Sacramento Bee: Roseville solar company survives without subsidies

Roseville solar company weathers industry shakeout – without subsidies

By Rick Daysog The Sacramento Bee

Published: Sunday, Oct. 2, 2011 - 12:00 am | Page 1D

Copyright 2011 The Sacramento Bee. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

After laying off 40 percent of its local staff and phasing out a once promising line of business, Roseville's Solar Power Inc. did the unthinkable last year: It returned nearly $25 million in federal stimulus funding.

The solar industry has come under intense scrutiny in recent weeks with the collapse of Solyndra, the Fremont manufacturer that received $535 million in federal loan guarantees.

But for every Solyndra, there are scores of companies like Solar Power Inc. that have gotten by without federal funding. They provide a counterpoint to the growing criticism that the solar industry requires heavy subsidies.

"Solyndra has given the industry a black eye," said Solar Power CEO Stephen Kircher.

"I think it's huge disservice to the solar industry that … the public now thinks that solar is too expensive, isn't going to work, that it's black magic."

As Solyndra's bankruptcy filing indicates, the nation's solar industry is facing a huge shakeout. Plummeting prices for solar panels, low-cost competition from China, huge upfront costs for consumers and a lack of funding for large-scale projects are just some of the barriers to the industry's growth.

Kircher sat down with The Bee last week at the company's new headquarters in Roseville's Johnson Ranch community for a wide-ranging interview about the solar industry and recent developments at the company.
Solar Power – which is in the middle of changing its name to SPI Solar – was founded in 2005 and is best known for high-profile projects such as a rooftop installation at Staples Center in Los Angeles and a solar farm at Aerojet in Folsom.

But like many companies in the renewable energy sector, Solar Power has struggled, losing money in each of the last four years.

The company's stock has gone from a high of about $4.50 in October 2007 to a low of 18 cents last October. It's now trading around 30 cents per share.

"We've proven in the past that we have good developers and good sales people," Kircher said. "What we've been unable to do is make money with that."

That's about to change thanks to Solar Power's new partnership with LDK Solar Inc.

In March, LDK, a leading Chinese maker of solar panels, acquired a 70 percent stake in the company for $30 million.

Kircher said Solar Power spent about a year looking for a U.S. or foreign partner. It ended up choosing LDK because it not only provided much-needed cash to the company's balance sheets, but also offered access to low-cost solar panels.

The LDK deal also brought financing for future projects, giving Solar Power a huge edge over its competitors.

The magnitude of the financing is staggering for a company of Solar Power's size.

According to Kircher, the China Development Bank will provide Solar Power and LDK with as much as $750 million in funding for new solar projects.

Kircher took issue with "China bashers" who say such a deal takes jobs from California and sends them overseas. He noted that Solar Power has added about 15 employees to its payroll since LDK's investment in March.

"This did not bring China jobs to China, it brought American jobs to America," he said.

Kircher credits the company's Chinese investors for the company's most recent deal, a three-year pact with a New Jersey-based renewable energy developer, KDC Solar LLC.

The arrangement calls for the construction of dozens of solar farms atop large East Coast warehouses and factories. The company estimates that the pact will generate at least $600 million in revenues over the next several years for Solar Power and LDK.

"We're a real player now," said Kircher.

Kircher's optimism represents a stark contrast to the mood at Solar Power a year ago.
In August 2010, Solar Power laid off 25 its 65 Sacramento workers when it unloaded its once-promising residential solar unit.

The company also mothballed plans to build a solar panel factory at McClellan Park, which would have brought more than 100 new jobs to the region.

The project was to be financed by $24.7 million in federal stimulus bonds. It was postponed due to a weak bond market and the lack of local interest in buying panels from big commercial buyers.

The company later returned the funding to the federal government.

A year later, Kircher says that Solar Power and LDK may resurrect its plans for a new solar panel factory, but it probably won't be in the Sacramento area.

There's an irony in this, given Sacramento's much publicized quest to be a green jobs leader. Last month, that effort received a significant boost when a group led by billionaire Richard Branson said it would invest $100 million in local energy efficiency projects.

Even so, the region faces stiff competition for green jobs from places like New Jersey, which offer much more lucrative incentives to build commercial-scale solar systems.

The bulk of Solar Power's pending projects are located in that state.

"We're there because we can make a lot of money," Kircher said.