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Thursday, December 15, 2011

First Solar slashes forecast, staff & plans to flee subsidized markets

First Solar slashes forecast, staff & plans to flee subsidized markets — Cleantech News and Analysis:

First Solar will focus on sales in countries in which providing low-priced equipment and engineering services will make money versus subsidized solar markets.

Solar panel maker and project developer, First Solar will unveil a 3-year plan early next year to describe just how it will move into and stay in markets that aren’t heavily dependent on government incentives.  The goal is to avoid political risks that cause shifts in government funding for solar electricity.  

The company’s 2012 action plan is to target the utilities market and to reduce its focus on the rooftop and off-grid market that serve businesses and consumers.

The company cut its 2011 sales forecast by about 12% to $2.8-$2.9 billion because of delayed projects due to “weather and other factors”.

Cost cutting measures forced the layoff of 100 workers, or nearly 1.5 percent of thier workforce.
Although investors will have to wait until early 2012 to hear the detail of the company’s 3-year plan, they got a glimpse of it Wednesday when Ahearn laid out the roadblocks that he said have made it necessary to avoid markets heavily subsidized by the government. 

The global solar industry has depended so much on government incentives, from guaranteed solar electric pricing to rebates or tax credits to offset the cost of installing solar projects.

Government subsidies have been the means for turning countries such as Germany and Italy into the largest solar markets in the world.  In United States the chief solar industry trade group is fighting to extend a federal grant program that covers 30 percent of the cost of a project.

These subsidies, while helping to build a fast-growing market for solar electricity, also can change quickly from political decisions that are driven in large part by worries that the subsidies will cost too much money. These concerns are particularly prevalent during times of weak economy, when governments struggle to tighten spending.

Moreover, government subsidies have attracted manufacturers, particularly those in China that have been able to build up huge fleets of factories and ship huge volumes of cheaper products, even when demand is low. That imbalance of supply and demand has been particularly significant this year and led to trade complaints against Chinese solar manufacturers that make silicon solar panels.
First Solar ran an analysis of key government subsidy programs and noted that how countries such as Spain, Czech Republic and France cut their programs dramatically after realizing that their incentive programs were causing a solar construction boom that they hadn’t anticipated.

The growth of the U.S. solar market has depended largely on policies in states that require their utilities to include an increasing amount of renewable electricity in their supplies. California has become the largest solar market thanks to its aggressive mandates for utilities and also incentives for consumers to put solar panels on their rooftops. But Ahearn pointed out that the state has capped its program from the start – the requirement calls for sourcing 33 percent of the electricity from renewable sources by 2020. Utilities in the state have been signing so many contracts to buy renewable energy for delivery in the coming years that they are close to meeting their state mandates, he added.

Pacific Gas and Electric, for one, expects its renewable electricity mix to hit around 19 percent by the end of 2011, PG&E’s spokeswoman, Lynsey Paulo, told me yesterday. The state mandate is to reach an average of 20 percent during the years of 2011 to 2013. PG&E has signed power purchase agreements that will deliver more than 10 gigawatts of renewable energy, including solar, and they will more than meet the 20 percent goal for the next few years, Paulo added.

Ahearn said First Solar could make panels and design and develop solar power projects at even lower costs, and that advantage should allow it to compete in unsubsidized markets. The goal is to deliver solar energy systems at a price of $1.40-$1.60 per watt, which does not include the development costs that project owners will have to shoulder. “We don’t think our Chinese competitors can get there directly or indirectly” and remain profitable, Ahearn said.

“The real competition is (fossil fuel-based power), and we need to focus on the road ahead as opposed to the review mirror of these silicon guys,” Ahearn said.

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