| LOS ANGELES, June 10
LOS ANGELES, June 10 One of the largest
companies to manufacture solar panels in the United States uses
a surprising resource to keep costs low and compete against
producers from China: prison labor.
Suniva Inc, a Georgia-based solar cell and panel maker that
is backed by Goldman Sachs Group Inc, farms out a small
portion of its manufacturing to federal inmates as part of a
longstanding government program intended to prepare them for
life after prison.
Suniva does not actively publicize its work with the
prisons, saying it prefers to talk about its in-house factories
in Georgia and Michigan, which handle most of its production and
employ more than 350 people.
But the company's arrangement with Federal Prison
Industries, known as Unicor, has helped Suniva move all of its
solar panel assembly to the United States from Asia over the
last 18 months, said Matt Card, vice president of global sales
and manufacturing. The company says prison labor accounts for
less than 10 percent of its panel manufacturing.
By making panels in the United States, Suniva has been able
to capture lucrative federal contracts, avoid U.S. government
tariffs on Chinese-made panels, and appeal to private sector
customers who want American-made products. The company is the
third-biggest producer of solar modules that are made in the
United States, according to GTM Research.
"As a U.S. company you have to be very, very smart about
where you manufacture," Card said.
Inmates working for Unicor, which has existed since the
1930s, have long made things like license plates and goods for
the military. Solar panels were added to its list of products so
that inmates could acquire skills in a new and growing industry
and help government efforts to use more renewable energy.
The vast majority of Unicor's 12,000 inmate workers make
products for the federal government, but as federal budgets have
shrunk in recent years the company has been trying to attract
more contract work from private businesses. About 10 percent of
its inmate workers are now engaged in such work.
About 200 inmates make solar panels working in factories at
prisons in Sheridan, Oregon and Otisville, New York. A request
by Reuters to visit a prison solar factory was denied by prison
Suniva was founded in 2007 by solar scientists from the
Georgia Institute of Technology, and it has grown rapidly. While
the private company doesn't disclose its financials, a federal
contract from 2014 said Suniva had $93 million in annual
The company's panels generate more electricity from the sun
than typical Chinese-made panels, and they therefore command a
premium price in the market.
'A GOOD PRODUCT'
Suniva panels are on systems at Whole Foods Market Inc's
flagship store in Austin, Texas and at the Guantanamo
Bay Naval Base, to name just two projects. The company does not
disclose where panels for individual projects are made.
SolarCity Corp, the top U.S. rooftop solar
installer, also purchases Suniva panels.
"It's a good product," SolarCity spokesman Jonathan Bass
said in an email. "Suniva's relationship with Unicor has never
been a factor in our decision to use the modules... the mission
to provide job training to prepare inmates for successful
re-entry to the workforce is admirable."
Suniva has raised more than $200 million from investors
including Goldman Sachs, venture capital firms New Enterprise
Associates and Prelude Ventures and private equity firms H.I.G.
Ventures and Warburg Pincus. It has also received $6.8 million
in Department of Energy grants.
Goldman Sachs would not comment on its investment in Suniva.
Suniva would not give any details on its financial
arrangement with Unicor, citing government restrictions on the
disclosure of contract terms. Unicor also declined to offer
details on how individual contract manufacturing agreements are
The average wage for inmate workers in the Unicor programs
is 92 cents an hour, though employers pay a significantly higher
amount to Unicor for overhead and other costs. Inmates
responsible for court-ordered fines, victim restitution or child
support payments are required to use half their earnings to meet
those financial obligations.
Suniva has "no visibility" into how much inmates are paid,
"It costs us more to manufacture through Unicor than it does
in China," he added.
But the company sees advantages to its American operations,
both in and out of prisons. The company saves 30 to 45 days of
transit time from Asia so products get to market more quickly.
This is significant now that 90 percent of Suniva products are
used in U.S. projects and marks a change from when it was
shipping most of its solar cells to Europe and Asia.
Unicor says its workers are 24 percent less likely than
other inmates to return to criminal behavior once they are
released from prison. The program is focused on providing work
experience to prisoners who are within two years of release.
In 2012, Suniva approached the prison company about starting
production as a contract manufacturer, according to Card. Under
the agreement, Suniva provides all the raw materials. It also
paid to convert Unicor's factory equipment to support its
Unicor had been making its own panels since 2009 but later
gave up because federal agencies were hiring large energy
service companies for solar projects and were not purchasing
The arrangement with Suniva was among the first in which
Unicor positioned itself as a manufacturer that could help U.S.
companies transfer production from overseas to the United States
through what it called "repatriation."
The repatriation projects are meant to address criticism
that it is unfair for U.S. companies to have to compete with
Unicor for government contracts. Unicor has about 40
repatriation projects for private companies that manufacture
signs, electronics and more.
The Business Coalition for Fair Competition, a group opposed
to the government competing with private businesses, said it
would like to see a verification system to make sure the
so-called repatriation work being done in prisons is not being
taken away from American workers.
"There has to be some transparency," said John Palatiello,
the group's president.
Solar was one of the industries considered ripe for the
repatriation program, because Chinese-made panels were being
slapped with hefty tariffs in the United States, according to
Unicor board meeting minutes.
But the deal has been far from a success for the prison
company so far. Revenue from the solar operations has fallen
short of projections, Cantwell said, but declined to specify
"We are therefore currently evaluating how best to proceed
with the solar program," she wrote.
Suniva's Card said he could not comment on specific
operational details, adding that demand for Suniva modules
"We are very happy with Unicor's workmanship and quality,"
Card said. "Both organizations continually look for
opportunities to increase production and deepen the relationship
(Editing by Terry Wade and Sue Horton)