Trade Resources Industry Views Upstart Arise Opened The Doors of a Brand-New Solar Cell Manufacturing Plant

Upstart Arise Opened The Doors of a Brand-New Solar Cell Manufacturing Plant

Tags: solar

Three years ago, with much fanfare, Canadian upstart Arise Technologies Corp. opened the doors of a brand-new solar cell manufacturing plant in Bischofswerda, Germany. With financial support from the German government, the operation was to be a key foothold for the Canadian company, giving it access to the lucrative European solar energy market.

Last month, Arise shut down the facility, unable to get sufficient financing to expand and upgrade in order to make high-efficiency cells. Arise’s German arm is now in insolvency proceedings, which could see its assets sold or disposed of.

Arise, like other Canadian companies that staked their future on manufacturing solar panels and cells, has fallen victim to falling prices that have resulted from overcapacity, intense competition, and weak markets. While the worldwide market for solar products has grown by an average of 30 per cent a year over the past two decades, the industry is now in a slump.

Manufacturers rushed to build capacity following a boom year in 2010. That pushed down solar cell and panel prices, which only fell further when the world economy staggered. The cost of a solar panel is now about 40-per-cent less than a year ago.

The glut of solar panels on the market is hurting everyone in the business, said Deloitte Canada analyst Duncan Stewart. “Too much supply, and the fact that some markets are cutting subsidies, means that this is a tough business no matter where you make the cells,” Mr. Stewart said. “It is now high-stakes poker; you need to be able to keep raising [money] in order to stay in the game.”

In Canada, the situation has been exacerbated by confusion in Ontario, where the provincial government has provided significant subsidies for solar installations, but bureaucratic issues in connecting them to the power grid have stalled growth. The recent provincial election campaign, during which the opposition Conservatives vowed to kill off key parts of green-friendly legislation, also tempered development of the solar industry.

The downturn goes far beyond Canada. In the U.S., solar giant Solyndra LLC recently filed for bankruptcy protection, and in October the CEO of First Solar Inc.,

the largest maker of photovoltaic modules in the U.S., abruptly left his job.

"The entire solar industry is in severe crisis at this stage,” said George Rubin, president of Vancouver-based solar technology firm Day4 Energy Inc. "A lot of the big players are fighting for their lives.”

Day4, while struggling with slumping sales and a diminishing stock price, has insulated itself from some of the industry’s problems by licensing its innovative solar cell technology to other manufacturers, which absorbs much of the production risk.

At Waterloo, Ont.-based Arise, however, manufacturing was a core of its strategy. When excitement over its German plans was at its peak in 2007, the stock traded at over $3. Now the shares are under 3 cents. The Toronto Stock Exchange is considering de-listing the company, and Arise is in talks for a “business combination” with another, unnamed, firm. To keep itself going, the company recently arranged a bridge loan of $1.5-million – at 12-per-cent interest.

A few kilometres down the road from Arise’s head office, another Canadian player has also taken a hit from the slumping solar cell market. Cambridge, Ont.-based ATS Automation Tooling Systems Inc. couldn’t find a buyer for its Photowatt solar division in France, and has started bankruptcy proceedings for the unit. It is also having trouble spinning off its Ontario Photowatt division.

Even Canadian Solar Inc., a huge global maker of solar cells and modules with headquarters in Kitchener, Ont., and most of its manufacturing in China, has had to trim back plans for its new Canadian solar panel plant in Guelph. Canadian Solar stock is now well below $4, less than one-quarter of the value of a year ago, and a tenth of its peak level hit in 2008.

Arise’s founder Ian MacLellan, who recently resigned from the company’s board, said a central problem is the massive expansion in Chinese supply. Chinese firms got lots of low-cost financing from quasi-government sources, he said, and thus were able to build new plants at a furious pace. “Some of our Chinese suppliers and competitors have access to phenomenally huge amounts of cheap capital,” he said.

U.S. manufacturers are so upset with the wave of cheap solar devices that has come into their market from China that seven companies asked the government to slap anti-dumping tariffs on Chinese solar products.

And weak European economies – Europe is by far the largest market for solar power systems – are so strapped for funds that their subsidies to the sector are threatened. “With governments running out of money, how long will the subsidy schemes last?” said Day4’s Mr. Rubin.

Still, Mr. Rubin said, the industry will eventually thrive, even if there is a shakeout in the short term. Low prices for solar panels means the sector is increasingly competitive with other forms of power generation. “With the rapid reduction in solar hardware prices, the industry overall is rapidly getting into that coveted territory of ‘grid parity’ in some pretty large markets,” he said.

Mr. MacLellan sees the current difficulties as part of a boom-bust cycle that hits many new technologies. An industry restructuring will be similar to that of the personal computer market in the 1980s and ’90s.

The solar energy business will succeed over the longer term because there is “huge demand for free energy from the sun,” he said. “It is just at the beginnings of becoming a very massive industry … This is the oil of the 21st century.”
 

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