Over the years, news in the solar industry has been dominated by niche players, start-ups, and companies hoping to utilize their first-mover advantages. The Market Vectors Solar Energy ETF (NYSE: KWT), for instance, holds companies like MEMC Electronics (NYSE: WFR), Yingli Green Energy (NYSE: YGE), and Solarfun Power (Nasdaq: SOLF).
However, enormous federal deficits and declining subsidies in Europe (the largest market for solar) has tarnished the immediate growth prospects of the industry, and accordingly, the above ETF has actually seen a 15% drop this year as opposed to a modest gain for the broad market.
The more the merrier
Things may start to get even more difficult though, as big conglomerates step up to the plate and try to push their way into the party. Dow Chemical (NYSE: DOW) decided to get into the game early and is now providing solar roofing shingles and has been approved for a 15-year, 155.5-acre Renewable Renaissance Zone in Midland, Mich., that will house its Dow Powerhouse Solar Shingle manufacturing facility.
General Electric (NYSE: GE), which has already carved out a nice niche for itself with wind turbines, first showed solar interest in 2007 when it acquired stakes in PrimeStar Solar, a producer of cadmium telluride thin-film technology, the kind that competes directly with industry leader First Solar (Nasdaq: FSLR).
Yesterday, the company made a stronger and more vocal push into solar, saying that it was going to roll out two new products (both thin-film), in addition to two new solar inverters. Bloomberg reports that GE has already spent about $1 billion in R&D with regard to renewable energy, and it wouldn't be absurd to assume that more and more money will be spent on solar in the near future. Victor Abate, who oversees GE's renewable energy business has said that "this is a big-bet commitment that GE's making in renewable energy, and the next big phase is solar."
Getting squeezed out
With companies like GE, Dow, and now 3M getting into the solar game, smaller players should beware. These conglomerates have the ability to spend boatloads of money in order to catch up from a technology perspective, and in a world where cost per watt means everything, their scale allows superior margins and faster cost-reduction.
Solar companies are expected to post strong Q3 results due to higher demand and a stronger euro, making the industry even more attractive. The best that small-time players like Evergreen Solar (Nasdaq: ESLR) can hope for is a possible buyout or a possible niche game; however, the biggest threat clearly falls in First Solar's lap, as the biggest thin-film cadmium telluride producer, the company can't be happy about GE's giant leap into the market.
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