Despite a growing U.S. solar energy market, a changing political landscape is presenting challenges for domestic solar panel makers that could dampen the future of the Toledo area's budding alternative-energy industry.
Government subsidies and assistance have played a significant role in the growth of the domestic solar industry. But two federal programs that have largely helped local solar companies are to expire in the next year, and it's unclear whether they will be extended.
Companies such as Willard & Kelsey Solar Group LLC in Perrysburg, Xunlight Corp. in Toledo, and First Solar Inc., which is based in Arizona but has its only North American factory in Perrysburg Township, have depended on state and federal incentives to help them ramp up production.
Willard & Kelsey, for example, has received at least $16 million in state loans and grants to buy equipment and prepare for production.
Chief Executive Officer Michael Cicak said the company has lined up customers, and production is expected to begin in January. “Everything that we can make is sold,” he said.
Mark Shanahan, energy adviser to Ohio Gov. Ted Strickland, said many of the state's recent solar successes have been helped by the state's renewable energy policies and the Third Frontier Program, Ohio's $2.1 billion investment pool for advanced technology research, development, and expansion.
The policies, approved by the Ohio General Assembly, in 2008, require 25 percent of electricity sold in the state to be produced from alternative resources by 2025.
Among notable projects was two solar-panel arrays installed by the government this year near an I-280 interchange in North Toledo, using solar modules from First Solar and Xunlight. It received a $1.5 million federal grant. Also mentioned by Mr. Shanahan was a 10-megawatt solar installation, spurred by the state's policies, that used 160,000 First Solar panels on a farm field near Wyandot County's Upper Sandusky.
State funding continues to play a crucial role. For instance, Xunlight received a $99,000 state grant in January for its Next Generation Solar Module Manufacturing Technology project and received a $4.1 million loan from the state in December to help expand production and create 181 jobs.
Meanwhile, First Solar and Xunlight received state grants last month through the Energizing Careers Program to train employees in new technologies. First Solar received $1.02 million through that program, and Xunlight received $229,000.
But with last week's election sweeping conservative Republicans — most of whom espouse limiting government spending — into U.S. House seats, governorships, and state legislatures across the country, it is uncertain whether government assistance for such solar projects will continue.
Governor-elect John Kasich supports Ohio's renewable energy portfolio as well as the hird Frontier program, campaign spokesman Rob Nichols said.
“He supports increasing renewable generation in Ohio in a way that expands our energy choices,” Mr. Nichols said in a statement. “He wants to do everything possible to prevent Ohio's utilities from having to buy expensive electricity from other states and raise prices on businesses and homeowners.”
On a national level, a couple of programs that aid solar firms are in danger of ending if Congress doesn't extend them. The federal Treasury Grant Program provides cash worth 30 percent of construction costs for solar projects if construction starts by Dec. 31.
The program has provided $387 million in funding for 1,047 solar projects nationwide since July, 2009. In Ohio, the program has granted $1.2 million for 15 projects worth about $4 million.
Separately, the U.S. Department of Energy has a loan guarantee program that helps companies gain financing for advanced energy projects, but the projects must begin construction by Sept. 30, 2011.
Solar industry insiders and advocates are pushing for an extension of those incentives.
The loss of the programs would hurt companies such as First Solar, which said in its 2009 annual report that their potential expiration “may adversely affect our ability to arrange financing for utility-scale projects and may adversely affect the attractiveness of the U.S. solar market.”
A spokesman for the Solar Energy Industries Association in Washington, Monique Hanis, said: “There is concern that it would dampen the activity that we've been seeing” if the programs expire.
Analysts agree that the incentives are crucial for supporting the domestic solar industry.
Even though there is a “gross oversupply” of solar modules worldwide, Colorado-based Pike Research said in May that it expects the “enormous but largely untapped U.S. solar market” will experience substantial growth in 2011, particularly if the government reinstates or adds to federal incentive programs.
But April Taylor, an analyst with the Motley Fool, said last week that government tax breaks and subsidies that are important to alternative-energy businesses “could dry up as a result of the election.”
First Solar spokesman Ted Meyer wouldn't disclose how the company finances its projects, but said “the government programs make it easier to finance project construction.”
In its most recent annual report, First Solar said it was planning for “strong” North American growth, in part because of help from state renewable energy policies and the investment tax credit cash grant.
It said the loan guarantee program helped reduce the financing costs of such projects as its 550-megawatt Desert Sunlight solar plant being constructed in California.
The company also received a $16.3 million tax credit this year through the federal stimulus to assist with its recent expansion of the Perrysburg Township plant.
First Solar told investors in the report that the extension of federal incentive programs is “highly uncertain.”
Xunlight has relied on federal incentives in the past, having received a $34.5 million tax credit through the federal stimulus program in January. The Toledo company said in a statement that the credit would help it “achieve large-scale commercialization in a cost-effective manner.”
Global solar market demand is expected to exceed 19 gigawatts by 2013, up from 10.1 gigawatts in 2010, according to Pike Research. Much of that demand growth, it said, will be from the United States, which makes up about 8 percent of current worldwide solar demand.
Although Ohio doesn't produce as many solar modules as other states, such as California, New Jersey, Arizona, and Florida, Ohio officials have touted the state's growing solar industry.
First Solar, which began in Toledo, has more than 1,000 employees at its Perrysburg Township plant. It considers the domestic solar market a bright spot for sales of its cheaper-to-produce solar panels made with thin-film technology.
“The U.S. market is really new, and it's coming online very quickly,” spokesman Mr. Meyer said.
The company announced last month that, to keep up with increasing orders, it will build another U.S. plant to make its thin-film cadmium telluride panels. Although the site hasn't been announced, the plant is likely to be built “in an area that would support future market growth,” Mr. Meyer said. California and southwest states such as Arizona and Nevada are First Solar's largest markets in the country.
The company, which had $2 billion in 2009 sales, plans to reach 2.7 gigawatts of global production capacity in 2012, up from 1.4 gigawatts by the end of this year.
Xunlight, which has 90 employees, said last month that it is gearing up to begin shipping its thin-film polysilicon modules for three major long-term contracts worth $70 million. One of the customers is based in the United States, amd the others are in Europe.
Company executives declined to comment for this story.
Mr. Cicak of Willard & Kelsey declined to name customers for his company's rigid cadmium telluride panels, but he said he expects to produce 70 megawatts of capacity in the first year.
Although he plans to proceed without federal help, Mr. Cicak said his company will help meet the projected need for American-made solar panels.
“[The federal government] said that by 2020, just in this country, they'll need a minimum of 500 plants just like we have,” he said.
Contact Sheena Harrison at: email@example.com or 419-724-6103.