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Solar Energy Industry Maintains Footing Amid Recession

April 14, 2009 at 6:35 PM EDT
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Amid the economic slump, there may be a silver lining for solar energy businesses that have withstood the recession so far. NewsHour special correspondent Spencer Michels reports.
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SPENCER MICHELS, NewsHour Correspondent: From the hills of Berkeley, California, the solar revolution looks as though it’s in full swing. Two teams of installers for a young firm called Sungevity work every day, mounting photovoltaic solar panels on roofs, so the homeowners can provide most or all of their own electricity.

Danny Kennedy, a longtime environmental activist, now is a business man, running the firm in a time of economic turmoil.

DANNY KENNEDY, Sungevity Solar: It’s going great. Really, in the big-picture, long-term sense, the only way is up, because we need it. And this year might see a bit of a slowdown in the growth.

SPENCER MICHELS: Kennedy says costs of rooftop solar are coming down, partly because of strong competition. After federal tax credits and state rebates, installations average about $12,300, depending on the size.

DANNY KENNEDY: On most systems we’re installing, we’re seeing a three- to seven-year payback period.

Funding for companies drying up

SPENCER MICHELS: Nationwide, some figures seem to reflect Kennedy's optimism. Photovoltaic installations were up 75 percent last year, and a recent industry report says solar, along with wind and biofuels, had another banner year, even in the face of a brooding economic storm.

But that storm has dropped stock prices of green companies 60 percent to 70 percent last year, and the credit crunch made it hard for companies to finance new technologies.

Take OptiSolar, a Bay Area firm that had contracts to produce large amounts of electricity by using thin film photovoltaic solar panels. According to spokesman Alan Bernheimer, the company failed to get the money to build its systems.

ALAN BERNHEIMER, OptiSolar: Most of our growth has been financed by private equity investors, and that is a group that has simply not been responsive since the worldwide economic crisis.

SPENCER MICHELS: So the company stopped much of its work, laid off almost all its workers, and sold most of its assets to a larger company, evidence, say analysts, of a consolidation in the solar industry.

The weeding out of weaker firms may be a good thing, according to Silicon Valley venture capitalist Vinod Khosla, who has multiple investments in green energy.

VINOD KHOSLA, Venture Capitalist: Irrational exuberance is dying quickly. People are becoming much more critical. So I would say to you, a year ago, any solar photovoltaic company could get funding. I was afraid we might have a huge bubble of irrational valuations like we had in dot-com. I don't think we'll see that now.

I do believe the really good companies are still getting funding and that many companies will do better because of the current economy, because they'll be more cautious.

Green energy has bright future

SPENCER MICHELS: A year ago, Khosla was working with Robert Fishman, the CEO of a solar firm called Asura. The company had big plans to make steam and power for California's largest utility. With a large solar thermal plant already in operation in Australia and a pilot facility in California, Fishman was confident he had the money to proceed.

ROBERT FISHMAN, CEO, Asura: I would say there's more people who want to give us money than we need. Everybody, I think, knows that this is going to be the hottest part of the power market for the next 10 years.

SPENCER MICHELS: Governor Arnold Schwarzenegger agreed when he went to dedicate Asura's new facility.

GOV. ARNOLD SCHWARZENEGGER (R), California: ... goes to show that this is not only green for our environment. This is green, also, for our economy, because it's a job-creator.

SPENCER MICHELS: But the economy changed, and the money didn't materialize. Khosla, who is still working with Asura, put a positive spin on negative developments.

VINOD KHOSLA: They've changed their product plan temporarily. It means they're not trying to go start building a $600 million power plant, because the financing for it is not available, but they are adding lots of $15 million, $20 million projects that don't need project financing.

SPENCER MICHELS: Still, says Khosla, he continues to invest in green energy because its future is very large.

VINOD KHOSLA: We ourselves are being quite aggressive because, in fact, valuations have come down. We get a better deal.

Some firms doing well

SPENCER MICHELS: At another firm, BrightSource Energy, investment money has not been a problem. BrightSource has a new contract to sell Southern California Edison enough solar energy from the Mojave Desert to power 845,000 homes, the largest solar contract of its kind.

John Woolard is CEO.

JOHN WOOLARD, CEO, BrightSource Energy: We take hundreds of thousands of mirrors. We have them out in the desert. They reflect light up onto a boiler, and the boiler generates steam and turns a turbine, and that turbine produces electricity.

SPENCER MICHELS: To finance such an expensive project, Woolard says his firm is working at a smart, stately pace.

JOHN WOOLARD: We, fortunately, raised a significant amount of money last year, and we're very conservative as an organization, so we've spent very little of it. So we have no debt and quite a bit of capital in the bank, which is, in a time like this, a nice place to be.

Green energy source of jobs

SPENCER MICHELS: The president's stimulus package may help. It includes a 30 percent cash rebate for individuals or companies installing solar energy systems, and it provides loan guarantees that will bring down interest rates for companies like BrightSource, who are building new solar installations.

JOHN WOOLARD: I think that was well thought through. It drives tens of thousands, if not hundreds of thousands of jobs, and helps plants actually put steel in the ground this year and next year to start delivery.

SPENCER MICHELS: Meanwhile, utilities continue to sign contracts with solar companies and plan to build some of their own solar facilities. Currently, solar energy supplies less than 1 percent of America's electricity, a figure the industry hopes to raise eightfold by 2025.