1366 Technologies has got a $150 million DOE Loan Guarantee as the startup looks to raise $300 million to fund its solar wafer producing factory.Note the company is using an innovative technology which it says will be game changer in reducing the costs for making solar wafers.Note Solar Wafer Companies in China have managed to raise scale and reduce costs substantially in recent years winning marketshare from European companies like REC and Solarworld.The smaller companies like PV Crystalox are in deep trouble because of their high cost of operations and are trading at a fractional of their book value.Its a tough environment for solar companies especially if they are starting out as established solar panel companies like Evergreen Solar are facing potential bankruptcy.Evergreen Solar got millions of dollars in grants and loans from Massachusetts however the company has been forced to shut down its factory.Like 1366 Technologies Evergreen too uses a unique technology “String Ribbon” to producer solar wafers .However it has not been able to scale and reduce costs compared to the mainstream silicon solar wafer producers like LDK and GCL.

New Solar Wafer Technology

The last 5-10 years have seen a dramatic decline in the costs of silicon solar panel, mainly due to the improvement in manufacturing processes and polysiliconincrease in scale. The cost drop has been so fast and so steep that it has made solar energy competitive with major fossil fuels, such as coal and gas in most parts of the world.

Solar energy is not only being installed due to its cheap price and rapid installation, but also majorly because of its green attributes and environment friendly nature. However, the solar panel manufacturing process has more or less remained the same with most of the cost decline coming due improvement of existing processes. Though technology has played a role in improving the efficiency of silicon solar cells that has not been the major factor behind the decline in prices of solar panels from $4/watt in 2008, to around 45 cents/watt now.

Now a new startup plans to radically change the manufacturing of solar panels through a new technique. The firm 1366 Technologies which has been around for a long time is now starting to make commercial shipments of its uniquely manufactured solar wafers. These solar wafers are the main raw materials for the production of solar cells, which are an intermediate step to the production of solar panels. Solar wafer is the biggest cost component of a solar cell and a cost decline in solar cells will lead to a further sharp cut in the cost of solar panels.

Read more bout 1366 Technologies’ disrupting technology here.

1366 Technologies is producing solar wafers by molding of solar wafers, rather than following the traditional process of production of polysilicon ingots and then slicing them into wafers. 1366 claims that this process reduces the amount of polysilicon usage in wafers by 50%, which will allow almost 25% of the cost of the wafers to be saved in terms of raw material costs. These wafers can also be used in existing production lines, which will make it easy to adopt this product by solar cell companies.

Another USA company Evergreen Solar had got a fair bit of success by making wafers differently, but the company required that its wafer should be used in its own solar cell and module making processes, which limited its adaptability. Like many of the other solar startups Evergreen also folded up, as it was unable to compete with the large scale of the Chinese major solar panel companies.

1366 Technologies is also making further R&D to reduce the size of the wafers, by planning a wafer with differential thickness in different areas of the solar wafers. This will reduce the incidence of breakage of the thin wafers, which is the main impediment behind the further improvement of solar wafers going forward. Solar wafers which are already at the 180-200 um thickness, are now facing trouble in reducing the thickness as thin wafers break more easily.

Green Investing

Choosing investments options that support your environmental concerns can be a challenge. Attempting to structure your portfolio around emerging green technologies has historically proven to be less profitable. Some of the prime examples in this regard could be the companies like Evergreen Solar Inc. and Coda Automotive that not only had strong investor support but also substantial government backing by way of low or no interest loans and tax incentives. If it is difficult to choose a winning stock with millions of government backing to support it, then simply choosing one based on its own financials would be somewhat difficult and impossible.

Another concern to the planet conscious investor is the fact very often the information you are looking at is based only on its holdings in it home country. A large corporation often has manufacturing plants scattered widely throughout the world. A primary reason for this is less regulatory requirement in some regions of the world than others. The fact a company has an award in the US or Europe for operations there says nothing about its stewardship in less monitored areas.

How to Balance between Profit making and Green Investing

As with any investing, your strategy must include areas you can expect to make reasonable profits in. If you cannot
accurately determine a company’s commitment to the environmental programs when choosing from the mainstream companies or newer/ start-up green technologies which need to be reserved for high risk capital only, then there are few choices left. One area that has shown growth is in the construction sector. While green technology companies have been hit or miss with far more misses, the growth of construction companies in the last 2 years has been impressive and choosing the ones that specialize in the field of construction implementing environmentally sound building practices can be as close to a sure bet as you can get. The difficulty in them is that most of them are privately held stocks, so investment opportunities are limited.

One area that you invest in with high profit expectations is in the Foreign Currency Exchange markets. Trading currencies you are simply facilitating global trade rather being forced to choose a particular stock to support. This is obviously speculative investment, but also gives the opportunity to earn high returns equally well in an up or down global economy. While considered a risk capital investment by most when trading on the Forex, it will still help diversify a limited portfolio.

