PV FIRMS LAY OFF STAFF IN WHAT PROMISES TO BE A DISRUPTIVE YEAR

New Energy Finance :Downstream vertical integration is nothing new in the solar sector, at least since the PV market began to boom in 2004. SunPower has successfully manufactured modules and developed and financed projects, while the biggest of the Spanish infrastructure players have successfully developed projects and integrated technology. Others, such as First Solar and Suntech, have recently moved into project development. But in a time of constrained capital, newer arrivals with ambitious, vertically-integrated business models spanning technology development, manufacturing, and project development have begun to circle the wagons.

Compact linear fresnel reflector STEG technology developer Ausra is already in possession of a manufacturing plant, a pilot project and advanced plans to build a 177MW project in California, yet it recently announced that it will now pursue only technology development and product manufacture. Drawing back from an all-in projects strategy, it will now focus on bolt-on systems for existing fossil fuel power plants and standalone steam applications, including enhanced oil recovery – projects with shorter lead times, lower development costs and quicker revenue generation cycles.

At the same time, Ausra laid off roughly 10% of its workforce, although presumably not many came from its factory, which is largely robotic. It joins a number of other highly visible industry players in furloughing staff. OptiSolar, perhaps suffering from the similar stresses of vertical integration, was forced to lay off half of its staff at its major California thin film PV module plant.

Even industry leaders SunPower and Suntech have let dozens go, although both companies stressed that these were defensive, rather than drastic measures considering their workforces number in the thousands.

The sector is in the first throes of what will be a disruptive year for PV systems prices and, at least in the US, for the ability to finance billion-dollar projects. PV module price declines may squeeze some marginal manufacturers out of production entirely, at the same time potentially creating an opportunity cost challenge for bog-standard STEG plants with no thermal storage mechanism.

Yet all is not gloom in the sector, nor is it entirely a race to a least-cost bottom.

Spanish STEG developers continue to secure finance for their costly projects, buoyed as always by the country’s generous subsidies and a dedication to technological innovation. Of particular note is the USD 171m in debt secured by Masdar/Sener JV Torresol for its 17MW Gemasolar tower and heliostat project with a 65% capacity factor. The all-in cost of EUR 14m per megawatt is discontinuously expensive against current price trends, but then again so is its new technology and its ability to generate at full bore nearly two-thirds of the time.

And in California, regulators announced that the state’s PV incentive programme funded 158MW of systems in 2008, doubling the figure from 2007, although this was still piddling compared to Spain, which despite remarkable opacity from its national energy commission, seems to have installed nearly 3GW in 2008. Even better, California installed 40MW in January 2009 alone, with the average commercial system costing USD 5.7m per MW – a sign that system financing is still available for at least the biggest builders who are rigorously cutting costs, and that the state is hopefully back in a play as a world leader in the PV market.