Twin Creeks Technologies and Stion need high-tech success to compete with cheap overseas labor
See related MBJ story: “Calisolar lays off 80 Calif. workers”
With the continued controversy over the Obama administration’s support for the now-bankrupt Solyndra, which came weeks after the collapse of Spectrawatt and Evergreen Solar, the renewable energy industry is eagerly watching to see how other U.S. solar manufacturers will fare.
Gov. Barbour has branded Mississippi as a green energy leader, and two companies he helped recruit to the state — Twin Creeks Technologies and Stion — have finished the first phase of their plant buildings, hired some employees and are preparing for commercial production.
In today’s global marketplace the success of solar companies in Mississippi and elsewhere depends on the development of new technology for panels that can compete with those produced with low-cost labor in China.
Senior alternative energy analyst Daniel Ries of boutique investment banking firm Collins Stewart LLC said new technology is the only way the United States will be able to stay viable. Solar manufacturing, like iPhone manufacturing, for instance, is low-tech. High-tech companies like Apple choose to have their products made overseas with cheap labor.
Mississippi’s Twin Creeks Technologies in Senatobia says it will create low-cost solar cells using monocrystalline silicon, while Stion in Hattiesburg is using thin-film technology (see Aug. 26 MBJ story “Stion: Bankruptcy not in the plans”).
Although he couldn’t comment specifically on the Mississippi companies, Ries said, “There have been many efforts to make a better mousetrap in the solar industry. The standard approach using silicon cells has been the approach of China for the most part. … Most of the competition against that effort has been based on a higher level of science, generally thin-film … For the most part the efforts to compete against the standard process have failed. The most notable exception is FirstSolar whose cadmium telluride thin film has proved to be a very low-cost method of making a lower-cost solar module.”
Another technology that has showed great promise theoretically but not practically, he said, is CIGS (copper indium gallium selenide), which is the technology Solyndra was using before it declared bankruptcy in early September. Solyndra had received more than $500 million in federal loan guarantees.
“(Some collapsed) companies set out to produce (solar cells at) $2 per watt hoping to sell for $3 per watt,” Ries said. “The production costs fell much faster than expected. Modules are currently selling for $1.10 to $1.20 on the open market. That’s below the production cost of most of the efforts that have been out there. … Solyndra was producing for about $6 per watt and selling them for $3. They were hoping with a larger plant they could produce them cheaper.”
Yi Li, president of solar panel company Renogy and a Louisiana State University doctoral student, understands Chinese manufacturing first-hand. She operates solar company Renogy at an LSU business incubator and sells panels manufactured by her family’s company in China.
“I’m not confident U.S. manufacturing will be long-term. Inevitably, the Chinese labor cost is cheaper,” Li said, adding later than one-time U.S. government stimulus money is not a good long-term strategy for American businesses.
China has a minimum wage, but workers are not paid overtime. Competition for jobs is high, so employees work hard and efficiently and won’t complain about extra hours, she said.
Li’s family owns four plants that handle all the stages of the panel-making process, from the creation of ingots, wafers and solar cells to panel assembly. With cells and panels combined, they sell about 50 megawatts of solar products annually.
Although most Chinese citizens can’t afford solar panels and there is little market at home due to cheap traditional energy, Chinese solar manufacturers are incented to export panels, Li said. In some cases the government will even pay business travel expenses to the United States for research.
Li calls the current solar market that is flooded with a panel surplus “a complete mess.” But while solar prices were $2 a watt last year, Renogy can still turn a profit selling its polycrystalline panels for around $1.30 per watt and its monocrystalline panels for a few cents more.
State green energy strategies
Ed Bee, founder and president of Taimerica Management Company, a national economic development consulting agency, said solar projects are still hot items for economic developers nationwide and competition between states is “fierce.”
“There has been a real boost in (PV solar manufacturing) because of the stimulus bill passage, but economics aren’t really driven by the stimulus bill. What’s driving the generation of panels are the renewable portfolio standards in the states. About two-thirds of the energy generated in the U.S. is in states with renewable portfolio standards. Mississippi and Alabama don’t have those,” Bee said.
Renewable portfolio standards are state regulations requiring increased power production from sources like wind, solar and biomass.
Additionally, a lot of solar manufacturing is centered near its customer base to avoid shipping costs on the bulky panels.
Regarding Mississippi’s solar startups, Bee said, “I’m not sure what’s driving those locations and why they’re being attracted to Mississippi.”
The largest U.S. solar markets are in California, New Jersey and Massachusetts, states with aggressive renewable portfolio standards, or regulations requiring the increased power production from sources like wind, solar and biomass.
Bee noted that in 2006 Michigan, looking forward to the electric car market, began developing an aggressive economic development strategy to establish itself as a manufacturing hub for lithium ion batteries. The plan, logical in light of Michigan’s auto industry background, has proved successful.
When Michigan raised its tax breaks and incentives for high-tech battery companies to $555 million, four companies quickly announced their intent to build plants in Michigan. Each was granted $100 million in state tax credits. Three other companies later announced plans to locate there for a total of seven and a collective investment of more than $3 million.
Mississippi green energy companies receiving state loans
Company Loan amount Money spent Announcement
Twin Creeks $50 M $22 M April 2010
Soladigm $40 M $35 M July 2010
KiOR $75 M $39 M August 2010
Stion $75 M $41 M January 2011
Calisolar $59.5 M – September 2011
HCL Cleantech $100 million – September 2011