First Solar prepares to boost output as cost crunch hits rivals

The manufacturing process at First Solar uses cadmium telluride instead of expensive silicon.

Earth-moving equipment is poised for work that will result in a $74 million solar-panel plant.

The stars may finally be aligned for First Solar LLC, which is to formally break ground Thursday on a second $74 million plant in Perrysburg Township to make solar panels.

"We think demand is going to strengthen in a number of markets," said Ken Schultz, marketing vice president for the Scottsdale, Ariz., company whose majority shareholder is Wal-Mart heir John Walton.

Thanks to massive subsidies of solar and wind power by the German government that are being eyed elsewhere in Europe, First Solar expects to book its first-ever profit in 2005, on sales of more than 300,000 panels.

The new investment by the company, whose research arm and operations are in the Cedar Business Park in Perrysburg, occurs as rivals using an alternative technology face a raw-material and cost crunch.

The price for silicon, an element used in the dominant technology, has nearly tripled in the last two years as rising demand gobbled up supplies.

Additionally, company officials believe they are about to lay to rest environmental concerns about their technology, which uses cadmium telluride instead of silicon. The metal can be harmful to the environment and humans.

The manufacturing process at First Solar uses cadmium telluride instead of expensive silicon.

The company plans to formally announce in late May a first-of-its kind warranty program as part of which it will pre-arrange to recycle the metal at the end of the First Solar panels' 20-year lifespan.

A portion of the revenue received on the sale of each panel will be paid to an insurance company that will issue a policy to cover recycling costs, Mr. Schultz said.

"It is novel," said Paul Maycock, a solar energy consultant who heads PV Energy Systems Inc., in Warrenton, Va., said of the program.

"I think they'll find that the market will accept them."

Mr. Maycock praised the timing of the firm's expansion.

"First Solar is coming in at a very good time," he said, noting that the price of solar panels has risen to $3.25 a watt from $2.60 because of the silicon shortage.

He was unconcerned that Gemany's Social Democrats, who approved so-called "green energy" subsidies, could be toppled in elections called yesterday by Chancellor Gerhard Schroeder for as soon as September.

The subsidies have become so entrenched that they are unlikely to be overturned by the rival Christian Democrats, who tend to be more conservative, the consultant said. About 95 percent of panels produced locally go to Germany.

Spain also subsidized solar energy, and Italy and the European Union are studying such programs.

Additionally, California legislators are considering a subsidy program backed by Gov. Arnold Schwarzenegger.

When the local project is completed in 2007, the capacity of First Solar's Perrysburg Township complex will triple to nearly 1 million panels a year capable of producing 75 megawatts of power.

Depending on moves by rivals, the plant could catapult the firm into the top 10 producers of panels worldwide.

The leading producer now, with a capacity four times that planned locally, is in Japan.

As it stands, First Solar has an insignificant share of the $7 billion market for panels, related equipment, and services worldwide, company officials concede.

The project is expected to eventually double the firm's 195-person local workforce.

That pleases the Wood County Economic Development Commission.

"This is the kind of high-tech business that everybody is looking for in the region," said Wade Gottschalk, associate director.

The expansion will boost the company's payroll by more than $7 million, or roughly $35,000 a job, he said.

Besides its local workforce, First Solar employs 30 in Scottsdale and at a sales office in Germany.

The expansion will include $11 million for a building, $60 million in machinery and equipment, and $3.3 million in inventory.

The state of Ohio is providing a $15.5 million loan for the project as well as tax credits. Perrysburg Township has agreed to property tax abatements.

Last year, First Solar spent $20 million in Perrysburg to replace its lone production line in a bid to boost efficiency and quality.

Contact Gary Pakulski at:

gpakulski@theblade.com

or 419-724-6082.