Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States.
But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.
The factory closing in Devens, Mass., which Evergreen announced earlier this week, has set off political recriminations and finger-pointing in Massachusetts. And it comes just as President Hu Jintao of China is scheduled for a state visit next week to Washington, where the agenda is likely to include tensions between the United States and China over trade and energy policy.
I hope Massachusetts gets its 43 million back, but I won’t hold my breath.
The move to China makes good sense. Some financial performance statistics on Evergreen Solar over the past 12 months:
Profit Margin: -47%
Return on Equity: -36%
Net Income Available to Common Stock Shareholders: -$152M
Operating Cash Flow: -$7M
By moving to China, ESLRD should be able to flip those numbers to positive, be acquired by one of the bigger players in the industry (e.g., First Solar), provide a nice payoff for stockholders, and continue contributing to the global growth of clean energy.
We continue to see our future energy technologies leave our shores because our leaders refuse to require the electric utilities to pay full value for solar energy at the avoided cost of peak power. In this country the undervaluing of solar energy is hurting the potential for our country to move to energy independence all for the short sighted goal of maximizing electric utility return on equity at rate payers expense.
“Banks in the United States were reluctant to provide the rest of the money even at double-digit interest rates, partly because of the financial crisis. “Therein lies the hidden advantage of being in China,†Mr. El-Hillow said.”
This is the story across the country. Banks taking billions and billions in bail-out money, but doing what with it? Not lending it out…that’s for sure.
So an alternative energy company (Obama’s pet industry) can’t get stimulus money (an Obama “answer”) and moves to China. How’s that taste Barack?
Sigh, somebody needs to help the US understand that Solar energy without significant government subsidies is NOT competitive. One of the things that has made the US standard of living what it is today is abundant and cheap energy. The ‘alternative’ energy options (solar, wind) are NOT cheap. In fact, we will have to keep an equal amount of other energy production sources available for any and all solar or wind generated power because they are not consistent.
Hmm, #5, … I wonder if solar is that expensive relative to the true costs of peak power. You have been fed the line that those against renewables and for our continued use of fossil fuels want you to believe.
Consider the actual costs of peak power is the price paid by all rate payers to build a new generating plant when the peak keeps going up. Afterrall, that is the main business of the electric utilities; to use the rising peak to justify the need for additional power plants and to achieve their return on equity on those facilities from the rate base. Considering that solar energy generates at or very near the utility on peak time, solar would be considerably less expensive then new base load generation.
In the US we allow utilities to operate at an average 40 – 50% average system load factor, (that is, the power needed to meet the peak only generates energy half of the time) which means that all these plants we’ve paid for are only producing half the units of electricity they could if we operated them 24-7. Anyone who took an industrial management course knows that a plant that produces units on a 24-7 basis produces those units at a lower unit cost than one that only produces those units 12/7 or less.
But according to an article in the Electicity Journal, over a twenty-year period in Vermont, the electric utility, Central Vermont Public Service (CVPS), invested in technologies to improve their average system load factor from 55% to 70%. What they found is that not only did they meet the load growth of the burgeoning ski industry, but they were able to lower costs and hence electric rates by about 4%. In other words, by improving the system load factor, rather than simply building additional power plantc, CVPS was able to lower electric rates.
In a study produced by the National Renewable Energy Laboratory in the aftermath of the blackout of 2004, it was found that the sun was shining at 4 PM when the peak drove the system to failure, and, that a modest amount of solar power deployed in northeast Ohio would have averted the cascading effects that led to the blackout. Billions of dolars were lost over that weekend (from the midwest to New York City and Canada too) that could have been saved by a few million dollars worth of solar panels. Other NREL studies prove that solar is available during the peaks of most electric utilities thus, improving the overall system load factor by lowering the peak and, thus the amount of additional generation needed to meet the peak.
Solar only appears expensive because utilities do not want the true very expensive costs of additional peak power uncovered, lest we stop allowing new power plants to be built. I would advocate that until and unless utilities achieve an average capacity factor that is in the neighborhood of 70% no new large central power plants should be developed. Solar would then take off as an alternative lower cost way to meet the peak.
Several thoughts on businesses moving to China, power grids and green(?) energy.
(1) When a job is lost from the USA and appears in someother country, then we all lose. Some might say that we gain because Americans can buy a product at a cheaper price when it is made in another country, but what about the costs incurred within the USA as the result of a now under-employed or unemployed American worker? What about the loss of buying power and income taxes paid by the worker and the loss of taxes once paid by the relocated company? What about the effect on the net cash flow betweenn the USA and the rest of the world?
(2) Power grids are not simple. I can still remember a high-level introductory course in circuit theory taught by Dr. Lichtenstein that I took at RPI that addressed power grids using matrix and tensor theory. It was an eye opener and somewhat mind boggling to my 20-year old mind. In addition, I learned a great deal about the practical micro-side of power generation as the chief engineer of a destroyer-type naval ship. One thing that I learned was that the ability to excess generators with an excess of electrical power on hand gave our micro-system a redundancy and a flexibility that helped the ship to handle equipment failures and battle damage. If our ship had been using over 60-70% of its total capacity on a continuous basis then there would hace been ‘no where to go’ should we have lost a main ship’s service generator during a period of very high power demand (such as during General Quarters).
