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Current Trends in Government and Private Investor Funding for the US Solar Industry

Over the last couple of years there have been clear signs that the solar industry is heading toward a tough period in its development because of a steady decline in both government and private funding for large scale solar projects and companies. This trend was first evident in Europe, where countries struggling to deal with the financial crisis, started scaling down on investments into alternative sources of clean energy such as solar power. While the Obama administration was an avid supporter of the budding domestic solar industry during the president’s first term, tough economic times have also lead the government to cut back on its funding. Private venture capital firms in the US are in a similar position, many have chosen to withdraw their initial support and funding and pursue safer investment opportunities. As the solar industry in the US struggles to get back on its feet, facing stiff competition from heavily subsidized Chinese solar panels, it remains to be seen whether the tides will turn once again and the industry will get both public and private assistance that it currently seeks to survive.

Downturn in private investment: Uni-Solar’s bankruptcy auction canceled



Following UniSolar’s bankruptcy, as of May 7, 2012 Energy Conversion Devices made a decision to cancel a bankruptcy auction scheduled to take place on May 8, 2012 for its Uni-Solar subsidiary. The company had to discontinue the court-approved sale process after it was unable to find an “acceptable, qualified bid” by the deadline (May 8, 2012). According to the Wall Street Journal, Uni-Solar’s executives told the bankruptcy court that they were cancelling the auction because it may not generate enough money to pay off the company’s debt or shareholders. The only publicaly known bid came from Modesto, Calif.-based Salamon Group Inc, offering 2.5 million. The company was interested in purchasing Uni-Solar primarily for the purposes of a tax write-off. Salamon Group Inc made no indication that it had any interested in operating Uni-Solar as a business (source).

This is a concerning situation since it is one of the many signals of a clear turn of the tide in terms of private investor interest in the solar industry. It was only a few years ago that domestic solar companies had no problem attracting not only government funding, but also securing funds from leading venture capital firms and big corporations such as Google, Siemens and NRG Energy (source). These companies were all eager to jump on to what seemed to be an attractive bandwagon of cutting edge green technologies and a smart alternative to investing in fossil fuels. Banks also used to be more than willing to lend money to solar start ups, lured by heavy incentives and tax credits rolled out by the federal government in support of the solar industry (source).



However, as the federal government scaled down on its support and banks had to deal with the aftermath of the financial crisis, many of them have recently not been willing to give loans to the solar industry. Similarly, many private investors are currently weary of investing into the solar industry since it is clear that these projects are risky and require enormous funding without strong guarantees of returns. This is evidenced by the fact that despite a steady increase in the installation of solar panels across the US and the rollout of new utility-scale plants, profits remain scarce and the stock prices of even leading companies are down. Moreover, according to Ernst & Young’s latest quarterly global Country Attractiveness Indices (CAI) report, following a record year in 2011, investment flows in clean energy during the first quarter of 2012 (Q1’12) were the weakest since 2009. For global initial public offering (IPO) markets this was the poorest quarter for renewable energy since Q2’09, with approximately $14.3 billion raised from 157 issues. This is down by about 69% compared with Q1’11. According to the report, new asset finance also fell sharply, with only $24.2 billion being raised. This represents a 30% decline from the previous quarter and a 7% decline from the same period in 2011. Analysts attribute this decline to wavering political support both in Europe and the US as well as a continuing lack of liquidity in the project financing market (Source – solarindustrymag.com).

The potential for future private investment into the solar industry will also be undoubtedly affected by the fact that currently domestic natural gas prices are at about $2 per million British thermal units, which is the the lowest price in more than a decade. This makes gas-fired plants more attractive and many private investors are choosing the safety of investing into fossil fuels as opposed to green sources of energy (source).

Waning government support

Like many other solar companies, Uni-Solar has benefitted from millions of dollars in state economic development tax breaks and Community Development Block Grant funds. The company did not receive a Department of Energy-backed loan. Strong government funding, incentives, and tax breaks were able to propel the growth and development of the solar industry, making it a poster child for a domestic green energy industry success.However, many of the initiatives rolled out by the Obama administration to support the budding solar industry are due to expire and the domestic and global financial crisis coupled with a sting of bankruptcies among solar companies that have received government funds, are making law makers leery of pledging more tax payer dollars into the industry. The problem is that to wither the storm and continue growing, our solar industry really needs government support. In fact, it needs it now more than ever before since the industry’s competitors in China are speeding ahead full blast, holding close to 60% of the world’s solar market shares, backed by massive government investment (last year China got around 30 billion dollars in federal subsidies) These numbers dwarf the investments made by our own government and beg the question how our domestic solar industry can compete against such a heavily subsidized competitor?

Levchik (Leo) is a renewable energy activist from Boston, MA, and has been involved with alternative energy and green construction since 2004.

In 2009, Leo and his green roofing company (CoolFlatRoof.com) sponsored Boston’s Solar Decathlon Team, providing materials and installation labor to install a cool white roof on the top of Curio home (Joint effort by Tufts University and Boston Architecture College) – more info about the project here.

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with one comment

Written by Levchik B

Posted on June 4th, 2012 at 7:22 pm

Posted in Solar Manufacturers

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  1. [...] in solar energy, containing nine of the largest fifteen solar markets in the world. Despite the prolonged economic downturn affecting solar industry, the debt crisis and a slow decline of government support for solar programs in a number of [...]

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