http://www.nytimes.com/2011/01/15/business/energy-environment/15solar.html?ref=business&src=me&pagewanted=print
January 14, 2011
Solar Panel Maker Moves Work to China
By KEITH BRADSHER
BEIJING — Aided by at least $43 million in assistance from the
government of Massachusetts and an innovative solar energy technology,
Evergreen Solar emerged in the last three years as the third-largest
maker of solar panels in the United States.
But now the company is closing its main American factory, laying off
the 800 workers by the end of March and shifting production to a joint
venture with a Chinese company in central China. Evergreen cited the
much higher government support available in China.
The factory closing in Devens, Mass., which Evergreen announced
earlier this week, has set off political recriminations and finger-
pointing in Massachusetts. And it comes just as President Hu Jintao of
China is scheduled for a state visit next week to Washington, where
the agenda is likely to include tensions between the United States and
China over trade and energy policy.
The Obama administration has been investigating whether China has
violated the free trade rules of the World Trade Organization with its
extensive subsidies to the manufacturers of solar panels and other
clean energy products.
While a few types of government subsidies are permitted under
international trade agreements, they are not supposed to give special
advantages to exports — something that China’s critics accuse it of
doing. The Chinese government has strongly denied that any of its
clean energy policies have violated W.T.O. rules.
Although solar energy still accounts for only a tiny fraction of
American power production, declining prices and concerns about global
warming give solar power a prominent place in United States plans for
a clean energy future — even if critics say the federal government is
still not doing enough to foster its adoption.
Beyond the issues of trade and jobs, solar power experts see broader
implications. They say that after many years of relying on unstable
governments in the Middle East for oil, the United States now looks
likely to rely on China to tap energy from the sun.
Evergreen, in announcing its move to China, was unusually candid about
its motives. Michael El-Hillow, the chief executive, said in a
statement that his company had decided to close the Massachusetts
factory in response to plunging prices for solar panels. World prices
have fallen as much as two-thirds in the last three years — including
a drop of 10 percent during last year’s fourth quarter alone.
Chinese manufacturers, Mr. El-Hillow said in the statement, have been
able to push prices down sharply because they receive considerable
help from the Chinese government and state-owned banks, and because
manufacturing costs are generally lower in China.
“While the United States and other Western industrial economies are
beneficiaries of rapidly declining installation costs of solar energy,
we expect the United States will continue to be at a disadvantage from
a manufacturing standpoint,” he said.
Even though Evergreen opened its Devens plant, with all new equipment,
only in 2008, it began talks with Chinese companies in early 2009. In
September 2010, the company opened its factory in Wuhan, China, and
will now rely on that operation.
An Evergreen spokesman said Mr. El-Hillow was not available to comment
for this article.
Other solar panel manufacturers are also struggling in the United
States. Solyndra, a Silicon Valley business, received a visit from
President Obama in May and a $535 million federal loan guarantee, only
to say in November that it was shutting one of its two American plants
and would delay expansion of the other.
First Solar, an American company, is one of the world’s largest solar
power vendors. But most of its products are made overseas.
Chinese solar panel manufacturers accounted for slightly over half the
world’s production last year. Their share of the American market has
grown nearly sixfold in the last two years, to 23 percent in 2010 and
is still rising fast, according to GTM Research, a renewable energy
market analysis firm in Cambridge, Mass.
In addition to solar energy, China just passed the United States as
the world’s largest builder and installer of wind turbines.
The closing of the Evergreen factory has prompted finger-pointing in
Massachusetts.
Ian A. Bowles, the former energy and environment chief for Gov. Deval
L. Patrick, a Democrat who pushed for the solar panel factory to be
located in Massachusetts, said the federal government had not helped
the American industry enough or done enough to challenge Chinese
government subsidies for its industry. Evergreen has received no
federal money.
“The federal government has brought a knife to a gun fight,” Mr.
Bowles said. “Its support is completely out of proportion to the
support displayed by China — and even to that in Europe.”
Stephanie Mueller, the Energy Department press secretary, said the
department was committed to supporting renewable energy. “Through our
Loan Program Office we have offered conditional commitments for loan
guarantees to 16 clean energy projects totaling nearly $16.5 billion,”
she said. “We have finalized and closed half of those loan guarantees,
and the program has ramped up significantly over the last year to move
projects through the process quickly and efficiently while protecting
taxpayer interests.”
