Solar facing hurdles, but sector still holds much promise

The headlines on solar energy have been a bit confusing the past few days. On the one hand, Germany's Q-Cells, the world's largest maker of solar cells, and Solon, a solar module manufacturer reported first-quarter net losses. On the other hand, PG&E Corp.'s (PCG) utility has agreed to the world's largest solar power deal, while Suntech Power (STP) announced plans to build a manufacturing facility in the United States to serve the growing U.S. market for large-scale utility projects.

Keeping the mixed message going , The Wall Street Journal says, "The global recession and tight credit conditions have cast a chill on the solar-power industry after years of breakneck growth, and could usher in long-term changes in the industry," while Reuters reports, "Globally in 2008, solar heating capacity increased by 15 percent."

So, is the world's largest solar thermal plant planned for Arizona and the unique new solar factory in New Mexico what to expect form new policies, incentives and stimulus funding, or are the slashed subsidies in countries such as Spain and Germany as well as the curtailment of financing from banks what will be affecting the solar sector?

Perhaps it's unfair to expect any sector to be completely immune to economic forces, even if it is supposed to be getting a big push given our planet's environmental concerns and limited resources. Stimulus money may take some time to trickle through and in the mean time solar companies will have to cut prices and costs. Already analysts believe that sales of solar cells will drop by at least 20 percent this year. The average cell price is expected to drop to $2, down nearly 50 percent from last year. While not good for the solar companies, a definite boon to consumers waiting for solar energy to be more aligned with fossil fuel costs.

It's just very disheartening to hear from BP (BP) it would cut back on investment in the sector as the CEO said that solar power will not be able to compete with conventional energy until there is a breakthrough in the technology. And that after the big oil & gas company has invested hundreds of millions of dollars in making solar cells and components.

What that breakthrough or change is, however, BP did not say. Perhaps Concentrated Solar Power is the way to go. Either way, lucky that other companies are still trying to make those breakthroughs. DuPont (DD) just announced it launched two new families of photovoltaic encapsulant sheets that are expected to improve durability and efficiency of photovoltaic modules. And while BP no longer sets a target for solar sales, DuPont said it expects to nearly triple annual sales from its photovoltaic materials to more than $1 billion by 2012. Similarly, despite the wave of losses, the German solar industry expects a recovery in the second half of this year. There are reports that even China is going green (yes, despite Krugman's assertion to the contrary), which would definitely give a big push to alternative energy.

With global warming now "the biggest public health threat of the 21st century, eclipsing infectious diseases, water shortages and poverty," alternative energy sources, and solar among them, should get an even bigger push. I hope they will and that companies will not get discouraged and governments will continue to push.

In a related matter, while solar investments may have dropped recently, there have been increases in the battery storage and fuel cell sector. Not surprising then that General Electric (GE) just decided to open a battery plant.

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