JUNE 2008: ENERGY
SUN, SUN, SUN, HERE IT COMES
Boosted by new state incentives and betting on the future,
Oregon’s solar industry is soaring.
By Ben Jacklet
John Schumacher developed a revolutionary idea to lower the
cost of solar power during the last oil crisis 33 years ago.
Answering a call from the U.S. government for solar
innovations, he invented a closed-loop, low-energy system to
produce high-quality polysilicon for solar cells. He was
certain his process would improve efficiency throughout the
solar industry, but he never got to find out. Support from the
government faded as oil prices returned to earth, and investors
didn’t fill the gap. Schumacher reluctantly dropped his
plans and proceeded with a successful career that saw him earn
over 40 patents and create hundreds of high-paying R&D jobs
through the various technology companies he created in
California.
Three decades later, Schumacher is getting another chance to
make his solar system a reality — in Oregon. His company,
Peak Sun Silicon, has broken ground on a polysilicon
manufacturing plant in Millersburg, north of Albany, with
ambitious plans to raise $718 million and create 500 jobs by
the end of 2011, generating raw materials for a solar
manufacturing industry that is growing robustly both globally
and in Oregon. State officials predict that by this time next
year Oregon will reach $1.4 billion in committed capital for
solar manufacturing. And that figure doesn’t include the
earnings of a growing legion of system installers,
distributors, marketers, electricians, researchers, financial
consultants, lawyers and architects who plan to be soaking up
rays and revenues as the push to solar intensifies.
Oregon is betting big on all forms of renewable energy, but
none has drawn more investment and business interest than the
burgeoning solar industry. At the world’s largest solar
trade show in Munich, Germany, in April there was one U.S.
state with its own booth: Oregon. Solar entrepreneurs enticed
by lucrative incentives, most notably the German powerhouse
SolarWorld, are pouring into the Oregon market, and more are
being recruited, making the state’s goal of a
“self-reinforcing cluster” in the solar industry
seem less like wishful thinking and more like concrete reality.
Residential solar installations are up 35%, commercial projects
are on track to quadruple from 2007 to 2008, and the market
looks even sunnier to the south, where California has launched
a $3.35 billion solar initiative that will further boost demand
for solar equipment that is more and more likely to be made in
Oregon.
The timing is serendipitous. The weak dollar is boosting
exports and sending oil prices to all-time highs. New concerns
and laws regarding climate change are strengthening a market
that is firmly established in Europe and growing everywhere
else. Venture capital investments in solar energy topped $1
billion in the U.S. last year, and two of the hottest stocks on
Wall Street have been First Solar in Phoenix and Sun Power in
San Jose. With a strong Silicon Forest workforce familiar with
the basic technology used in solar manufacturing and some of
the most generous subsidies offered by any state, Oregon has
positioned itself to capitalize mightily on what New York Times
columnist Thomas Friedman recently labeled “the next
great global industry — clean power.”
But for all of the investor exuberance regarding solar, the
fact remains that solar energy is not even close to eclipsing
wind power, much less coal, hydro and even nuclear energy. For
solar to compete without exorbitant subsidies, costs must come
down. That is the goal of the solar companies expanding in
Oregon, and the industry as a whole.
Joseph Reinhart, executive director of the Oregon Solar Energy
Industry Association, says solar’s future is rooted not
in idealism but in “continued and sustained
profitability.” A veteran of the semiconductor industry,
Reinhart doesn’t see any reason why mass production and
innovation can’t bring down costs quickly. “Just
think about the $800 laptop you can buy today,” he says.
“Less than 10 years ago it was $2,500, and you
can’t even compare the functionality. I see the same
thing happening with solar.”
John Schumacher,
CEO of Peak Sun Silicon, stands near the foundation
for Peak Sun’s new polysilicon plant in
Millersburg. Schumacher hopes to create 500 jobs at
his plant in the next three years.
PHOTO BY FRANK
MILLER
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For the past 30 years Oregon’s solar sector has been
dominated by early adopters with plenty of ideas and innovation
but limited access to capital. That has changed dramatically.
