/ 3 February 2009

Struggling solar firms look to public projects

John Fitzpatrick is in a buoyant niche of construction. Building subsidised homes for disadvantaged people, with solar panelled roofs for environmentally friendly power, he is funded by the government.

A British scheme to halve the cost of installing solar panels on schools and social housing is aiding a solar power industry hit by the housing slump.

It’s tiny compared with United States President Barack Obama’s multibillion-dollar plans to invest in cutting carbon emissions from government facilities. But as a slowdown threatens many renewable energy projects, such schemes offer hope for jobs.

”We were set up four years ago to do the predominantly social housing. We’re not seeing any tail-off,” said Fitzpatrick, site manager for the public housing arm of developers Croudace Homes.

New orders in the construction industry fell 14% in the 12 months to November 2008, according to the Office for National Statistics. In the third quarter of 2008 orders for private homes fell by one-third, while those for public housing were steady.

Pitting bail-out funds against climate change to boost ”green growth” has been a mantra among business and political leaders including those meeting in Davos last week. Obama has promised to spend $150-billion on clean energy to create five million jobs.

Outside Fitzpatrick’s office sprouts a clutch of half-built homes, each sporting glinting blue silicon solar panels, intended for people on low incomes in Guildford, a prosperous town 50km south-west of London.

Britain will spend about £80-million ($114,5-million) through 2010 subsidising low-carbon energy generation on buildings, much of that on public housing. This has offset declining interest from residential home-owners.

For private homeowners it costs up to £15 000 ($21 460) to install solar panels to meet half their electricity needs, not including grants, says privately owned Solar Century, which is supplying solar panels to the Guildford site.

That is a significant cost in a recession, especially when mortgage lenders are cautiously eyeing falling house prices. Solar Century says the cost will fall 10% in the second half of 2009.

”New-build is probably at least 25% to 30% down, year on year,” said Derry Newman, Solar Century’s chief executive, referring to installations on new private homes.

”So we’ve redirected our efforts. We do a lot of work with schools, public buildings and government agencies. That’s obviously a sector where revenue isn’t falling, if anything government is trying to push forward purchasing.”

Britain says it plans to bring forward to this year and next spending of £3-billion on houses and roads, to stimulate the economy. Prime Minister Gordon Brown has voiced support for measures to ease social housing construction to house 4,5-million people.

Under an economic stimulus plan which may cost up to $900-billion, Obama plans to spend tens of billions to cut carbon emissions from federal facilities.

The details are not yet clear but the plan being rushed through US Congress is expected to include about $15-billion in grants and loan guarantees for local renewable energy generation and efficiency improvements.

”That will be enough to keep every renewable energy developer busy,” said entrepreneur Jigar Shah, founder of America’s biggest operator of solar panels, SunEdison, a company he recently left to pursue fresh start-ups.

Tens of billions of dollars of clean energy tax breaks may also be included under the stimulus plans. The solar sector has the advantage of being zero-carbon emitting, but needs public subsidy because it is still more costly than rivals such as coal-fired power plants.

The British approach of supplying grants for residential home energy generation — also called microgeneration — differs from that in Germany, the world leader in solar power generation whose model the UK aims to emulate.

Germany guarantees prices for ”green” electricity for 20 years, encouraging homeowners to feed their solar-generated electricity back into the national grid using a so-called feed-in tariff.

According to Citigroup analysts, German residential installations were proceeding ”flat out” at the end of last year, reinforcing the success of the model. Britain is to launch a feed-in tariff for microgeneration from 2010.

Home installations are a slice of a bigger, global solar power market which includes large, centralised clusters of panels in solar parks.

Banks repairing their balance sheets are now reluctant to lend to such projects, so project developers say they are trying to ”educate” alternative investors including any cash-rich private equity firms.

Coupled with Japan’s goal to bring back solar power subsidies for homes, emergency stimulus funds may help bridge a difficult 2009 until renewable energy is revived by countries trying to meet pledges to fight climate change.

But a sweeping transformation of the building sector is still far off, for some.

”Carbon neutral homes? I think it’s going to be impossible, absolutely impossible, I’ve no idea how we’re going to achieve that,” said Fitzpatrick, referring to a UK goal to make all new homes net zero carbon-emitting from 2016.

European solar power capacity nearly doubled in 2008 to about nine gigwatts, enough to power two to three million homes, according to the European Photovoltaic Industry Association. But that is still only about 1% of European power generating capacity. – Reuters