November 9, 2011 / 4:02 PM / 6 years ago

Solar bankruptcies mark industry coming of age

BRUSSELS (Reuters) - Solar companies will continue to go bust as a natural part of the industry's coming of age that will make it ever more competitive relative to fossil fuels, a senior official at Dow Corning said in an interview.

Stiff competition from China and subsidy cuts have increased the strain on solar companies and some, including Solyndra LLC and Evergreen Solar Inc, have filed for bankruptcy protection.

Solyndra's failure stirred up a political storm in the United States over an Energy Department loan guarantee to the firm.

"It's very likely the industry is going to go through a phase of consolidation. The bankruptcies we have seen are not the end, but the start," said Eric Peeters, vice president of Dow Corning in Europe.

"It's a consequence of the industry growing up and being very successful in getting the cost down. A company that does not have the right cost structure or the right technology is going to find it very hard to compete," he told Reuters.

He said Dow Corning, a U.S.-based company with international operations, was in robust health.

U.S. Department of Energy Secretary Steven Chu has set a target of bringing the cost of solar down to $1 per watt of installed capacity by 2020.

Peeters said that would amount to a 50 percent cut from current costs and should be achievable.

"It's completely in line with the industry," he said, adding costs had been falling by 18 percent every time capacity doubled.

Solar capacity doubles every two years on average, Dow Corning said.

Sharp drops in feed-in tariffs in Britain, for instance, have been politically sensitive, but Peeters said it was appropriate that tariffs for feeding solar energy into the grid should fall as costs declined.

"Germany has come the closest to maintaining that correctly," he said. "The feed-in tariff shouldn't lead to windfall profits."

Europe has sought to take a lead in renewable technology, with relatively ambitious European Union targets for increasing the share of renewables, such as solar and wind, in the energy mix and cutting the amount of carbon the bloc emits.

But the renewable sector complains that intense lobbying by the fossil fuel industry is seeking to derail change by promoting the idea that gas and oil are cheaper.

Proponents of new energy technology say there is nothing inherently cheap about fossil fuel. It has simply had much more time to achieve economies of scale.

Peeters said he avoided lobbying, adding: "We just provide accurate data."

Reporting by Barbara Lewis; editing by Jason Neely

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