Friday, February 6, 2009

New York Times: Dark Days For Green Energy

An interesting tale for those of us (once) solar and (still) wind fans via New York Times. It is so bad in solar than even President (or President Elect) Solar has not run these stocks up. I was pensive on solar (for the long run) early in 2008 [Jan 3, 2008: The Long Term in Solar] but I thought there would at least be 2 years of good times before the commoditization took over the space... credit crisis and plummeting oil/energy prices accelerated the arrival of the massive consolidation stage. At this point solar is just like buying a financial or commodity stock - put your chip down (red or black) and hope that tomorrow is the day HAL9000 & friends run up your stock 15%. Because most other days you are getting pummeled.
  • Wind and solar power have been growing at a blistering pace in recent years, and that growth seemed likely to accelerate under the green-minded Obama administration. But because of the credit crisis and the broader economic downturn, the opposite is happening: installation of wind and solar power is plummeting.
  • Factories building parts for these industries have announced a wave of layoffs in recent weeks, and trade groups are projecting 30 to 50 percent declines this year in installation of new equipment, barring more help from the government. Solar energy companies like OptiSolar, Ausra, Heliovolt and SunPower, once darlings of investors, have all had to lay off workers. [Aug 14: Photovoltaic Solar Looks to be Arriving in Scale the United States] So have a handful of companies that make wind turbine blades or towers in the Midwest, including Clipper Windpower, LM Glasfiber and DMI.
  • Prices for turbines and solar panels, which soared when the boom began a few years ago, are falling. Communities that were patting themselves on the back just last year for attracting a wind or solar plant are now coping with cutbacks. “I thought if there was any industry that was bulletproof, it was that industry,” said Rich Mattern, the mayor of West Fargo, N.D., where DMI Industries of Fargo operates a plant that makes towers for wind turbines. Though the flat Dakotas are among the best places in the world for wind farms, DMI recently announced a cut of about 20 percent of its work force because of falling sales.
  • Much of the problem stems from the credit crisis that has left Wall Street banks reeling. Once, as many as 18 big banks and financial institutions were willing to help finance installation of wind turbines and solar arrays, taking advantage of generous federal tax incentives. But with the banks in so much trouble, that number has dropped to four, according to Keith Martin, a tax and project finance specialist with the law firm Chadbourne & Parke.
  • Some big wind developers, like NextEra Energy Resources and even the Texas billionaire T. Boone Pickens, a promoter of wind power, have cut back or delayed their wind farm plans. [Oct 26: 60 Minutes - T Boone Pickens]
  • Because of their need for space to accommodate giant wind turbines, wind farms are especially reliant on bank financing for as much as 50 percent of a project’s costs. For example, JPMorgan Chase, which analysts say is the most active bank remaining in the renewable energy sector, has invested in 54 wind farms and one solar plant since 2003, according to John Eber, the firm’s managing director for energy investments.
  • In the solar industry, the ripple effects of the crisis extend all the way to the panels that homeowners put on their roofs. The price of solar panels has fallen by 25 percent in six months (deflation! deflation all around - except foodstuffs) For homeowners, however, the savings will not be as substantial, partly because panels account for only about 60 percent of total installation costs.
  • After years when installers had to badger manufacturers to ensure they would receive enough panels, the situation has reversed. Bill Stewart, president of SolarCraft, a California installer, said that manufacturers were now calling to say, “Hey, do you need any product this month? Can I sell you a bit more?”
  • Wind and solar companies have urged Congress to adopt measures that could help revive the market. (who isn't?) But even if a favorable stimulus bill passes, nobody is predicting a swift recovery.
  • The solar and wind tax credits are structured slightly differently, but the House version of the stimulus bill would help both industries by providing more immediate tax incentives, alleviating some of their dependency on banks. Both House and Senate would also extend an important tax credit for wind energy, called the production tax credit, for three years; previously the industry had complained of boom-and-bust cycles with the credit having to be renewed nearly every year. (if we're going to go ahead with "stimulus", I'd prefer to spend my unborn grandchildren's money on renewable energy rather than a new ladybug study or building a new road to a new empty office complex/mall)
[Dec 20: BusinessWeek - Clouds Over the Solar Industry]
[Jul 10: Well It's a Start - Sunpower to Build 2 Solar Power Plants]

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