Local solar sector heating up as silicon costs plunge

Friday, May 23, 2008
Boston Business Journal - by Jackie Noblett Boston Business Journal

Roger Little, chairman and CEO of Spire Corp. in Bedford, says there will be a flood of polysilicon-production plants hitting the market in 2009. Above, he displays some of the company’s solar-system equipment and products.

The specter of falling raw materials prices has many local players in the solar-energy industry expecting a boom in business, but skeptics say the changes may spur a shakeout among solar-panel system manufacturers.

Experts say a confluence of factors, from increased consumer awareness of climate issues to government subsidies, will likely buoy the solar sector, but the real tangible change is expected to come from a flood of polysilicon now flowing into the market.

The material, used to make the vast majority of solar cells, has been in short supply, keeping the sector's manufacturing costs and barriers to entry high.

But with several new polysilicon-production plants coming online in the next 12 to 18 months, prices are expected to fall. Industry-watchers already say more companies are entering the solar-cell manufacturing business.

"Definitely in 2009, there is going to be a flood of polysilicon in the market and no question that's going to be good for us," said Roger Little, CEO of Spire Corp. (Nadsaq: SPIR), a Bedford maker of solar-related equipment.

Prices for polysilicon began skyrocketing in 2004 and 2005 because of static production; spot prices have reached as high as $350 per kilogram, compared with $25 earlier in the decade, according to the Prometheus Institute for Sustainable Development in Cambridge.

Analyst consensus is that the shortage will begin to dissipate by the end of this year, and some analysts are projecting an oversupply by 2010.

One company betting on cheaper solar systems is Lexington's 1366 Technologies Inc. The startup, founded by Massachusetts Institute of Technology scientist Emmanuel Sachs, is developing a technology that reduces the amount of silicon needed to make solar cells. It received $12.4 million in venture funding in March.

"If you list the main objections to silicon, the No. 1 or No. 2 reason is cost," said Carmichael Roberts, 1366 Technologies' chairman and a general partner at Waltham's North Bridge Venture Partners.

But while the boom may benefit manufacturers and solar-related startups, some analysts say the trend could pose major problems for the area's largest solar cell manufacturer: Marlborough's Evergreen Solar Inc. (Nasdaq: ESLR).

Evergreen's complex "string ribbon" technology reduces the amount of silicon in a photovoltalic wafer by about two-thirds, reducing costs significantly.

In a recent research report, Citigroup's Timothy Arcuri said Evergreen's high capital costs will hamstring the company when prices fall.

As prices reverse course, "we think a shakeout will ensue and those with sustainable cost advantages ... should build insurmountable scale and share," Arcuri said.

Evergreen executives say the company will still compete even if prices fall.

"We started the company with silicon prices significantly lower and our plans were that we were going to make wafers with the least amount of silicon," said Richard Chleboski, Evergreen's vice president of strategy and business development.

Evergreen saw its first quarter revenue jump to $22.9 million from $14.1 million in the year-ago period, and it narrowed its loss to about $25,000 from $6.2 million. Despite the promising news, its stock is down $7.70, or about 45 percent, year to date. Its stock hovered around $9.50 a share this week.

Chleboski said the company disagrees with Citigroup's assessment, adding that its capital costs will fall as more production facilities come online.

Jackie Noblett can be reached at jnoblett@bizjournals.com.

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