Rocker.
Inverters are components in a solar installation that convert the direct current
generated by a solar system into alternate current consumed by a home's
appliances.
The Delaware factory that GE is shutting down is one that the conglomerate
acquired in 2004 out of bankruptcy from AstroPower Inc.
The price for crystalline silicon panels dropped about 30% over the past 12
months, as financing for solar installations evaporated around the globe. As
prices fell, that meant that producers with higher costs of production also saw
their margins shrink.
BP Solar International Inc., part of BP PLC (BP), announced in April that it
would close panel production in Frederick, Md., and in Madrid, eliminating 620
positions. It also is drawing more on outsourced manufacturing through Chinese
suppliers.
Evergreen Solar Inc., meanwhile, said on Wednesday that it will move solar-
panel assembly from its Devens, Mass., factory, to China next year. Energy
Conversion Devices Inc., a maker thin-film solar panels, has also slowed
production in Michigan even as it plans to start production in China.
Schott Solar Inc. shut down production at its 15-megawatt solar-panel
production facility in Billerica, Mass., in July.
"Some of those assets that were owned by global multinationals are now on the
auction block," said Craig Cornelius, managing director at Hudson Clean Energy
Partners, a private equity firm focused on clean-technology investments. "
Truthfully, they are not very attractive assets."
"The property and equipment was put in there a number of years ago," Cornelius
said. "The pace of innovation and manufacturing tool development has been so
fast, that even if you were to buy those manufacturing facilities for a penny
and write down the amortization and depreciation to zero," you'd still wind up
with high processing costs on the old equipment, he said.
Instead, an investor would be better off acquiring a more recently built
facility abroad or constructing a new facility in the U.S., he added.
Those trying to sell these older solar manufacturing plants "will have a hard
time getting interest," Cornelius said. He previously led the $1.5 billion Solar
Energy Technologies Program at the U.S. Department of Energy.
"The combination of older equipment, higher labor costs, tax rates and the
cost of utilities just makes [such production facilities] non-economic,"
Cornelius said.
GE's production equipment has an average age of five years, and its oldest
equipment at the Delaware facility is seven years old, according to the
document.
BP hasn't yet found a buyer for its Frederick, Md., building. "Regarding the
building, we continue exploring options there," Tom Mueller, the company's
spokesman, wrote in an email. "We haven't been able to find a buyer at this
point, but continue exploring options."
The GE facility compares negatively to the BP one, according to one investor
who backs solar companies. "It was built longer ago than the BP facility and has
a much smaller footprint. It's way too small as to the scale that you need to be
operating such facilities," the person said.
GE's withdrawal from the crystalline solar business raises the question of
whether a small and variable solar business is compatible with a large
conglomerate. GE isn't the first large company to buy into solar production and
decide to exit. Royal Dutch Shell (RDSA) had manufacturing in Camarillo, Calif.,
that it sold to SolarWorld AG in 2006.
"A big order for us was $10 million--that's not a big order for GE," said
Allen M. Barnett, founder of AstroPower, the company that was folded into GE.
Barnett is now leading a solar-research program at the University of Delaware.
He added that while a small company focused on its main product has the time and
interest to dedicate itself to the product, that doesn't necessarily happen when
a big company takes over and may consider that product marginal.
At the same time, even as some of the legacy plants in the U.S. are closing,
foreign manufacturers, as well as some start-up solar companies, are opening
production.
Suntech Power Holdings Co. and Yingli Green Energy Holdings Co., two Chinese
panel manufacturers, are planning to open production in the U.S. Sharp Solar
opened production in Tennessee in 2003. SolarWorld AG is building a large plant
in Oregon.
For foreign companies, one reason to move production of modules to the U.S. is
to assuage any discomfort with products made abroad. There's also some concern
that Buy-American regulations may become more stringent when it comes to
projects that use U.S. government money. At the same time, the cost of
transporting large solar modules by ship is high, and as the U.S. market grows,
it may be economical to locate panel production close to demand.
The American Recovery and Reinvestment Act of 2009, commonly known as the
stimulus package, created a $2.3 billion program that gives manufacturers of
renewable-energy components tax breaks. Several companies, including SolarWorld
and Yingli, filed applications. Keeping manufacturing jobs in the U.S. has been
high on the agenda of local and federal governments.
But for the solar industry, that may not be the smartest move, as far as job
creation goes.
If one looks at the entire labor chain of getting electricity to flow from a
solar system, the majority of jobs are in installing the system, not in
manufacturing the various components.
"If midstream can be performed abroad, at a lower cost, maybe we should let
that happen," said Cornelius, of Hudson Clean Energy Partners. "If you're
looking at it from a job-creation standpoint, the best thing we can have in the
U.S. is very low-priced equipment that allows for a large number of
installations."
(Dow Jones Clean Technology Insight covers news about public and private
clean-technology and alternative-energy companies.)
-By Yuliya Chernova, Dow Jones Clean Technology Insight; Yuliya.chernova@
dowjones.com
(END) Dow Jones Newswires
11-06-090915ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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