According to the Portland-based research firm Clean Edge,
capital investment in renewable energy companies in the United
States has ballooned from $599 million in 2000 to $2.7 billion
in 2007. VC investment in solar topped $1 billion in the nation
in more than 700 financing rounds last year, according to the
Prometheus Institute, a sustainable technology research firm
based in Cambridge, Mass. Global powerhouses such as General
Electric, Google and Applied Materials also are wagering
aggressively on the future of solar as a hedge against rising
energy prices and concerns about the true costs of pollution
and climate change.
Oregon saw the light in the legislative session of 2007,
approving sizable subsidies to companies willing to invest in
solar. The biggest incentive is an aggressive business energy
tax credit or BETC (pronounced “Betsy”) that was
expanded by the state Legislature in January to cover an
enticing 50% of a company’s investments up to $40
million. This super-sized incentive has had an immediate
impact, enabling companies to leverage significant capital to
set up, expand and drive up production in Oregon. Four
companies — SolarWorld, Peak Sun Silicon, Solaicx and PV
Powered — have received state approval for a combined $46
million in tax credits from this one subsidy alone.
A little more than a year ago, PV Powered was a small startup
in Bend with 25 employees building inverters to change the
direct current generated by solar systems to alternating
current compatible with the grid. Now, with the help of $7
million in BETCs and nearly $30 million in venture capital, the
company has grown to more than 60 jobs at a new
100,000-square-foot facility and plans to keep growing in Bend
and begin exporting.
Solaicx vice
president Jeff Jones at the company’s new
manufacturing plant in north Portland.
“It’s fun to be back in an industry
that’s in a growth mode,” says Jones, who
recently left the semiconductor business.
PHOTO BY LEAH NASH
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Gregg Patterson, a former Hewlett Packard vice president and
general manager, took over as CEO and chairman of PV Powered in
March 2007. His eyes grow wide as he describes market
potential. “The worst forecast I’ve seen calls for
a 30% annual growth rate for solar,” he says. “And
the inverter will be a critical component of every
installation.”
Solar experts have long decried the inverter as a weak link in
the photovoltaic chain, causing 80% of a system’s
downtime. Like all inverter manufacturers, PV Powered has
struggled with reliability. But a recent collaboration with
Boeing has helped the company tighten quality control
standards; its inverters come with a 10-year warranty.
The more efficient a system becomes, the better it will
compete. That is one of many lessons Jeff Jones learned from
the boom years of the semiconductor industry. Jones was one of
the original hires when Siltronic moved to Portland in the late
1970s, and in his 28-year career there he trained 450 people to
manufacture semiconductors. Now he’s doing the same thing
with silicon wafers for solar cells.
Jones left Siltronic during a recent downturn and is now vice
president of manufacturing at the new Solaicx manufacturing
plant in North Portland, where the sign on the entrance states
the company’s mission clearly: “Making Solar
Electricity Cost Effective.” Jones compares the solar
market to the market for semiconductors in the early
’80s. “It seems like every time you turn around
someone has figured out something they were never able to
figure out before.”
Solaicx designed and built the machines at the center of its
new Portland factory. The company developed its high-volume
process over five years of research in California backed by
$58.4 million from investors and expanded to Portland in 2007
after considering Austin, Phoenix and Vancouver, Wash. Among
the many government incentives that enticed Solaicx to Portland
was a BETC worth approximately $9 million.
Solaicx CEO Bob Ford says government support played a role in
the decision to set up in Portland, but the region’s
reliable, low-cost power was also a factor, as was the
available workforce. “There were five crystal-growing
operations already here and some of them were closing
down,” he says. “That means you have an immediately
available pool of workers who understand the
process.”
The company has hired more than 50 people and is accepting
applications for crystal growers and wire saw operators. Ford
predicts the number of jobs will double by the end of the year
as the company works out the kinks in its new process and gears
up to meet demand. “The solar industry is a locomotive
that has already left the station,” he proclaims,
“and it is accelerating.”
