Toledo-area solar firms shining bright through some dim spots in market
Recent California bankruptcy case prompts look into operations
Tech Marty Horvath working inside the Willard & Kelsey solar panel plant in Perrysburg, Ohio.
Xunming Deng believes the clouds are beginning to part for his start-up solar panel company, Xunlight Corp.
The Toledo firm faced setbacks, including dozens of layoffs, this year when an Italian customer delayed receipt of a large order of solar panels. Since then, Mr. Deng said, his small business has slowly climbed back, securing new customers and considering a partnership with another solar firm that could lead Xunlight to expand its production beyond traditional solar panels.
Mr. Deng said Xunlight’s retooled strategy could make the company stronger.
“The industry has changed and is changing, and we have to constantly rethink and constantly look for various opportunities to broaden our product line and attract new customers,” he said.
Although solar experts say the domestic market for photovoltaic panels is growing, Toledo-area solar firms are working to overcome hurdles at the state, federal, and global levels. Companies such as Xunlight, First Solar Inc., which has its only U.S. manufacturing plant in northwest Ohio, and Willard & Kelsey Solar Group LLC of Perrysburg face an economic downturn, numerous competitors worldwide, and the potential end of renewable-energy policies and subsidies that help drive panel sales.
Can the local operations withstand the pressures?
Rick Stansley, director of strategic business development at the University of Toledo, said each of the local solar companies has the wherewithal to do so.
“All in all, I would say that we are doing relatively well with respect to our business enterprises,” he said.
Negative factors
Among the issues facing local solar companies is a proposed repeal of Ohio’s Alternative Energy Portfolio Standard, which requires 25 percent of electricity sold in the state to be produced from alternative resources by 2025. Further, a loan guarantee program from the U.S. Department of Energy that helps companies gain financing for advanced energy projects is to expire at the end of this month.
The debate of the federal loan guarantee program has been heightened by the collapse of Solyndra Inc., a California solar panel manufacturer. The company received $535 million in federal-loan guarantees before filing for bankruptcy this month, and Solyndra faces a Justice Department investigation and a congressional probe.
Solyndra’s downfall has led some lawmakers to contest federal aid for other solar manufacturers. U.S. Rep. Darrell Issa (R., Calif.) argued last week that loans to solar panel makers are poor bets, and that foreign competition and other pressures could lead to the “collapse of the solar panel manufacturing business in America.”
But Thomas Kimbis, general counsel for the Solar Energy Industries Association in Washington, contends that the most financially fit and strategically oriented firms stand to benefit as the United States becomes one of the world’s fastest-growing solar market.
“The competition in the market is so fierce that only the strongest companies are going to survive, especially in economically poor conditions and with policy uncertainty,” said Mr. Kimbis, who is also vice president of strategy and external affairs for the trade association.
Growth potential
Solar firms envision growing opportunities for U.S. sales despite a lag in demand outside the country, he said. The solar association projects that 1,750 megawatts of solar modules will be installed this year in the United States, double last year’s total. One megawatt of solar power capacity can provide power for 150 to 250 homes, according to the trade group.
Financial figures are not available on Xunlight or Willard & Kelsey, which are privately owned, but First Solar made $664 million in profit last year on sales of nearly $2.6 billion. That was for its global operations; it does not provide figures for its U.S. market.
Each of the firms has been helped with federal and state money and tax breaks: Xunlight received nearly $50 million, and Willard & Kelsey has obtained at least $19.5 million in aid. First Solar’s local facility was approved this month for a $455.7 million loan from the Export-Import Bank of the United States, and the company received $16.3 million in federal tax credits for a recent expansion at the plant.
Challenges faced
Amid conditions faced by the industry as a whole, solar firms in the Toledo area have experienced a number of challenges this year. Tempe, Ariz.-based First Solar shuffled about 60 jobs, or 5 percent of its 1,200 local employees, within its Perrysburg Township manufacturing complex last month because of what they termed “a shift in our production processes.”
The company, which was started in Toledo and later moved to Arizona, has declined to discuss details of why it “redeployed” the workers, but said that no jobs were eliminated and no salaries were affected by the decision.
Alan Bernheimer, a spokesman for First Solar, said production continues to ramp up at the northwest Ohio plant as First Solar works to build a new factory in Mesa, Ariz. The local facility is expected to produce nearly 250 megawatts of solar panels by the end of this year, and the Mesa plant is to match the Ohio plant’s capacity when it is completed next year.
