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Evergreen Solar (ESLR)Stock (Consumer Products Industry, Diversified Electronics Industry, Solar Power Industry, Energy Industry)
 Within the solar industry, Evergreen Solar must compete on the basis of its solar panel efficiency and its manufacturing costs. Judging from its current efficiency of around 15% and a manufacturing cost of $2.25/watt, the company doesn't compare too well against competitors like SunPower or First Solar, with 22% efficiency and $1.40/watt manufacturing cost respectively. With a stated goal of reaching 18% efficiency with $1.50/watt by 2010, however, the company could eventually stack up rather well. The solar sector is becoming more and more competitive; among ESLR's competition are such powerhouses as SunPower, SunTech, BP Solar, Sharp, Kyocera, and Q-Cells.
[edit] Business & FinancialsEvergreen Solar is a vertically integrated company that operates through four stages of the solar power industry. The company produces multicrystalline ribbon silicon wafers from refined silicon. Evergreen's string ribbon PV technology allows the company to form photovoltaic wafers with less silicon than the mono- and multicrystalline wafers made by other solar manufacturers - almost making them silicon versions of thin film. These wafers are then made into photovoltaic (PV) cells, that turn light energy (usually from the sun) into electricity. Each of Evergreen's cells generate about 1.7 watts of power, which isn't very much - an incandescent light bulb takes 40-100 watts[1]. This problem is remedied by the formation of solar modules, which are collections of PV cells that together generate much larger amounts of energy - up to 190 watts for Evergreen's modules[2]. Finally, Evergreen takes its modules and wires them together into solar power systems, which can generate thousands of watts of electricity. The company sells to installers in Europe and North America.
Revenue decreased from 2006 to 2007 because in 2007, Evergreen cut its share in EverQ from two-thirds to one-third. In the process, Evergreen stopped using EverQ's financials in its own accounting. [edit] EverQEverQ is a German solar company that currently produces 30 megawatts of power per year and has a stated goal of increasing production to 300 megawatts by 2010. In 2007 ESLR reduced its ownership from two thirds to one third. Per accounting rules it is no longer consolidated on ESLR financial statements. In October 2007 ESLR announced a plan for an EverQ IPO, though it has not stated when the spin-off would occur. Evergreen's interest in EverQ gives it access to the fast-growing German solar market. [edit] Solar IndustryThe Solar Power industry is more developed internationally than in the US. Globally it is a $7 billion industry growing at greater than 20%. It is very popular where traditional electric lines have a hard time reaching. German government subsidies have spurred growth in the country as have subsidies in Japan. Hence ESLR has a plant in Germany with a partnership with EverQ. It benefits heavily from government subsidies.
[edit] Trends & Forces[edit] ESLR has Enough Silicon to Meet Production Goals for the Next Four YearsIn November of 2005, ESLR sold 12% of EverQ to REC. In return, REC agreed to supply up to 250 metric tons of solar-grade silicon to ESLR and EverQ every year for seven years - 60 metric tons to Evergreen and 160-190 metric tons to EverQ[3]. Currently, ESLR uses 5 grams of silicon to make 1 watt worth of PV cell - half the industry average[4]. One metric ton is 1000 kilograms, or one million grams - so 60 metric tons is 60 million grams of silicon. With its current production technology, ESLR can use 60 million grams of silicon to make 12 million watts, or 12 megawatts (MW), of PV cells. Furthermore, ESLR 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[5]. Evergreen Solar's silicon security is important because there is currently a worldwide silicon shortage. This shortage has been caused by a lack of silicon refining capacity. In the past, companies like MEMC Electronic Materials (WFR) produced silicon wafers for the semiconductor industry. Now, with the advent of solar power and its rapid growth, demand for silicon has increased greatly, leading to its under-supply as production capacity is not enough to meet current demand. This under-supply has led to rising prices for solar equipment which in turn raises the price of solar power compared to other clean energy production technologies such as wind and ethanol. Furthermore, higher silicon prices mean higher production costs for solar companies - and lower margins. By securing a large amount of silicon at 2005 prices, ESLR has hedged itself in the short term against rising silicon prices; even its 2007 agreements should allow the company to trim the fat from increasing future production. [edit] While String Ribbon Technology has Below-Average Efficiency, it Uses Much Less Silicon than Traditional PV CellsString 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 22%[6], 18%[7], and 18.5%[8]) (respectively), they are cost-intensive and use large amounts of silicon. Evergreen maintains that its current technology allows it to use 50% less silicon than most other competitors, and it is planning to use its recently released Quad-furnace technology to raise its efficiency from 15% to 18%, reduce its silicon consumption by another half, from five grams per watt to 2.5 grams per watt, and cut manufacturing costs from $2.25/watt to $1.50/watt - all before 2011[9]. High-efficiency solar companies like SunPower use 7 grams of silicon per watt (on the low end)[10] to get 22% efficiency, while low-cost, non-silicon manufacturers like First Solar produce at $1.40[11] to get efficiencies of 10.5%[12]. 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 trended upwards over the past several years. As rising oil and gas prices lead to more expensive commercial electricity, consumers may start to demand new, cheaper sources of power. Solar power is currently 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 the current 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 allows more electricity to be produced with thinner PV cells, for less money, then solar power will become more competitive. [edit] Government Support is Vital for the Growth of the Solar Industry - and Evergreen SolarThe 33% share that ESLR has in EverQ gives the company access to the lucrative German solar market, a sector which has grown tremendously since the passage of the Renewable Energies Laws (EEG) in 2000. These laws required electric utilities in Germany to subsidize solar power by buying solar-generated electricity at higher rates. Such legislation makes the young solar industry more profitable, and therefore more likely to grow. Governments worldwide have implemented legislation to encourage alternative energy production, due to political pressure from public concerns about climate change and energy independence. Examples include:
Emissions caps and clean energy mandates that are supported by subsidies and tax cuts make solar energy relatively cheaper. This means that corporations and utilities companies may turn to clean energy sources to generate electricity for manufacturing facilities and power plants, directly benefiting solar power companies like Evergreen Solar. Without government support, however, solar companies would have difficulty vending their products, as solar energy is currently much less cost effective than coal or natural gas. Obama's victory over presidential contender John McCain was a big victory for solar energy. Although his plans will change once he confronts the reality of American Congress, Obama's energy solution includes spending $150 billion over the next 10 years on "climate friendly energy", much of which will go to solar energy.[13] His plan also includes implementing a CO2 cap and trade program, which will make oil and gas more expensive and less competitive.[13] [edit] Competition and Market ShareEvergreen Solar is still a relatively small player in the solar market, and sells a technology type (String Ribbon) that is younger than most other solar power technologies. Other competitors, with 2005 market shares[14], include:
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