Solar Energy Looking More Viable In The U.S. Market

More American companies are beginning to look to the sky for their next source of energy.

Companies like Apple Inc are already considering the development of solar powered iPods, California’s Ironwood prison installing more than 6,000 solar panels, and even Fenway Park in Boston using the sun to power Red Sox games.

The 2007 World Series-winning Red Sox baseball club last month became the first professional sports team to go solar, installing solar hot water panels that will replace a third of the gas used to heat water at Boston’s historic Fenway Park.

The resurging interest into solar capabilities in America is being driven by rising fossil fuel prices as well as public concern over climate change.

Solar’s high costs have kept the resource out of reach for many residences and businesses, but industry analysts say not for long. Although solar panels are easy to install, it is the building of the panel, which is expensive because of tight supplies of silicon, their costliest element.

Most industry analysts expect a constraint on silicon supplies to end within two years. But they are divided on whether this would help or harm the industry.

The tipping point at which the world’s cleanest, most renewable resource is cost-competitive with other sources of energy on electricity grids could happen within two to five years in some U.S. regions and countries if the price of fossil fuels continues to rise at its current pace, they add.

"In the long run — as in two to three years — you should see competitiveness especially with the grid in a number of regions in the world," said Vishal Shah, an analyst who tracks the industry at U.S. investment bank Lehman Brothers.

Tom Werner, chief executive of SunPower Corp, the largest North American solar company, sees “grid parity” for solar power in the U.S. and other industrialized nations within five years, or as soon as 2010.

"That’s actually more aggressive than what we would say previously, and that’s because the cost of electricity is going up faster than we had ever modeled," Werner said

"It is becoming more and more clear it is a real possibility, and we believe, a reality."

Under laws in 25 U.S. states and Washington D.C., solar and other clean energy sources such as wind must constitute up to 30 percent of a utility’s energy portfolio in five to 15 years. Just 10 states had such requirements in 2003.

Richard Feldt, chief executive of U.S. solar panel maker Evergreen Solar Inc, calls grid parity the industry’s "Holy Grail" and sees it happening in about five years. "It’s not far away," he said.

But much of the progress balances on November’s U.S. presidential and congressional elections.

A Democratic win of the White House, and possibly greater Democratic control of Congress, could spur aggressive U.S. measures to limit climate-warming emissions of carbon dioxide — including legislation opposed by President George W. Bush that would cap emissions from 86 percent of U.S. facilities.

Cap-and-trade provisions would make it costlier to emit carbon into the atmosphere and discourage the burning of fossil fuels.

Republican candidate John McCain has touted his support of alternative energy sources, and Democrat Barack Obama says he wants to require U.S. utilities to generate 25 percent of their electricity from renewable sources like solar by 2025.

Either way, "Obama or McCain would be better than Bush," said Feldt.

Such panels use refined crystalline silicon. But rival technologies are emerging such as thin-film panels that require almost no silicon, raising the possibility of a costly battle in the industry over which type of solar power will dominate.

"The solar industry will look very different just two years from now," said Ted Sullivan, a senior analyst at Lux Research, a New York market consultancy.

He said he expects "a shake-out among companies that aren’t prepared to thrive in this new environment — particularly crystalline silicon players that haven’t invested in new thin-film technologies."

Shares in California-based SunPower Corp are down nearly 60 percent this year, Colorado-based Ascent Solar Technologies Inc has shed 50 percent and Evergreen has lost about 40 percent of its value this year.

That compares to a heady 2007 when industry leader SunPower rose 253 percent from the start of last year to the end, Ascent surged 785 percent and Evergreen shot up 134 percent.

Some hope to see the U.S. overtake Germany as the world’s top solar market within four years, according to the European Photovoltaic industry Association.

"While silicon oversupply in mid-2009 is likely to pressure companies’ margins, we believe investors at some point will become comfortable with solar’s improving costs," said Ronan Wolfsdorf, a solar and renewable energy analyst at consultants Macroenergy Monitor in Cambridge, Massachusetts.

"The solar market needs to cross this great divide, and a lot of that has to do with cost. But one thing to remember is that tougher regulations on emissions of carbon into the atmosphere are going to translate into higher prices for electricity produced by conventional sources," he said.

"That will make solar more competitive in the long run."