First Solar Ends Research Into ‘Holy Grail’ Technology That Sank Solyndra

By Christopher Martin – Dec 14, 2011 2:29 PM MT

The sun shines off of First Solar Inc. solar panels that form a one megawatt (MW) solar photovoltaic array at Intel Corp.’s campus in Folsom, California. Photographer: Ken James/Bloomberg

First Solar Inc. (FSLR) is abandoning a research project aimed at developing the same material for solar panels that doomed Solyndra LLC after a global supply glut caused prices to crash.

First Solar slashed its profit and sales forecast and plans to fire about 100 employees, including 60 at a Santa Clara, California, research center, the Tempe, Arizona-based company said today in a filing. The cuts are part of a reorganization plan to narrow its focus to large utility-scale power plants and away from smaller, rooftop installations.

Solyndra declared bankruptcy Sept. 6 saying it couldn’t compete after prices for polysilicon, the raw material in traditional solar cells, fell 64 percent this year. Global panel production has “effectively tripled” during the last three years and demand is slowing in Europe and other regions where subsidies have been cut, said First Solar’s Chairman and Acting Chief Executive Officer Michael Ahearn.

“We’re dedicating all of our resources” to making utility-scale projects more cost-effective, Ahearn said today on a conference call. Other initiatives “will be on the back burner.”

First Solar’s Santa Clara team was developing copper- indium-gallium-selenide panels, or CIGS, technology, said Mark Bachman, an analyst at Avian Securities LLC.

Solyndra received $535 million in U.S. government loan guarantees to build a CIGS panel factory, which it shut in August. First Solar received loan guarantees through the same program to build large-scale power projects that it later sold to power producers.

‘Holy Grail’ Research

First Solar has concluded that CIGS wasn’t going to compete on cost against polysilicon, Bachman said.

“They were going heavy into CIGS research as sort of a ‘holy grail’ effort that they’ve now abandoned,” he said today in an interview. Instead, the company will “double-down” on its existing thin-film technology, he said.

First Solar became the world’s largest maker of thin-film panels, which require half the energy to manufacture of those made from silicon, using an automated process to apply cadmium- telluride to glass. General Electric Co. (GE) and closely held Abound Solar Inc. are also betting that the technology will make solar power cheaper than electricity from fossil-fuel plants.

Allocating Resources

“They’ve shifted the allocation of resources from CIGS to what is more important in the near term for them, which is to realize cost reductions from their existing technology,” said Shyam Mehta, senior analyst for Boston-based GTM Research. “The price drops we’ve seen for polysilicon have eroded the value properties of all alternative technologies, including cadmium- telluride.”

The company fell 21 percent to $33.45 at the close in New York, its lowest price since February 2007.

First Solar is “refocusing its research and development center in Santa Clara” to improve its cadmium-telluride technologies, according to the filing. Ted Meyer, a company spokesman, wouldn’t discuss the goals of the center.

The company this year received $3.43 million in sales tax breaks from California to purchase $37.7 million in solar manufacturing equipment for the Santa Clara center, according to state filings. Meyer said the company is “in discussions” with state officials regarding the facility. “We believe that we have met all of the requirements for the sales tax credit,” he said.

The California State Treasurer’s Office didn’t return calls today.

State Tax Incentives

Besides the U.S. government loan guarantees, Solyndra received $25.1 million in state sales tax breaks under the same program. The company developed solar panels using glass tubes lined with CIGS. Solyndra was the only CIGS manufacturer to win U.S. loan guarantees.

First Solar received more than $3 billion in U.S. loan guarantees for three projects it’s developing in the Southwest, with total capacity of 1,070 megawatts, comparable to one nuclear reactor, making it the largest single recipient of backing under the U.S. Energy Department program.

Those projects already have buyers for the electricity they will produce and carry less risk than guarantees offered for manufacturing plants.

Focusing on large projects may be a good strategy for First Solar, said Jenny Chase, senior solar analyst at Bloomberg New Energy Finance in Zurich.

“The companies that survive this slash-and-burn market are going to have to be the best at what they do,” she said in an interview. “The utility scale market is First Solar’s sweet- spot and they are the best in the arena.”

To contact the reporter on this story: Christopher Martin in New York atcmartin11@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s