Dynalectric Oregon
workers Dustin Henry and Jarred Coy install solar
panels at the Portland Habilitation Center as part of
an 870-kilowatt rooftop system.
PHOTO BY LEAH
NASH
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Solaicx and PV Powered are growing quickly and may one day
raise further capital by going public. But for now their
combined market share is minuscule compared to that of
SolarWorld, the vertically integrated German giant that is
building the nation’s largest solar factory plant in
Hillsboro.
SolarWorld vice president Bob Beisner says his company
considered the option of building in Asia to save on labor
costs and rejected it. “We made a decision to manufacture
in the U.S. because we feel the U.S. will become one of the
biggest marketplaces for solar in the world over the next five
to 10 years. For us to be here makes perfect sense. It will
help us to diversify our risks, and the euro exchange rate
makes it very favorable to be manufacturing in the U.S. We were
also dissuaded by intellectual property rights laws in
China.”
Beisner says SolarWorld chose Oregon over states such as
California, Washington and Colorado because the Silicon Forest
“gives us an automatic base of people, vendors and
suppliers that already understand silicon. We can go out and
get crystal, we can go out and get graphite, we can go out and
get the people to maintain our equipment because our equipment
is very similar to what is used in the semiconductor
industry.”
Local and state subsidies also played a role, including an
enterprise zone property tax abatement, $500,000 for workforce
training from the state’s Strategic Reserve Fund and a
whopping $20 million BETC. SolarWorld plans to create 1,000
jobs by 2010 and may expand beyond that depending on the
market.
SolarWorld’s stock peaked last November but has returned
to earth as solar panel prices have gone up instead of down.
The mass production that was supposed to bring down costs in
the industry has created a global shortage of silicon, and
prices for that crucial material have risen from $25 to $400
per kilogram, making it even more of a challenge to bring down
prices.
But the silicon shortage is expected to be short-lived, as new
companies such as Peak Sun Silicon rush to meet demand. Peak
Sun CEO John Schumacher has launched the first of three planned
phases for the Millersburg plant, backed by undisclosed private
capital and a healthy package of subsidies including a
seven-year property tax abatement and a $10 million BETC.
Schumacher has a strong record of turning ideas into profits
for the J.C. Schumacher Company and other enterprises, but he
has yet to prove that his manufacturing system can reliably
produce large volumes of cost-competitive, high-grade
polysilicon. Assuming he succeeds, he will have no shortage of
customers, including SolarWorld and Solaicx, which will need a
steady supply of polysilicon for their processes. Schumacher
predicts other solar companies will move to Oregon because of
the availability of silicon, not to mention the strong support
from state officials.
Christopher Dymond, the solar program manager for the Oregon
Department of Energy (ODOE), says landing SolarWorld and Peak
Sun makes it easier to convince businesses that Oregon is
serious about solar. “When I talk with other companies,
they ask ‘Well, what do you have there already?’
It’s a question that comes early in the
conversation.”
Tim McCabe, newly appointed director of the Oregon Economic
and Community Development Department, says the state is
recruiting 11 solar manufacturing companies from the Munich
trade show, five of which have already visited Oregon.
“We’re trying to capitalize on this because it
won’t last forever,” he says. “More states
are offering incentives and the competition will get
tougher.”
Oregon recently lost out in the battle to recruit Schott
Solar, which plans to invest $500 million and create 1,500 jobs
in Albuquerque, N.M. as a result of an aggressive package of
incentives from New Mexico Gov. Bill Richardson. Other states
have outbid Oregon to attract an estimated $4 billion in
investments from Schuco International, Evergreen Solar,
Optisolar and REC, according to an ODOE report.
Large manufacturers aren’t the only Oregon businesses
investing in subsidized solar. Kettle Foods, Pacific
Botanicals, PepsiCo, Gerding Edlen and Sokol Blosser Winery are
just a few of the companies that have installed solar systems
on their rooftops with support from the Energy Trust of
Oregon.
