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The solar panel industry is grappling with severe overcapacity and collapsing prices globally, but that has not stopped a Chinese hydroelectric dam-building company from buying two Western producers of an alternative technology that has struggled to compete against conventional designs. Hanergy Holding Group, a privately held company based in Beijing, announced in the first week of January that it had completed its acquisition of MiaSole, a 100-employee manufacturer of thin-film solar modules based in Santa Clara, California.
The deal follows Hanergy's completion in late September of its acquisition of the 400-employee thin-film solar unit of Q Cells, an insolvent German solar company. The two deals have allowed Hanergy to acquire at low cost an array of patents developed at the cost of hundreds of millions of dollars of venture capital investments.
Thin-film solar modules use more exotic materials than conventional solar panels, which are made from crystalline silicon. Most thin-film modules are slightly less efficient at converting sunlight into electricity than conventional panels, but they are much lighter, which makes them easier to mount in locations that may not support the weight of conventional panels.
Supporters of thin-film technology contend that it has the potential for considerable further efficiency gains that may not be possible for conventional panels, which have been heavily researched for decades. And some research has shown that thin-film can outperform conventional silicon-based panels at high temperatures, like in deserts, where solar farms are often located.
A cluster of Silicon Valley companies, including MiaSole, SoloPower and the now-bankrupt Solyndra, spent years and hundreds of millions of dollars trying to develop efficient thin-film panels. But even as the newer companies made technological improvements, Chinese companies embarked on a frenzy of investment in conventional panels that led to a 17-fold increase in Chinese solar manufacturing capacity over four years. That led to a three-quarters drop in the price per watt, prompting unfair-trade complaints against the Chinese in the US and Europe, and causing bankruptcy or severe production cuts at a dozen North American solar producers and a dozen European producers.
"Going head to head against the Asian low-cost, mass-volume crystalline silicon manufacturers is not a wise strategy if you're trying to produce an ultra-cheap module in the United States or in high-cost markets," said Neil Auerbach, managing partner of Hudson Clean Energy Partners, a SoloPower investor. "But if you're adopting advanced technology, you have a niche strategy in which those incumbents do not have a competitive edge because they don't really have a product that suits."
Venture capital financing
The failure of Solyndra, which had received a loan guarantee from the Obama administration, cost US taxpayers about $500 million and became a political football. The industry's broader competitive issues also prompted private investors to flee the sector.
Last year, venture capital financing in the solar sector plummeted nearly 50 percent to $992 million in 103 deals from $1.9 billion in 108 deals in 2011, according to Mercom Capital Group, a cleantech research and communications company.
Chinese regulators, too, have begun trying to deal with the overcapacity, discouraging their banks from making more large loans to the solar panel sector.
Li Hejun, the chairman of Hanergy, said at a news conference in Beijing that the company's hydroelectric dams produce several hundred million dollars a year in free cash flow, so it can finance its own investments in solar, which already include six thin-film solar factories, plus three more under construction.
"Everyone knows about the overcapacity in solar energy industry in China, but for us industrial insiders, this overcapacity is but a relative one," he said. "For those who have technology, the situation is the opposite." Hanergy has pursued thin-film technology as a way to distinguish itself from the pack of large manufacturers like Suntech and Yingli that make conventional crystalline silicon modules. But Hanergy had originally relied on a much less efficient material, amorphous silicon. Shyam Mehta, a senior analyst at GTM Research, a renewable energy consulting firm, said that MiaSole, which uses a blend of other materials, makes the highest-efficiency modules among its thin-film competitors. "It's a better technology choice."
Li said he planned to keep MiaSole's manufacturing and research operations and staff in California, sending only two Chinese executives to join them. Hanergy also plans a larger factory in China using MiaSole's technology. John Carrington, the chief executive of MiaSole, said in a telephone call that he believed there would still be demand for thin-film modules. "I don't know if there is overcapacity for really good, efficient technology."
Thin-film demand
Many of the thin-film companies are overhauling their strategies. First Solar, an industry leader, restructured last year and sees itself as a developer and seller of solar power plants, rather than as a module maker. Eventually, the company plans to produce panels only for its own projects rather than selling them as well.
Other companies are pursuing niche applications for their products, like SoloPower, a start-up that has begun producing flexible thin-film panels in Oregon that are aimed at commercial and industrial rooftops that cannot support the weight of glass-encased modules, whether conventional crystalline silicon or thin film. Hanergy reached an agreement to buy the Solibro subsidiary of Q Cells in June, and signed its agreement to acquire MiaSole in September. After obtaining various government approvals in China, Germany and the US, Hanergy completed the Solibro deal at the end of September and the MiaSole deal at the end of December, but delayed its press conference until this week in the hope that it would attract more attention, people involved in the deal said. Hanergy reportedly agreed to pay just $30 million for MiaSole, but Li said that this was only what Hanergy had repaid to the company's creditors.
Li did not indicate a price in his remarks in Chinese, but in the English translation, his translator said that the purchase price had been about one-tenth of the $1.2 billion that MiaSole's board initially sought for the company. MiaSole's investors, mostly venture capital firms, including Kleiner Perkins Caufield & Byers and VantagePoint Capital Partners, had put more than $550 million into the company, but were unwilling to provide the additional large sums the company needed. More than 90 potential purchasers looked at the company, but it attracted few bidders.
"Unfortunately we were not able to find somebody that was just going to be a partner," said Stephan Dolezalek, a managing director at VantagePoint who was a member of MiaSole's board. "What we found in Hanergy was someone who was large in and of themselves but also had the Chinese government backing and so provided a combination of scale and government backing but was only willing to do so in a complete acquisition of the company." Hanergy's main business lies in building large hydroelectric dams, including a project in northern Myanmar that has been criticised by environmental groups, who object that it would flood a large area to export electricity to China. (The New York Times News Service)
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