Solar industry looks to new markets

The two largest solar panel manufacturers in the US built a massive solar power plant, but they’re struggling for contracts. SunPower and First Solar are now focusing on new markets: homeowners and businesses. John Dyer reports from Boston.

The US solar power industry is moving away from large solar power plants and instead focusing on homeowners and businesses.

The US solar power industry is moving away from large solar power plants and instead focusing on homeowners and businesses. (Image credit: First Solar)

The American solar power industry is shifting away from big solar power generation and refocusing on homes and other customers — at least for now.

“Certainly 2017 will be a difficult year in power plants,” said Tom Werner, chief executive officer of SunPower, the second-largest solar panel maker in the United States. “The power plant market is unlikely to improve in America in the next few quarters. It will in time.”

Still, Werner forecast “sustained strong industry growth” in rooftop solar panel sales.

“We wanted to re-position supply closer to the end market,” Werner said, adding that solar was still in its infancy. “We’re in transition. We’ve been through this before.”

The roof as solar panel

SunPower isn’t alone. Recently the biggest solar panel manufacturer in the country, First Solar, said it also foresaw selling more panels to businesses rather than constructing massive solar panel facilities for power companies.

And SolarCity, another big panel maker, announced its plan this week for a high-tech roof that would be composed entirely of solar panels. Around 5 million Americans install solar panels on their roofs annually, according to the company. SolarCity chairman Elon Musk wanted to convince those people to be even more ambitious with his new product.

“It’s not a thing on the roof. It’s the roof,” Musk said on Tuesday.

Musk is currently seeking to merge his electric car company, Tesla, with SolarCity to produce an integrated battery business before the end of the year.

Tax credit puts pressure on producers

The shift away from power plants stems from a tax credit for solar generation. Under a previous version of the law, utilities needed to sign deals for new plants before the end of last year. But President Barack Obama and Congress extended the tax credit for another five years in a budget agreement in December 2015.

Power plants and the solar power industry were pleased with the extension. But they are now holding off on building more plants because they now have more time to consider how best to proceed with projects, said industry representatives.

“Because the tax credit got extended, which of course was a good thing, there’s less of an urgency for utility customers to sign contracts,” Raymond James analyst Pavel Molchanov told Bloomberg.

Bloomberg New Energy Finance reported that new solar power plants will be producing 8 gigawatts this year, around double the amount last year. That increase reflects the rush of projects that occurred as the tax credit was due to expire. But next year, only 7.1 gigawatts are expected to come online, an 11 percent decline from this year.

In the midst of a solar winter

The solar industry is hurting right now. SunPower announced 1,200 layoffs and a “restructuring” charge of as much as USD 45 billion this quarter. The company expects to lose USD 175 million as power plant construction drops off. For 2016, its revenues are now slated to be around USD 3 billion, or USD 320 million less than analysts estimated. The company is now closing a factory in the Philippines.

SunPower’s plight illustrates how big power plants were driving growth in the industry, said Energy analyst Pierre Maccagno. Unfortunately, the sector will hit a rough patch as it retools to earn money from smaller customers. It could take a year or two before solar companies like SunPower gain the volume they need to replace their lost business.

“I call it a solar winter,” Maccagno said. “I don’t think things will recover for a while. Right now there is an incredible amount of supply above and beyond demand, so I think it will take probably a year and a half to be resolved.”

Story could still have a great ending

But if SunPower and other companies adjust and improve their marketing to homeowners and businesses that want to take advantage of the sun, they will be in an excellent position once utilities start reordering and producing big power plants.

“It’s a negative story for solar for now, but once it recovers it’s going to be great,” he said. “People will make a lot of money.”

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