Joe Soto had good reason to leave his job at an auto parts supplier last year to work at Siliken SA, a global solar energy equipment maker with a new plant in his hometown of Windsor, Ont.
Since his wife was also employed in the auto sector, the couple, with two young children, figured it would be better if they weren’t both in the same turbulent industry. And Siliken was riding a frenzy of investment in alternative energy.
“This new energy, with wind and solar, it was the biggest thing out there at the time and it was supposed to be something huge for Canada,” said Mr. Soto, 36, who was the warehouse logistics co-ordinator. “It was something that was supposed to take off.”
It hasn’t worked out that way.
Siliken closed its Windsor factory in May, the victim of suddenly soured markets for alternative energy equipment in Ontario. Mr. Soto lost his job as the company consolidated with other operations in Mexico. He was fortunate to find new work in construction, albeit with less pay.
The sector’s problems extend far beyond Ontario. Globally, the solar power industry is a mess.
Just two years ago, solar energy was basking in exponential growth and surging investment, as it promised to be the future of energy. Now it’s picking up the pieces of a colossal bust.
The spectacular downward spiral at solar product manufacturers has left a trail of destruction. Many companies have failed outright, and those that have survived have seen their stock prices plummet as much as 90 per cent.
A tidal wave of growth and investor enthusiasm in the decade up to 2010 was spurred by government subsidies – especially in the United States, Germany, Spain and Japan. Companies that were able to produce solar cells and panels, despite a global shortage of solar-grade silicon, were buoyed by high prices and massive demand.
But the rush of new entrants, especially from low-cost Chinese manufacturers, pushed panel prices down sharply, squeezing margins across the board. Reductions in solar subsidies in Germany, Canada and elsewhere made matters worse, and a moribund global economy didn’t help. Industry revenues, which more than doubled from 2009 to 2010 to about $82-billion worldwide, rose just 12 per cent in 2011 and are expected to level off in 2012, according to research group NPD Solarbuzz.
Still, industry players are looking beyond the carnage and see better days ahead. There is a growing view that the shakeup is part of a natural economic cycle that accompanies disruptive technology, not unlike the tech bust early last decade when scores of well-funded but ultimately unsuccessful companies died and set the stage for a resurgence among the stronger players.
Solar energy executives say falling panel prices – the very problem that hurt them so badly – will eventually allow solar to be competitive with other forms of power. Companies that survive, by cutting costs or merging with others, will be in a position to resume dramatic growth.
The solar industry’s ability to prosper has broad competitive implications for other energy businesses, especially if costs of conventional power sources such as nuclear, oil and gas rise, while solar offers an increasingly price-competitive alternative.
In the meantime, however, the litany of bad news has hit players big and small:
The California rooftop panel maker Solyndra collapsed last fall and put 1,000 people out of work, two years after receiving a $535-million loan guarantee from the U.S. government. At the end of June, another recipient of U.S. loan guarantees, Abound Solar, applied for bankruptcy protection and suspended its operations.
In April, Arizona-based First Solar Inc., one of the largest panel makers in the world, announced the layoff of 2,000 workers and the closing of a plant in Germany. And Germany’s own giant Q-Cells, once the world’s biggest solar-cell maker, reported a huge loss in April then filed for insolvency. It has sold off assets in a bid to survive.
In Canada, Day4 Energy Inc., a once-promising solar panel maker in Burnaby B.C., in June was sold to senior managers in exchange for its debt and a small payment after being delisted from the TSX in the spring.