The Heavyweight Backing Thin-Film Solar

The solar media likes to talk about how government subsidies have given Chinese companies an unfair advantage because of government subsidies. But if we compare apples to apples, there's no shortage of government backing for solar in the U.S. -- it's just taken a different, much less successful form.

Witness the loss of most of the $58 million the state of Massachusetts gave Evergreen Solar (Nasdaq: ESLR  ) to build manufacturing there. After watching Energy Conversion Devices (Nasdaq: ENER  ) shift its manufacturing to Mexico, the government is trying to push the U.S. to become the world headquarters for thin-film solar. But will this be any more successful than past efforts? Here are a few of the big moves that the U.S. government has made so far:

  • SoloPower, a maker of thin-film cells and modules, recently received a $197 million loan guarantee to build a manufacturing facility in Oregon. The company uses CIGS technology, which has showed promise for years, but fallen on its face so far in large-scale manufacturing (see Nanosolar).
  • Abound Solar and the CdTe technology it uses have received a $400 million loan guarantee to expand capacity from 65 MW to up to 1 GW. CdTe has been proven by First Solar (Nasdaq: FSLR  ) , and Abound hopes to take it to the next level.
  • Solyndra received $535 million in a stimulus federal loan grant, but it has since cut 170 employees  and closed a plant, slashing production output to 300 MW from an originally planned 600 MW. Not exactly a great start.
  • 3M's (NYSE: MMM  ) Ultra Barrier Solar Film recently received another $4.4 million as part of the DOE's $200 million-per-year SunShot Initiative.

Meanwhile, established firms like thin-film maker First Solar are doing just fine without loan guarantees and U.S. subsidies. True, it looks like FSLR will get  approximately $20 million in incentives from Maricopa County to build a plant there, but many counties support manufacturing in this way.

And unlike rival startups, established firms such as SunPower (Nasdaq: SPWRA  ) , Trina Solar (NYSE: TSL  ) , and Yingli Green Energy (NYSE: YGE  ) are solidly profitable and have a bankable product to sell. So is government spending for thin-film solar the right way to go, or should these established firms be targeted? And does solar even need the money?

Who really needs the money?
I'm not suggesting thin-film solar -- Ultra-Barrier Solar Film in particular -- won't play a role in revolutionizing the industry. A few months ago, I argued that this technology could lead to an unlikely revolution in solar. But does 3M or solar really need the money, or require government help to pick the winners in the industry? A 3M film plant likely costing along the lines of $100 million is already under construction (I used to install capital equipment at 3M, and this is an estimate based on experience, not published company projections), so the company's clearly committed to the product already.

Venture capital funding for greentech companies has hit $1.7 billion in the first two months of 2011 alone. Thus, firms that have viable technology aren't exactly hurting for cash right now. The DOE is backing thin-film solar technology, which already had big money backers in the open market.

And here's this Fool's biggest problem. The government isn't a venture capital firm, and it doesn't share the same upside as equity investors. If some of these firms go belly-up, the feds lose our invested dollars in companies that probably didn't need the money anyway. The Chinese government may be providing subsidies for solar, but it's doing so through loans, not free money -- and China has been very successful so far.

I'm all for incentives to help solar become the industry power I hope it can be, and I'm also a big supporter of thin-film technology. But this doesn't seem like the best way to sort out who the winners and losers are in a high-tech industry -- that's the market's job.

So here's my open-ended question for Foolish solar investors. If you had $200 million of federal SunShot dollars to spend on stimulating the solar industry in the U.S., how would you spend it? Send a tweet to @FlushDrawFool, or leave a comment below with your thoughts.

And don't forget to add your favorite solar stocks to My Watchlist, and My Watchlist will aggregate all of our Foolish analysis on that stock.

Fool contributor Travis Hoium owns shares of First Solar and SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

3M is a Motley Fool Inside Value choice. First Solar is a Motley Fool Rule Breakers selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 29, 2011, at 3:14 PM, bubba99932 wrote:

    My goodness! Incremental gains in technology and cost reduction will come, if only there is real demand for the product. The Fed. Govt. has thousands of locations where solar energy could be put to work right now and save the taxpayers plenty of money, over time, on electric bills. The U.S. Govt. is the largest utility customer in the country! How about some significant moves toward real energy independence, moves that promote the industry through revenue. Install, baby, install!

