|Table of Contents|
|Intro and Overview|
|Trends and Forces|
|Key Trends and Forces|
|Competition and Market Share|
The 9.0 magnitude earthquake in Japan on March 11, 2011 and the following tsunami caused four nuclear power plants in Northern Japan to fail, leading to radiation release and overheating in the reactors. Japan has closed 11 of its 54 reactors since the earthquake, with the government struggling to prevent a nuclear meltdown. As a result, confidence in the future of nuclear energy has been shaken, while confidence in solar energy and natural gas has renewed. With solar panel prices falling, the industry is becoming more competitive with conventional fossil fuels.
Evergreen has lost 33% of its equity to stay competitive in 2007 and 2008. In order to lower costs the company has to create economies of scale by enlarging its manufacturing capacity. To raise and save money in order to do that, Evergreen has done two things. First, the company paid for its silicon contract with DC Chemical with a 13% equity stake in April of 2007. Second, the company lent Lehman Brothers 30.9 million shares in order to raise capital. When Lehman went bankrupt, it did not return the shares as it was supposed to, and so is facing legal action. If Lehman were to return the shares, Evergreen would have essentially completed a free buyback of 30.9 million shares. In absence of that, Evergreen's shares have been diluted approximately 20%, in addition to the 13% it gave to DC. These are not the first times the company has used equity to raise capital, and given its projected continued operating losses, will likely not be its last. As long as Evergreen gets something of equal value in return that doesn't matter, but with both DC Chemical and Lehman the company lost out. The company's silicon contract with DC Chemical has lost value, as the price of silicon fell in late 2008 and early 2009, and Lehman went bankrupt before its transaction with Evergreen could be completed.
The recession of 2008 and 2009 has turned an operating loss of $26 million in 2007 to one of $96 million in 2008. Five important reasons that has occurred include: falling solar subsidies, falling oil prices, tightening credit, falling silicon prices, and falling CO2 emission allowance prices.
In March 2011, Evergreen announced its plans to sell its solar PV modules manufacturing facility located in Devens, Massachusetts, using Hilco Industrial as its agent. The facility was valued at over $425 million in 2009, with production capability of 160 MW. Despite the capacity of the facility, the company itself produces only 180 MW worth of solar cells a year, which is almost 10% of USA's solar manufacturing capability. The facility could prove to be very valuable for companies interested in entering solar photovoltaic production. Michael El-Hillow, President and Chief Executive Officer of Evergreen, stated that the decision came from pressures created by the rapidly changing markets that have been existent since the facility first began operating.
Without government support, solar companies would have difficulty selling their products, as solar energy is less cost effective than coal and natural gas. Governments worldwide have implemented legislation to encourage alternative energy production, due to political pressure from public concerns about climate change and energy independence, but the financial crisis of 2008 and 2009 has hastened the decline of subsidies in large markets like Germany and Spain, the world's largest and second largest solar markets, respectively. Examples of legislation benefiting the industry by making it more profitable, and therefore more likely to grow include:
As the financial crisis has strained government budgets and crashed the price of oil, once a strong motivator for developing renewable energy, support for solar power has, in some places, decreased. Examples include:
Nevertheless, shifts of power from one administration to another and one party to another in several countries and states have increased the likelihood that new legislation benefiting the industry will pass. Examples include:
As global economic growth took a dive in 2008 and 2009, demand growth for energy has fallen, and is expected to stay low for several years. That hurts solar companies directly, in that there is less demand for the energy that they produce, but that also hurts them indirectly. As the prices of coal and natural gas have fallen, electricity has become cheaper, making Evergreen's solar power even less cost-competitive.
Since the company's formation in 2000, it has not once turned a profit. Growth for Evergreen Solar has, therefore, been funded through equity offerings and debt, which has been piling up. The company has $381.3 million in obligations coming due from 2009 to 2012. Unable to maintain liquidity in an environment of tight credit, Evergreen delayed construction of an $800 million plant in Asia, and in December of 2008, shut down its plant in Marlboro. Besides loosing sunk costs in both projects, by decreasing its production capacity Evergreen has nearly guaranteed that it will receive an oversupply of silicon. The five long-term silicon contracts it made in 2007 included supplies for those two, now defunct, projects.
The slowdown in the industry combined with an increase in silicon production capacity has made one of solar's largest costs - the silicon of which its cells are made, cheaper. As of early 2009, silicon prices have fallen as much as 50-60% since 2007. As the recession of 2008 and 2009 was anticipated by few, long term contracts only factored in the increase of production capacity, not the slump in the industry. That’s bad for Evergreen, as it entered into five different polysilicon agreements in 2007, with companies DC Chemical, Silpro, Nitol, and Wacker, to provide all the silicon necessary to meet production targets for the next four years: 125 MW of cells in 2009, 300 MW of cells in 2010, 600 MW of cells in 2011 and 850 MW of cells in 2012.
From the summer of 2008 to February 2009, the right to emit one ton of carbon fell from €30 on the EU carbon market to €11.80. Research has suggested that carbon needs to trade at around €25 in order to have a significant effect on green investment. With the price of carbon allowances so low, incentives for clean energy production in Europe have dramatically decreased.
String Ribbon technology is relatively new to the solar market; most solar companies use mono- and polysilicon to produce their wafers in highly energy-intensive casting and machining processes. While these processes allow companies like SunPower, Suntech Power Holdings, and Kyocera to produce solar cells with efficiencies of 23.4%, 19%</ref>, and 18.5%) (respectively), they are cost-intensive and use large amounts of silicon. Evergreen maintains that its technology lets it use 50% less silicon than most other competitors, and it is planning to use its new Quad-furnace technology to raise its efficiency from 15% to 18% and cut manufacturing costs from $3.5/watt to $1.50/watt before 2010, and reduce its silicon consumption by another half, from five grams per watt to 2.5 grams per watt before 2010. High-efficiency solar companies like SunPower use 7 grams of silicon per watt (on the low end) to get 23.4% efficiency, while low-cost, non-silicon manufacturers like First Solar produce at 98 cents to get efficiencies of 10.5%. If Evergreen Solar delivers on its goals of increasing efficiency while decreasing silicon use, it will have one of the strongest efficiency to cost ratios in the industry.
On a larger scale, solar panel efficiency and production costs are important because Oil and gas prices have, until mid 2008, trended upwards. As rising oil and gas prices lead to more expensive commercial electricity, consumers start to demand new, cheaper sources of power. Solar power is, as of 2009, less efficient than other energy sources, even wind. Sunlight, however, is available in massive quantities for half the day, and is free, unlike oil or coal. For these reasons, when oil and gas prices rise, solar power becomes a more viable alternative, despite its level of inefficiency. Concurrently, as solar power's efficiency rises, it becomes more competitive with oil and gas. The solar industry's R&D focus is on increasing this efficiency while minimizing the use of inputs like silicon, in order to keep manufacturing costs down. If solar companies can develop technology that lets more electricity to be produced with thinner PV cells, for less money, then solar power will become more competitive. (Read More about Evergreen Solar's Competition and Market Share...)