To balance off the higher risk of your Forex and Green technology emerging stocks, look at government and municipal bonds being sold to fund environmentally progressive projects such as solar installation into public buildings and clean water or air initiatives. These will provide small, but relatively safe returns that still make clear where your values lie. You may also consider making your commitment known by the purchase of Renewable Energy Certificates to help sponsor and endorse clean energy initiatives.

The Chinese have captured the global solar panel manufacturing industry by investing billions of dollars in building almostSolar Panels 40-50 GW of capacity even when the global demand is about 30 GW. Their low cost manufacturing has bankrupted erstwhile solar panel leaders such as Q-Cells, which have been bought for pennies to the dollar by Chinese giants as Hanergy. Major US solar panel makers such as Evergreen Solar, United Solar Ovonics have also gone under as they are unable to match the super low costs of Chinese solar panels. The US government imposed moderate CVD and AD duties on Chinese imports of solar panels last year. Europe also started an investigation into solar panel imports into Europe.

Will Europe loose the battle with China

However, Chinese pressure has made Europe buckle as major countries such as Germany were not willing to offend China which is one of the biggest export markets for German companies. After imposing a preliminary duty of 11.8%, both sides started negotiating. The Chinese took a very hard-line position. They have showed the stick by imposing 50% plus duties on imports of polysilicon from the USA. They did not impose big duties on poly imports from European poly factories of Wacker. The two sides have now finally signed an agreement in which China will be allowed to export 7 GW of solar panels at a minimum price of 56 eurocents/watt. This is a victory for China as European demand will be around 10-12 GW this year. The European companies will find it difficult to match the minimum price set, which means that the Chinese companies will be able to meet their full quota.

I think Europe has taken a prudent position, as most of the European solar manufacturing is shut down anyway. If they had not given China an opening, it would have unnecessarily started a mini-green trade war between these 2 trade blocs. Chinese solar panels would have been substituted by Korean/Taiwanese/Indian solar panels. This would not have helped the European cause anyway. The European solar industry also benefits from cheap Chinese solar panels which helps in lowering the overall installation cost of solar systems. I don’t think that the German and Italian solar booms would have been possible without the massive influx of super cheap solar panels from China. Solar panel prices have gone down from $4/watt in 2009 to around 60c/watt currently and this has been mainly due to massive investment by the Chinese companies which has substantially lowered the costs.

Solar Wafers are traditionally manufactured by growing polysilicon crystals in specialized furnaces. These crystals are then sawed to make thin slices of purified polysilicon which is then acted upon by various chemical processes to convert them into solar cells. There have been a number of companies in the past that have tried to find an alternative cheap way to make these solar wafers. The companies have tried to cut down the crystal growing and wafering processes by directly converting the polysilicon or silence gas into wafers.

Read on GWI about Global Solar Thin Film Companies.

Evergreen Solar was the first successful company to use a different “ribbon” approach to make solar wafers. The company enjoyed sharp growth and saw its stock price soar in 2008. However, the company could not compete with the low costs of traditional wafer companies. Also its wafers were not compatible with most of the cell making equipment used by most cell and module makers. The company also used to make cells and panels itself and did not license the technology. The company is now bankrupt unable to compete with the larger players. Evergreen Solar planned to shutter US factories to open a solar plant in Wuhan, China with Chinese government support. Evergreen Solar literally cried for government support without getting any.

Crystal Solar is another company that is now coming up with a thin wafer process and is backed by NREL. The company hopes to cut the module cost by half as it starts production in 2014.

I have seen a number of past cases where start-ups have bragged about totally changing the industry and then going bankrupt. Solyndra, Nanosolar, Sulfurcell, Energy Conversion Devices and the list goes on and on. It will be interesting to watch whether Crystal succeeds or joins the huge graveyard of solar start-ups.


US-based ultra-thin silicon wafer start-up Crystal Solar is planning to complete pilot production of its ‘Epi Thin-Silicon’ technology this year with volume production targeted sometime in 2014.The company claimed its technology would result in overall PV module production costs being reduced by approximately 50%. Dow Corning had also previously announced that it would work with Crystal Solar to jointly develop new products for building-integrated PV applications, using its ‘direct gas to wafer’ process for ultra-thin wafers.


The whole solar industry has been facing a massive overcapacity problem since the beginning of 2011. Thousands of solar companies have gone bankrupt, but the solar glut has yet to resolve itself. The biggest solar companies continue to reduce capacity and fire thousands in order to adjust to the “new normal”. China is particularly vulnerable as the country has a huge solar manufacturing base with an estimated 400,000 people being directly employed by the industry. The prospects of sanctions by the EU has sent chills down the spines of the biggest solar panel companies – Yingli Solar (NYSE: YGE), Trina Solar (NYSE: TSL) and Suntech (NYSE: STP). The reason is that China exported almost 20 billion euros worth of solar panels to Europe in 2011.

