Low Panel Prices Hurt Manufacturers,but Other Industry Segments Heat Up
The solar-power industry in the Bay Area has gone in two directions as manufacturers struggle to survive while companies that install or finance solar panels flourish.
An oversupply of low-price products, with much of the volume coming from China, has hit large manufacturers' profits and stock prices and sent smaller companies out of business. Solyndra, the Fremont-based solar-panel maker that filed for bankruptcy protection in September, is the best-known casualty.
Other Bay Area companies that make solar panels, such as MiaSolé, Nanosolar Inc. and SoloPower, are having a tough time. SunPower Corp. of San Jose has seen its stock price slide to around $5 from $133 in December 2007.
Yet local companies that install or finance solar-panel systems are largely doing well. These developers have found ways to tack on the panels more efficiently and are paying less for the panels and components. At the same time, government subsidies have made investing in these projects more attractive. Individuals, businesses, or investors who buy solar-panel systems are eligible for federal tax credits equal to 30% of the cost of each system and they also qualify for state incentives and payments from their local utility for any electricity they generate that they don't use.
SolarCity Corp., which installs solar-panel systems on the roofs of homes and businesses, is helping to power the growth trend in this part of the industry. The San Mateo-based company has raised more than $200 million in venture capital and over $1.5 billion in project financing. In April, the company said it planned to go public.
"It's been very difficult for the companies that manufacture solar cells and panels," says Sheeraz Haji, chief executive of consulting firm Cleantech Group in San Francisco. "But solar is a massive market that will continue to grow quickly and there are many companies doing well."
Overall, the Bay Area remains a major solar-market hub. About 30% of California's more than 1,800 solar firms are in the Bay Area, while about a fifth of the state's 48,000 solar jobs are located here, according to a February report from the California Community Colleges' Centers of Excellence.
Bay Area solar firms have raised about $4.73 billion in venture capital equity financing since 2007, about two-thirds of the total raised by U.S. solar firms, according to data compiled by Dow Jones VentureSource.
The region is also a top location for solar-power installations and generates about 30% of California's 1,200 megawatts of rooftop solar power. Santa Clara County is the third-largest in the state in terms of solar-power systems installed at homes, businesses and government buildings, behind Los Angeles and San Diego counties, according to data from the California Public Utilities Commission.
Local manufacturing start-ups MiaSolé, based in Santa Clara, and Nanosolar and SoloPower, which have headquarters in San Jose, are taking steps to improve their competitive position.
MiaSolé and Nanosolar have raised new venture capital to pursue their versions of next-generation thin-film technology, which the companies say have lower manufacturing and installation costs than conventional panels. In March, MiaSolé raised $55 million from VantagePoint Capital Partners, Kleiner Perkins Caufield & Byers and other investors. Nanosolar raised $70 million earlier this month from investors including Mohr Davidow Ventures and OnPoint Technologies Inc.
SoloPower, for its part, last year received a $197 million loan guarantee from the Department of Energy to build a factory to make thin-film panels.
The companies say they will prevail because of their low-cost, high-performing technology. "It's a tough market," says MiaSolé Chief Executive John Carrington. "But my view is, really good technology wins in the long run."
MiaSolé has a 150-megawatt factory in Santa Clara, where it makes thin-film solar panels with copper, indium, gallium and selenium, a cheaper alternative to the silicon used to make conventional panels. The company has been shipping products to customers in the U.S., Germany, India and Saudi Arabia.
For solar companies that install and finance solar systems, the picture is brighter. SolarCity, for instance, was founded in 2006 by brothers Lyndon and Peter Rive and has built a business installing and financing solar-panel systems. The Rives' cousin Elon Musk, who co-founded PayPal, SpaceX and Tesla Motors Inc., is chairman of SolarCity and a key investor in the company.
SolarCity has grown with the U.S. rooftop solar market, going from two employees in 2006 to 1,800 today. The company doesn't disclose revenue or other financials.
"Solar adoption has never been higher," says CEO Lyndon Rive. "You're competing against what the homeowner is paying the utility for electricity today, and that cost is going up, while the solar industry's costs are going down."
Clean Power Finance of San Francisco, a competitor of SolarCity, has also grown quickly in the past year, raising $25 million in venture capital from Google Inc.'s venture-capital arm, Kleiner Perkins and others, plus $500 million in project financing. Clean Power Finance connects solar-panel installers with investors through one of its software services. It also provides software and data that solar-panel installers can use to market their services to customers.
SolarCity and Clean Power Finance sign long-term contracts with homeowners to have solar-panel generators installed on their roofs. The homeowners then pay one of the companies a fixed amount each month and pay a small amount, or sometimes nothing at all, to their electric utility. The solar systems are bundled together and sold to investors.
The systems can bring returns ranging from 9% to 14%, says Clean Power Finance CEO Nat Kreamer. "It's a good deal for consumers, it's a good deal for investors and it's a good deal for the industry, which is growing," he says.