The solar association said the price of solar panels has declined 30 percent since 2010, mostly because of increased solar competition and falling silicon prices. Mr. Bernheimer said First Solar, which produces cadmium telluride thin-film panels, continues to experience sales growth because it makes panels deemed among the most affordable in the world.
Still, Wall Street is nervous about First Solar and other similar solar companies with publicly traded stock. First Solar shares closed at $70.24 Friday, near their lowest price since 2007.
Xunlight laid off 30 employees at its Toledo plant and 70 at its factory in Kunshan, China, in May after an Italian firm delayed payment for an order of Xunlight panels. Today, the local firm has 60 local employees and 60 in China. The company earlier this year stopped paying salaries to its top executives.
However, Mr. Deng said Xunlight is getting back on track. It has sold about 400 kilowatts of its flexible thin-film solar modules in the last two months, double the amount of panels it sold in all of 2010. The Italian customer, which Mr. Deng has declined to identify, began buying some of Xunlight’s panels after Italian lawmakers finalized a new set of solar incentives in May. And Xunlight has picked up new customers in China and the United States.
Xunlight, whose solar panels typically are used on rooftops, also is in discussions with larger firms to begin producing solar-powered chargers for cell phones and other consumer electronics, Mr. Deng said.
“We’re in good shape,” said Mr. Deng, who declined to provide sales estimates for Xunlight.
Willard & Kelsey started limited commercial production of its thin-film solar panels early this year after three years of delays in its announced production schedule. The company’s executives said in February that they hoped to reach full production by mid-March and have up to 250 employees by the end of this year. The firm had 90 employees at the beginning of the year. However, it has been tight-lipped since then about whether it is meeting those projections.
Representatives from Willard & Kelsey could not be reached for comment last week.
Pending legislation
Local solar firms face uncertainty ahead. A bill introduced this month by state Sen. Kris Jordan (R., Powell) would remove the alternative-energy requirement from Ohio’s 2008 rewrite of energy law. The bill has two Republican co-sponsors from the Cleveland and Cincinnati areas.
First Solar said such a repeal would not have much impact on its sales, because most of its locally made panels are sold in California and other states. However, Mr. Deng said the proposal could remove an incentive to drive sales of Xunlight panels in Ohio.
“We hope to have more product sales at our home in Ohio,” Mr. Deng said. “And so to maintain the renewable portfolio standard is very important for the solar industry in Ohio.”
Reversing course
Mr. Stansley at UT said the proposed legislation would make Ohio the first state to back away from renewable energy requirements that have become law. He called the energy standard’s potential repeal a mistake.
“It is not consistent with supporting these advanced technologies and the continued development of an industry that will be built around green technologies,” he said.
Meanwhile, the energy department’s loan guarantee program is “a subject of intense debate” in Washington as lawmakers consider whether to extend funding for the program past Friday, said Mr. Kimbis of the solar energy association. The loan guarantee has played a crucial role, he said, in helping solar companies to finance large projects in a slow economy and tight credit market.
“The loan guarantee program has done a good job of allowing projects to go forward that otherwise would not have been able to go forward, strictly because of the current economic conditions,” Mr. Kimbis said.
First Solar stands to lose if the federal loan program isn’t extended. The company announced Thursday that its 550-megawatt Topaz Solar Farm project in California won’t receive a loan guarantee because it can’t meet Friday’s deadline for the federal program.
In a statement, First Solar said it is in talks with potential buyers for the Topaz project that would allow it to move forward without a loan guarantee. The company is waiting to see whether two other large-scale solar projects will qualify for the federal loan program before it expires.
Mr. Bernheimer said First Solar is hopeful that federal lawmakers will find a way to renew the energy department loan program. He said companies that develop viable solar projects are creating energy and cost savings that justify financial backing.
“Unless you think people are going to stop using electricity, or use a lot less in 25 years, there’s a revenue stream there that will allow the project there to pay its debt,” Mr. Bernheimer said.
Local solar companies and supporters say they believe Toledo’s solar industry will thrive despite the industry’s current growing pains.
“There’s a bright future for the long-term market,” said Mr. Deng of Xunlight.
Contact Sheena Harrison at: sharrison@theblade.com or 419-724-6103.