Why Global Solar Panel Wars are occurring

The rapid decline in costs achieved by the major China companies has thrown the business models of other solar companies in a complete disarray. Chinese solar majors not only managed to drastically decrease the cost of making solar panels, but also expanded capacity at an exponential rate. This has led to a situation that despite the rapid growth in global demand, the industry is facing a massive oversupply of solar modules. Western Countries annoyed by the decimation of their solar industry and jobs have retaliated by either imposing or planning to impose duties on Chinese solar panels imports. Many countries and regions have also tried to protect their nascent solar manufacturers through domestic content rules. These have become contentious issues with Japan and China complaining to the WTORead more about the how global solar panel wars have panned out till date.

Past actions on the Diplomatic Front by China

China has been proactively trying to help its solar industry due to the fear of what would happen if the 400,000 jobs in the solar industry disappeared all of a sudden. The industry had become bloated mainly due to the heavy subsidies given by the local Chinese government and banks. Now with capacity almost double that of global demand, the whole industry is sick. The glut of Chinese solar panels has made the other governments angry as thousands of western solar manufacturers have shut down with many of them making media headlines such as Solyndra, Q-Cells, Abound Solar, Evergreen Solar etc. The Chinese Government instead of reducing its support has been fighting through measures like:

a) Protesting about the subsidies given by the US government to the cleantech industry.

b) Filing a case against Europe in WTO about the local domestic content requirements for solar panels by Italy and Greece.

c) Starting an anti dumping case against polysilicon imports as it tries to leverage all its cards. However the problems have kept on growing with India planning to impose duties on imports of cheap solar panelsto protect its dying domestic makers like Tata Power, Indosolar, Websol and others.

New Chinese Moves being Planned

1) Increase Chinese Solar Capacity Target from 21 to 40 GW target by 2015 – China is proposing to drastically increase the domestic installations from around 21 GW by 2014 to 40 GW. This would mean that almost 7-8 GW of solar panel capacity would be installed each year till 2015 giving a lifeline to the beleaguered domestic firms reeling from huge overcapacity and underutilization. It would benefit the biggest solar module companies like Yingli , JA Solar (JASO), LDK and Suntech who have a substantial presence in the domestic market.

2) Polysilicon duties of 30-50% on imports of polysilicon – The Chinese government may impose the AD duties before imposition on European duties. This will help its polysilicon producers 90% of which have already closed down. Only a few companies like GCL, Daqo (NYSE: DQ), Renesola (NYSE: SOL) are producing poly at this point, that too at 50% utilization even as poly imports have surged. This won’t have a big impact on consumers of poly as prices are expected to go to $18-20/kg from $15/kg now which would add at most 3c/watt cost for the overall modules. Note LDK has completely stopped production despite having a 17000 ton capacity.

3) Doubled outlay for Golden Sun Program – Recent reports indicate that China has added almost $1 billion in support under the Golden Sun Program with subsidies going to 100 solar panel makers and developers to urgently boost the cash strapped companies.

4) Bank Support – Chinese banks are an extension of the government and give credit based on government diktat rather than profitability. They continue to support bankrupt companies and are giving even bigger loans to solar companies despite western criticism. Jinko Solar, the 7th biggest module supplier got a $1 billion credit line from CDB.

Which Stocks are the Worst Affected

Chinese solar stocks for the most part trade together as a group and its very hard to pick winners and losers on a sustained basis. However during the last year , the extended downturn has led to a sharp decline in the worst performers such as

1) LDK Solar (NYSE: LDK) – The company with a debt of more than $3 billion and book value of less than $50 million is in the worst shape of all the Chinese solar stocks. I have already reviewed their problems in an earlier post of how they have stopped polysilicon production completely and is firing thousands each quarter. The company is trying to raise more debt to restart operations but outlook looks bleak.

2) Suntech (NYSE: STP) – Suntech Power is the second worst stock in the group and has been spending time in pennydom for the last few months as news of a fraud has made the company lose millions of dollars at a time when it can barely afford to lose even a penny.

The other Chinese solar stocks have also declined as well but they are not in the dire straits as the two discussed above. The best performers have been companies with low debt ratio, low costs and with good operations management eg. Renesola and Jinko. The better solar stocks have also outperformed as the market has started pricing in bankruptcy for the worst companies.


There is no free market capitalism in the solar industry which has resulted in such a deep and prolonged downturn in the industry. The excesses are not going away and the weaker players (LDK, Suntech) continue to survive due to government largesse. The Chinese government continues to prolong the pain by giving billions of dollars in subsidies preventing the industry from returning to a healthy demand supply balance. The recent Chinese moves have led to a temporary rally in stocks. But a sustained up move is difficult unless the noncompetitive capacity and players are removed from the market. That will only happen if the Chinese government stops giving handouts and bailouts. Till then the Chinese solar stocks will keep moving like a yo-yo.

Read about Cheap Solar Panels.