Evergreen did not try to go through the long, costly process of
obtaining a federal loan because of what it described last summer as
signals from the department that its technology was too far along and
not in need of research and development assistance. The Energy
Department has a policy of not commenting on companies that do not
apply.
Evergreen was selling solar panels made in Devens for $3.39 a watt at
the end of 2008 and planned to cut its costs to $2 a watt by the end
of last year — a target it met. But Evergreen found that by the end of
the fourth quarter, it could fetch only $1.90 a watt for its Devens-
made solar panels. Chinese manufacturers were selling them for as
little as $1.60 a watt after reducing their costs to as little as
$1.35 or less per watt.
Evergreen’s joint-venture factory in Wuhan occupies a long,
warehouselike concrete building in an industrial park located in an
inauspicious neighborhood. A local employee said the municipal police
had used the site for mass executions into the 1980s.
When a reporter was given a rare tour inside the building just before
it began mass production in September, the operation appeared as
modern as any in the world. Row after row of highly automated
equipment stretched toward the two-story-high ceiling in an
immaculate, brightly lighted white hall. Chinese technicians closely
watched the computer screens monitoring each step in the production
processes.
In a telephone interview in August, Mr. El-Hillow said that he was
desperate to avoid layoffs at the Devens factory. But he said Chinese
state-owned banks and municipal governments were offering unbeatable
assistance to Chinese solar panel companies.
Factory labor is cheap in China, where monthly wages average less than
$300. That compares to a statewide average of more than $5,400 a month
for Massachusetts factory workers. But labor is a tiny share of the
cost of running a high-tech solar panel factory, Mr. El-Hillow said.
China’s real advantage lies in the ability of solar panel companies to
form partnerships with local governments and then obtain loans at very
low interest rates from state-owned banks.
Evergreen, with help from its partners — the Wuhan municipal
government and the Hubei provincial government — borrowed two-thirds
of the cost of its Wuhan factory from two Chinese banks, at an
interest rate that under certain conditions could go as low as 4.8
percent, Mr. El-Hillow said in August. Best of all, no principal
payments or interest payments will be due until the end of the loan in
2015.
By contrast, a $21 million grant from Massachusetts covered 5 percent
of the cost of the Devens factory, and the company had to borrow the
rest from banks, Mr. El-Hillow said.
Banks in the United States were reluctant to provide the rest of the
money even at double-digit interest rates, partly because of the
financial crisis. “Therein lies the hidden advantage of being in
China,” Mr. El-Hillow said.
Devens, as the site of a former military base, is a designated
enterprise zone eligible for state financial support.
State Senator Jamie Eldridge, a Democrat whose district includes
Devens, said he was initially excited for Evergreen to come to his
district, but even before the announced loss of 800 jobs, he had come
to oppose such large corporate assistance.
“I think there’s been a lot of hurt feelings over these subsidies to
companies, while a lot of communities around the former base have not
seen development money,” he said.
Michael McCarthy, a spokesman for Evergreen, said the company had
already met 80 percent of the grant’s job creation target by employing
up to 800 factory workers since 2008 and should owe little money to
the state. Evergreen also retains about 100 research and
administrative jobs in Massachusetts.
The company also received about $22 million in tax credits, and it
will discuss those with Massachusetts, he said.
Evergreen has had two unique problems that made its Devens factory
vulnerable to Chinese competition. It specializes in an unusual kind
of wafer, making it hard to share research and development costs with
other companies. And it was hurt when Lehman Brothers went bankrupt in
2008; Evergreen lost one-seventh of its outstanding shares in a
complex transaction involving convertible notes. But many other
Western solar power companies are also running into trouble, as
competition from China coincides with uncertainty about the prices at
which Western regulators will let solar farms sell electricity to
national grids.
According to Bloomberg New Energy Finance, shares in solar companies
fell an average of 26 percent last year. Evergreen’s stock, which
traded above $100 in late 2007, closed Friday in New York at $3.03.
Tom Zeller Jr. in New York and Katie Zezima in Boston contributed
reporting.
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