State of U.S. Solar PV Industry

The U.S. Energy Information Administration (EIA) recently released its “Solar Photovoltaic Cell/Module Manufacturing Activities 2009” report, and the results demonstrate the rapidly evolving landscape of the U.S. solar PV manufacturing industry. In 2009, the industry reached a record high 1.3 peak gigawatts of shipments, the sixth-consecutive year of growth and a 30% increase from 2008. According to EIA, an influx of stimulus spending and a decrease in manufacturing costs largely contributed to this increase.

Domestic shipments increased 15% over the course of 2009 to 601,133 peak kilowatts, 47% of which went to commercial electricity generation. Installers, at 36% of the domestic market share, were the largest customer type, followed by wholesale distributors at 23%. The solar photovoltaic module/cell market made shipments to all 50 states, with California and New Jersey combining for 55% of all domestic shipments.

At 57%, imports accounted for more than half of total shipments for the third time in four years. The importation of 743,414 peak kilowatts, 95% of which were crystalline silicon cells and modules, represented a 27% increase from 2008. China (31.75%), Philippines (28.68%), and Mexico (17.83%) were the top importers. Japan had the furthest decline in U.S. imports, falling from 24.85% of total imports in 2008 to 11.32% in 2009.

Although import shipments constituted greater than half of total shipments in 2009, export numbers actually increased 47% from 2008. Buoyed by crystalline silicon cells and modules, exports surpassed domestic shipments for the first time since 2004. Germany dominated the U.S. solar industry export market in 2009 with 45.37% of total exports, followed by Italy (15.88%) and France (6.94%).

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As every cloud has a silver lining, the recession and the resulting weakness in the dollar has been a boon for American manufacturers.  Exports surged 21% to $1.28 trillion in 2010, and the American manufacturing sector added jobs for the first time since 1997.

Unfortunately, as long as the renminbi (RMB) remains pegged to the dollar, weakness in the dollar is synonymous to a weak currency in China.  While the recent détente in Sino-American relations has drawn focus away from the “managed float” of the RMB, the effects of this peg are rippling through both the American and Chinese economies. Inflation is building in China as foreign exchange reserves and M2 have surged as the American-Chinese trade deficit surpassed $273 billion in 2010

Chinese exchange rate policies directly impact the competitiveness of American renewable energy manufacturers.  One underlying similarity across the multi-faceted renewable energy sector, from wind to solar to fuel cells and beyond, is that each technology is still in its nascence.  Unlike more established industries where low-cost Chinese suppliers have come to provide components or assembly to higher value-add Western manufacturers, supply chains remain flexible and American products compete directly with Chinese on both function and cost.

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Building the U.S. Cleantech Manufacturing Consensus

The term “industry” is often cast about like a dirty word in discussions on reducing emissions.  Such criticism is not entirely misdirected, as industrial sectors around the world have been almost uniformly slow to begin greening themselves.  Industry also consumes a huge amount of energy: a recent report from Policy Matters Ohio indicates that 33% of Ohio’s energy consumption is industrial, making industry the largest culprit for both consumption and emissions in that state.

However, less often noted are the myriad ways in which achieving national emissions targets hinges upon the maintenance of a robust domestic manufacturing economy.  In truth, those who care about emissions reductions should be highly concerned about the decline of American industry, and should support efforts to boost manufacturing, such as the White House’s National Export Initiative.

The obvious first premise of this interdependency is that we’ll need to manufacture clean energy technologies such as turbines and combined heat and power systems in the very near future.  But the relationship between industry and emissions goes far beyond simply needing somewhere to build things.  It matters greatly that clean energy technologies are manufactured in the U.S. as opposed to elsewhere.  Below, I’ll outline some of the subtle but nonetheless powerful ways in which U.S. manufacturing strength affects both global and domestic emissions targets.

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Venture Capital’s Role in Clean Energy Innovation

A look at the role VC can play in clean energy innovation and where it will need government help.

Solving the clean energy crisis in the United States will require the commercialization of a plethora of new technologies. However, commercializing a new technology is a difficult endeavor, and many potentially breakthrough technologies languish due to lack of investment. Venture capital has increasingly become an integral funding source for clean energy startups, helping to guide technologies from the laboratory to the market. Yet, the level of capital required for clean energy demonstration projects has proven to be a dilemma that the private sector cannot sufficiently address, implying the need for significant government support.

One of the primary reasons for this dilemma is that as a financial industry, venture capital is relatively small. In 2009, around 200 startups raised $3.5 billion in VC money, which accounted to 15% of all VC money in the US (comparatively, the pharmaceutical giant Amgen spent $2.9 billion this past year alone on R&D). Overall, only 30 U.S. venture capital firms focus on clean tech investments, and some of these will not survive the next few years as the industry expects tighter balance sheets and increased consolidation.

Regardless of the overall size of the industry, VCs are an essential component for clean tech innovation due to their specialization in technologies and willingness to bet on high risk, high reward startups. Venture capital drives technological development by providing the financial and management expertise necessary to take a technology from the lab and commercialize it on a small scale. In certain phases of a clean tech startup’s development, venture capital can provide the injections of cash necessary to grow the company.

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