Journal of Corporate Renewal - July/August 2012

In the U.S., solar panel makers Evergreen Solar, Inc.; Spectra Watt Inc.; Stirling Energy Systems; and Energy Conversion Devices Inc. all filed for bankruptcy in 2011, and Energy Conversion Devices, Inc., and Konarka Technologies, Inc., followed suit this year. There also was the highly publicized and politicized failure of Solyndra, LLC, which, after receiving $535 million in U.S. Department of Energy loan guarantees in September 2009, shut down all operations and filed for bankruptcy less than two years later.

In addition, German solar project developer Solar Millennium AG and its American subsidiary, Solar Trust of America, which holds the rights to develop the world’s largest solar power project, the Blythe solar power project in Southern California, recently filed for bankruptcy and insolvency proceedings in both Germany and the United States.

Finally, claiming an inability by its solar business to sustain long-term returns for the company, industry super-major BP announced that, after 40 years, it was exiting the business and planned to sell its interests in the solar projects it had developed in the U.S., Germany, Italy, Spain, and the U.K.

cells is merely one indication of the conflicting implications that U.S. energy policymakers will face in the future. This is particularly true for alternative fuels, for which subsidization and incentives play such major roles in their ongoing development.

What follows is a look at the current state of development of certain alternative energies in the U.S.

Solar. Allegations of product dumping and low product prices, demand that was less than anticipated, and general market uncertainty have inflicted serious damage on the solar industry in the past 12 months, with most of the negative impact and notoriety landing squarely on solar panel manufacturers.

Department of Commerce to impose
duties on wind towers manufactured
in China. Also similar to the solar cell
controversy was the reaction to the
news by Chinese manufacturers, who
criticized the protectionist measures and
warned that implementing such
tariffs could have a negative
impact on the U.S.
wind industry. The
U.S. reportedly
imported $222
million in
Chinese
wind
towers
in 2011.

ExxonMobil
anticipates that
renewable fuels will
account for only 7 percent
of global demand for
energy by 2040.

One of
the biggest
constraints on
wind energy’s
growth in the
U.S. is the capacity
of the transmission
grid to deliver that energy to
customers. Another primary
issue will be concerns regarding
plant siting, including the potential
impact of plant locations on the
surrounding environment and wildlife.

U.S.-based First Solar, Inc., announced earlier this year that it would cut its workforce by 30 percent, eliminating 2,000 positions across the company’s global operations; close all of its operations in Frankfurt, Germany; and indefinitely idle some production lines in Malaysia. As of May 31, both the MAC Global Solar Energy Index and the Bloomberg Leaders Solar Index were down by more than 70 percent compared to last year.

Ethanol. Having rebounded from a number of major bankruptcies, significant restructuring, and consolidation in 2008-2010, the industry seemed to right itself in 2011 and into 2012. According to the Renewable Fuels Association, the U.S. ethanol industry produced a record 13. 9 billion gallons in 2011, up from 13. 2 billion gallons in 2010 and from 1.6 billion gallons in 2000. However, many questions regarding the ethanol industry remain.

To be sure, alternative fuels represent a rapidly growing segment of the overall energy market. Still, ExxonMobil anticipates that renewable fuels will account for only 7 percent of global demand for energy by 2040.

The industry pain extended globally as well. Citing variations of complaints of intense competition and the reduction of governmental support, European solar panel makers that filed for bankruptcy or insolvency proceedings included French company Photowatt and German manufacturers Solon, Scheuten Solar, Odersun, and Q Cells. Q Cells, which was considered the largest solar manufacturer in the world as recently as 2008, had seen its stock price plummet from $150 a share to just pennies a share by April 2012.

Is the reduction in the national carbon footprint that was anticipated from the use of ethanol actually being realized? Will historically high prices for corn, the principal feedstock for ethanol production, persist? Because of the role of corn as the principal feedstock and its increasing dedication to ethanol production, are prices for other grains and for food in general being forced upward in the U.S and throughout the world? These and many other issues will require continued consideration in the future.

However, the overriding issue that has not been discussed much is that practically all alternative fuels being developed in the United States depend heavily on various forms of government subsidies, incentives, or other support, without which they are not currently competitive with other traditional energy sources. With the forecasted increase in the supply of U.S. natural gas likely moderating prices in the near term, the ability for alternative fuels to compete, with or without government support, will be further strained.

Jul/Aug 2012

Journal of Corporate Renewal

Wind. The U.S. wind industry has also experienced many of the same issues as solar panel manufacturers. Allegations by U.S. wind tower companies of unfair subsidization of Chinese imports recently resulted in a decision by the U.S.

Internationally, recent trends reflect a move away from subsidization. In an effort to control increasing budget deficits, Spain earlier this year stopped all government subsidies and support for renewable energy projects. Germany has announced the phaseout of all subsidies for renewable power by 2017.