(3) How do we define “green?” Is it an ideological definition, a scientific definition, an esthetic definition, etc? Many find wind mill farms to be an eyesore and destructive to birds and bats. Otyhers quake in their boots at the thought of nuclear power. Others resent anything that does not leave the environment in a pristine primeval state. So what’s green? Is starvation green? Because starvation is where those who are against petrochemically derived fertilizers will lead the world.
[i]Solar only appears expensive because utilities do not want the true very expensive costs of additional peak power uncovered[/i]
Actually, it appears to be expensive because it is. There are some applications where solar power, despite its expense vs grid power does make sense (tax subsidies or not).
But as a prime, grid-supply, system of power for the nation it is still woefully mismatched to the power demands of the nation in terms of cost, efficiency, usability, reliability, and maintainability.
Mississippi has duplicated the Massachusettes experiment and I expect a few years down the road our entreprenural company will head to China also. BP is still making panels in Tennessee but I wonder how long that will last.
When something is uneconomic, and bound to be uneconomic for a long time (if not forever), it’s tough to make people keep pouring money into the same old sinkhole. This is what the ethanol industry has found, and hopefully that will die its deserved death before too long.
Electric utilities hold large reserves of peak power because that is their mission from the regulators who regulate them. The people who consume their power want it available 100% of the time, no excuses, no matter how much or how little is consumed. Since it takes years/decades to build new capacity, the utilities have to think large from the outset to fulfill their mission. Trying to compare that mission to the typical industrial operation is at best, trying to compare apples to oranges.
#8–Captain, Everything you say is true, but the underlying story here is about tax policy. We tax things at a higher rate if they are made here than if they are made in China. Combine that with regulatory costs and sanctions and labor law and legal issues, and its no wonder companies are bailing out. We need to reduce corporate tax rates significantly in the US and get rid of about 50% of the regulations and regulators then scrap the NLRB and and state versions of it, altogether.
David you are correct 10,000%. We are becoming one of the most inhospitable places to do business on the globe. And as long as a substantial number of folks in Washington (many of whom have never held a real job) hold to the the equations “business=bad; big business=evil”, it will likely get worse before it gets better.
Capt Deacon Warren – You said: Actually, it appears to be expensive because it is.
When you say (solar is) expensive, you should say compared to what? A new coal fired power plant when ammortized over 30 years, but only operated at 40 – 50% of the time will be more costly than the same amount of solar to reduce the peak load would be. The expensive part is that with solar you have no ongoing fuel or air compliance costs (your fuel costs are all up front), but with coal you have these costs paid as you go over time. So coal appears cheaper up front, but it is actually frightfully more expensive down the road.
Next you said that;
Electric utilities hold large reserves of peak power because that is their mission from the regulators who regulate them.
I have two points:
1) Referring to the CVPS story in the Electricity Journal, We have already proven that it is possible to operate the electric grid at 70% load factor, without such a large percentage of reserve margin, and, that do so. actually lowers costs across the board without impacting electricity reliability.
2) You agreed with David Keller who said we need to reduce or eliminate the regulations and regulators if we want to make America a better place to do business. Yet, when I point out how the electric utility regulators are screwing up the electricity market and making it hard for alternative energy makers to compete, you side with the regulators.
I am simply saying, that we need to have honest debate about all regulations on business, particularly the utility industry and how it is impacting these high tech energy companies. We have proof that we can operate the electricity grid much more efficiently, than currently in most states, with alternative energy strategies and that we need to deregulate the electric utility industry completely or, at least, require the utilities to operate the electric grid under higher system load factors.
If people are serious about conservation and alternate energy, why is geo-thermal energy not making the same headlines that solar does? Why does geo-thermal energy not get big government subsidies? Geo-thermal energy is constant, renewable, relatively inexpensive, low tech, and it works 24/7/365 at the same efficiency.
Geo-thermal energy is cheaper than Advanced Nuclear energy, Coal energy, Gas energy, most Hydro power energy, Solar energy, most Biomass energy, Fuel Cell energy, and Wave Power energy. The only energy source that is cheaper is wind.
Also, we neglect proven technologies like Stirling Engines. Right now, Stirling Engines are being married to solar technology. Why couldn’t they be married to geo-thermal technology, too? STM Power (formerly Stirling Thermal Motors) has 25 kW generators!
http://www.sesusa.org/
http://www.ripassoenergy.com/index2.html
http://www.whispergen.com/main/dcwhispergen/
http://www.energy.ca.gov/distgen/equipment/stirling_engines/vendors.html
I wonder if the Americans being fired, administrators included, would have taken a pay cut in order to keep their jobs – as being better than no jobs at all.. I wonder if our problem isn’y just that we have priced ourselves out of the market. Larry