Norcross solar company Suniva, a darling of Georgia’s clean energy sector, is taking the long view.
Its plan to nearly triple its solar cell producton and add 500 jobs is a nearly $100 million bet that the nation’s solar boom keeps on booming, despite doubt surrounding tax subsidies that have fueled growth.
The nation’s recent embrace of solar — driven by companies hoping for greener bona fides and utilities like Georgia Power looking to comply with federal environmental mandates — is central to Suniva’s expansion plans. As is fresh investment from a Chinese clean energy group.
It’s also aided in part by a bounty of federal and state incentives. The federal government — as with many energy sources including oil — has heavily subsidized solar, while the state of Georgia and Gwinnett County have aided Suniva to the tune of millions of dollars in tax credits for new jobs, grants and other incentives.
The Obama Administration’s plan to promote renewable energy sources is expected to keep fueling solar’s growth, but the industry also faces some significant hurdles.
A number of U.S. solar panel makers have closed or merged in recent years amid low profit margins and Chinese competitors that have flooded the market with cheaper panels. And the future of a pair of key federal investment tax credits that have stimulated U.S. development of solar energy is in doubt.
The federal government offers a 30 percent investment tax credit for commercial and residential solar panels. At the end of 2016, the commercial credit is scheduled to be reduced to 10 percent, and the residential credit will disappear unless a divided Congress acts.
The economics for utilities or corporations for installing solar arrays are “vastly less attractive at a 10 percent investment tax credit than a 30 percent tax credit,” said Mark Barnett, analyst with Morningstar.
“(U.S. manufacturers) are going to be under pressure if the 30 percent investment tax credit is not renewed,” he said.
That looming deadline has utilities and other businesses in particular racing to complete solar arrays to cash in before credits become less valuable. That has goosed demand this year and next, but one forecast said solar deployment could stall if the credits aren’t extended.
On its blog, the Solar Electric Power Association noted last month that of the 14 large-scale (what it termed “utility-scale projects”) announced during the second quarter of this year, only one is scheduled to be finished after the commercial tax credit is cut by two-thirds. Three others do not have a specified completion date.
Two of those 14 announced projects are in Georgia, and are expected to produce 55.2 megawatts. Ten other solar plants in Georgia are currently under construction.
Federal environmental mandates, moves by states to require more alternative energy sources and the plunging cost of solar panels could help prevent the industry from losing too much momentum, solar backers say.
‘Demand supports it’
Matt Card, a vice president for Suniva, expressed confidence not only in the business but in the future of solar power – whether the credits are extended in their current forms are not.
The Suniva expansion should wrap up in the second half of 2016 as the credits near their sunset. The expansion will grow Suniva’s solar cell production, as measured by potential power production of cells, from 150 megawatts to more than 400 megawatts a year.
“We have demand that supports it,” Card said.
Suniva says its cells are far more efficient than those of its competitors, earning Suniva’s panels a premium. Suniva is the No. 2 U.S.-based solar panel producer in a hyper competitive market dominated in large part by Chinese firms.
To compete with lower cost competitors, cells made by Suniva in Georgia used to be shipped to China to be assembled into panels and then shipped back.
To protect U.S. solar manufacturers from Chinese competitors, the U.S. enacted tariffs in recent years and Suniva brought its manufacturing back, opening a panel assembly plant in Michigan.
In August, Shunfeng International Clean Energy acquired a nearly two-thirds stake in Suniva, a move that will help Suniva grow domestically, Card said. It’ll also let the Chinese firm tap into the burgeoning U.S. market without tariffs tacked onto its overseas panels.
The cost of panels as measured by the energy they produce has been cut by about 80 percent. The amount of electricity produced by sun in the U.S. also has grown to 20 gigawatts, second only to Germany. Still, it remains a tiny part of energy supply in Georgia and nationwide.
Subsidies not unique
Solar energy backers acknowledge the government’s aid in the solar boom, but also note building new nuclear power units and exploring for new sources of oil and natural gas remain heavily subsidized, too.
As the cost of making panels drops, the price of generating solar power is becoming competitive with other traditional fuels, Card said.
“I don’t think this will be an industry supported by subsidy forever, nor does it need to be,” he said.
Suniva has won contracts with the U.S. government and major corporations including Whole Foods.
But even as the cost of solar cell and panel production has dropped dramatically in recent years, solar power has had to compete with cheap and plentiful domestic natural gas.
Suniva’s expansion will more than double its overall workforce and nearly triple its production of solar cells, which enable solar panels to turn sunlight into electricity.
The company stands to benefit from up to $11 million in incentives from the state of Georgia, including tax credits for jobs created and a $1 million grant, according to an Atlanta Journal-Constitution analysis of state data. That figure doesn’t include the value of job training from the state’s Quick Start program or sales tax breaks on certain equipment and power usage.
That follows at least $2.4 million in tax incentives Suniva has received from Gwinnett County since it was founded.
The company, birthed at Georgia Tech about eight years ago, employs about 380 people, Card said, including about 240 in Georgia.
“We would not as a community incentivize something that we didn’t feel confident about,” said Nick Masino, a senior vice president with Partnership Gwinnett and the Gwinnett Chamber of Commerce. “They are strong and we feel very good about them.’
Solar deployment is rising, but a Congressional Research Service report issued in January called the U.S. industry into question, particularly if the subsidies for solar panel buyers aren’t extended. Competition from solar firms overseas and the low cost and availability of shale gas is also a threat, the report said.
A Bloomberg New Energy Finance Report last month forecasts that growth in solar generating capacity could be cut by two-thirds from 2016 to 2017 if the credits aren’t extended.
It would then take until 2022 for solar growth to return to levels near the capacity coming online this year, the report said. Even so, capacity growth for 2017 would be equivalent to 2012 levels, when the tax incentives were 30 percent.
Bob Gibson, vice president of knowledge with the Solar Electric Power Association, said solar will continue to get cheaper, while natural gas and other fuels are historically volatile. A “hangover” is inevitable in 2017, he said, but solar isn’t going away.
“Solar is becoming ingrained into the electricity marketplace,” he said. “From an exotic niche product, it’s moving into the mainstream.”
This is the second of two articles on Georgia’s solar power industry. We previously looked at how farmers across the state are reaping extra revenue from the rays.