  • Report this Comment On March 29, 2011, at 6:13 PM, DDHv wrote:

    In the early 20th century, prizes would be put up for improved technologies. If I had $200 Mega to improve solar, I'd set up prizes for those who did the most to improve things. Something like the X-prizes!

  • Report this Comment On March 29, 2011, at 7:57 PM, earthunit wrote:

    More shoddy reporting!

    You guys ALL stink.

    Your quote:

    "After watching Energy Conversion Devices shift its manufacturing to Mexico"

    Excuse me! ENER still does 80% of its manufacturing in MICHIGAN!!

    Only the finishing touches are done in Mexico!

    Try doing some better research next time, please.

    Inexcusable!

  • Report this Comment On March 29, 2011, at 10:28 PM, ecdfan wrote:

    earthunit: Fool's reporting about Energy Conversion Devices (ENER) is factually correct. ENER apparently assembles all of its modules in Mexico these days ( http://www.uni-solar.com/wp-content/uploads/2011/01/SWEMagaz... ), despite having received millions of federal, state and local tax breaks, "recovery" funds, and plain old pork. ENER still makes its inefficient cells In Michigan, at horrendous cost of manufacturing, which will surely lead to Chapter 11 by mid 2013 (ENER's junk bonds yield 22%).

  • Report this Comment On March 30, 2011, at 12:19 AM, earthunit wrote:

    Not so fast ecdfan!

    The article is not factually correct.

    It is materially incorrect.

    There are approximately 200 employees at the ENER "finishing plant."

    There are many many more than that at ENER's

    "manufacturing plant" in Michigan.

    The above article is misleading and just plain wrong.

    No solar company does more manufacturing in the USA proper than ENER.

  • Report this Comment On March 30, 2011, at 10:39 AM, TMFFlushDraw wrote:

    I did say shift and not totally move everything to Mexico. I can see how you may misinterpret that but factually it is correct.

    And like @ecdfan said, it probably won't matter how many employees the company has now if it goes into Chapter 11. Bottom line, ENER hasn't been a good investment for the government (or shareholders).

    Travis Hoium

  • Report this Comment On March 31, 2011, at 3:48 PM, Geosquire wrote:

    ENER has a deal with PANL to manufacture OLED lighting panels at the new Michigan plant. That is why more business was shifted to the Mexican plant; anticipation of an even more profitable use of the new facility here in the states than it was originally meant for.

  • Report this Comment On April 14, 2011, at 11:07 PM, sailrick wrote:

    I think govt. loan guarantees for solar thermal power plants should be increased. For PV, there is always the distributed energy market to soak up production. I am not implying it should be limited to that.

    Solar thermal, which would be a very valuable addition to our energy mix, is capital intensive up front and mostly needs to be fairly large scale to be efficient. With heat storage, it has twice the capacity factor of PV, and can actually put out base load power, but that can follow the load, as well. Coal and nuclear base load plants don't follow the load, their power is not dispatchable.

    Don't get me wrong. I have seven PV solar stocks. But solar thermal will actually make it easier to intergrate the more intermittent PV into the grid.

    Wind too. They are all complimentary.

    Here's a how a CSP plant with 3.5 hours heat storage on typical summer day in Nevada would run.

    The plant would start saving heat at sunrise. A few hours later, it would start generating electricity and continue storing heat in the salt. By 1pm when the sun peaks, it would be at full rated power, say 1250 MW. It would continue to put out at least it's full rated power, while increasing output and peaking at about 3,000 MW at 5pm, exactly when demand in the grid peaks in the southwest. It would continue putting out steady but declining power until midnight. No fluctuation when clouds pass by.

    Cloudy periods, which are rare in the southwest can be planned for by the plant manager and utility, from weather forecasts. In the daytime in what the NREL calls Premium Solar Resource areas, there is sunshine all but about 4% of the time.

    3.5 hours heat storage means enough to provide 3.5 hours at full rated power, without any input from the sun.

    The first plant with molten salt heat storage in the U.S. is being built in Arizona. It will have 6 hours heat storage.

    source:NREL

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