Kacia Brockman, the trust’s senior solar program
manager, says incentives can make solar installations
attractive, with a return of up to 8% over the life of the
investment. “It’s not a huge moneymaker, but it is
a sound investment,” she says. “And it’s very
low risk, because the systems are guaranteed to produce power
for 20 years.”
SolarWorld VP Bob
Beisner says state support and Silicon Forest
expertise made Hillsboro the right place to build a
solar plant.
PHOTO BY LEAH
NASH
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The more systems that are installed, the more demand there is
for workers with solar expertise. In 2003 the trust had 12
“trade allies” to collaborate on solar
installations. That number has grown to more than 100,
according to Brockman. The trust also has helped train more
than 750 union electricians to assist with solar
installations.
There is also more work than ever for renewable energy
specialists from law firms such as Stoel Rives and Ater Wynne,
research firms such as Clean Edge, developers such as
Commercial Solar Ventures, plus the growing legion of
distributors and marketers moving into Oregon. The
nation’s first renewable energy undergraduate degree at
the Oregon Institute of Technology should bring more expertise
into the industry, as will training programs through Portland
Community College and research efforts at the University of
Oregon and Oregon State University. New products ranging from
solar-powered skylights and scooters to the City of
Portland’s goofy solar-powered garbage cans are just the
beginning. The next big thing will probably be building
materials with solar cells incorporated into them.
According to University of Oregon physics professor Frank
Vignola, two thirds of Oregon receives more solar radiation
than does Florida, and even soggy Astoria gets more sunlight
than Germany, which leads the world in solar installations. The
state’s recently enacted environmental goals — to
achieve 25% of power from renewable sources by 2025, limit
carbon emissions below Kyoto Protocol levels and put 1.5% of
costs for new public buildings toward solar — virtually
guarantee that all new energy investments will be in clean
power. But the same low energy costs that have enticed large
solar manufacturers to move to Oregon also make it impossible
for solar to compete with local power rates. As one developer
admitted at a recent energy forum, “The main thing the
incentives do is to keep a company’s CPA from laughing at
you.”
Nonetheless, solar installations are heating up as businesses,
governments and nonprofits strive to highlight their green
credentials. Last month workers began installing panels for a
870-kilowatt system on the rooftop of the Portland Habilitation
Center near the PDX airport. The project’s developers
billed it the largest solar installation in Oregon, but it
won’t be for long. Larger plans are in the works from
Multnomah County to Arlington to Medford. Portland General
Electric, which boasts more customers willing to pay a premium
for renewable power than any other utility in the nation, is
seeking up to 218 megawatts of additional renewable power
sources, and the utility has set the project threshold low to
encourage solar proposals.
PGE and the Energy Trust of Oregon are also working with
ProLogis, the largest owner of warehouses in the world, to
convert 17 Portland-area roofs into the equivalent of a
3.4-megawatt solar power plant. “So far we’ve done
about 750 rooftops in Oregon,” says Peter West, the
trust’s director of renewable energy. “Just think
about all the roofs in Oregon. We’ve barely touched the
possibilities.”
That’s a common theme throughout the industry. For all
of the renewed excitement about solar energy, it holds less
than one-tenth of 1% of the world’s energy market. The
possibilities for growth and innovation seem endless, but it
remains to be seen whether the industry will succeed where it
failed during the previous oil crisis in lowering costs to
compete without subsidies. Eventually, it will come down to
results. Until then, Oregon’s new crop of solar
innovators will be humming along to meet demand, scrambling to
prove that the state’s incentives have been money well
spent.
Schumacher is confident that the red-hot market for solar is
no passing phase this time, and the main reason behind that is
money. “Nobody ever made any money in this business
before now,” he says. “Now the timing is
right,” says Schumacher. “There is money to be
made. People are willing to invest and take risks because they
see there is no other way out. We have to get rid of our oil
dependence. There’s no other way. It’s got to be
done.”
To comment, email feedback@oregonbusiness.com.
OREGON
DEPARTMENT OF ENERGY:
