March 29, 2010, 2:37 PM EDT
By Joe Carroll
March 29 (Bloomberg) -- BP Plc’s decision to halt U.S. output of solar panels may help short-circuit President Barack Obama’s plan to create thousands of jobs in renewable energy.
BP, Europe’s second-largest oil company, said March 26 that it’s stopping manufacturing at its Frederick, Maryland, solar plant and cutting 320 jobs because of high costs and declining panel prices. The announcement came seven weeks after London- based BP said the division that includes solar and wind power was losing almost $183,000 an hour.
Solar companies are ramping up manufacturing in Asia even as they take government incentive funds to hire in the U.S. Suntech Power Holdings Co., which got $2.1 million to assemble panels at a 70-worker plant in Arizona, will employ 11,000 people in China to build components. Tempe, Arizona-based First Solar Inc. plans to do 71 percent of its manufacturing hiring in Malaysia after getting $16.3 million in federal funding to hire 200 people at an Ohio plant.
“We’re creating green jobs, for sure, but they’re in China or Malaysia or India,” Maryland State Senator Alex Mooney, a Republican whose district includes the shuttered BP factory, said today in a telephone interview. “We’re losing these valuable manufacturing jobs, and that’s a concern.”
The Obama administration predicted late last year that $80 billion in stimulus spending on renewable-energy initiatives would help create more than 700,000 jobs. Vice President Joe Biden said the stimulus package was contributing to “unprecedented growth” in the solar and wind industries, according to a December memo distributed to the media.
Jobless Rate
The U.S. unemployment rate was little changed last month at 9.7 percent, the Labor Department’s Bureau of Labor Statistics said on March 26. In Maryland, the jobless rate increased in February to 7.7 percent from 7.5 percent, according to the bureau.
Tax breaks and forcing utilities to buy a certain amount of power from renewable sources won’t be enough to stem the migration of solar manufacturing to lower-cost producers in places such as China and India, Reyad Fezzani, chief executive officer of BP’s solar unit, said today in an interview.
“These days the manufacture of relatively commoditized products will occur where costs are lowest,” Fezzani said. “Of course government incentives are part of the equation, but frankly, they weren’t the driving force in this equation. We just couldn’t make the economics of that factory work anymore.”
The closure of the Frederick factory means BP no longer makes solar panels in the U.S. The move followed the shutdowns last year of three Spanish solar facilities and one Australian plant, Fezzani said. The company is shifting production to joint ventures in China and India, he said.
Prices Tumble
The closures and other cost-cutting measures came after the recession slashed solar-panel prices by 40 percent to 50 percent, Fezzani said. He reiterated a prediction of 50 percent sales growth this year in BP’s solar division.
The WilderHill Clean Energy Index of 54 companies in the renewable-energy sector has fallen 9.8 percent this year after a 29 percent increase in 2009. The best-performing solar company in the index is China’s Renesola Ltd., which has advanced 19 percent this year.
Jeffrey Bencik, an analyst at Kaufman Brothers LP in New York, said BP’s Maryland plant shutdown didn’t dim his outlook for solar stocks, which he said are poised to rise as renewable- energy mandates stoke demand for panels.
“It doesn’t rattle anyone because BP was always pretty small on the solar side and they were never cutting-edge technologically and they were relatively higher cost,” Bencik said. “Besides, it always seemed more of a public-relations business for BP than an area of emphasis.”
U.S. Job Losses
The U.S. probably will continue to lose solar manufacturing jobs to lower-cost environs in Asia, said Bencik, who has a “buy” rating on First Solar shares. Germany also is competitive because of tax breaks, he said.
In Asia, “not only do you get cheaper labor but you also get major tax breaks just not happening here,” Bencik said. “They’re not getting the same incentives here in the states as elsewhere, and that’s pushing these positions overseas.”
BP acquired a 50 percent stake in the Frederick plant’s former owner, Solarex, through its 1998 takeover of Amoco Corp. BP bought the other half of Solarex from Enron Corp. for $45 million in 1999.
Closing the Maryland factory was the final step in a worldwide restructuring of BP’s solar business that reduced costs by 45 percent, the company said in a March 26 statement.
Cutting losses in solar will have little impact on the investment community’s view of the company as a whole, said Iain Reid, an analyst at Macquarie Bank Ltd. in London.
“I take very little interest in BP’s solar,” said Reid, who has a “neutral” rating on BP shares. “Talk to someone who cares.”
Royal Dutch Shell Plc of The Hague is Europe’s largest oil company.
--Editors: Tony Cox, Tina Davis.
Source: http://www.businessweek.com/news/2010-03-29/bp-s-solar-retreat-signals-exodus-of-u-s-renewable-energy-jobs.html
By Joe Carroll
March 29 (Bloomberg) -- BP Plc’s decision to halt U.S. output of solar panels may help short-circuit President Barack Obama’s plan to create thousands of jobs in renewable energy.
BP, Europe’s second-largest oil company, said March 26 that it’s stopping manufacturing at its Frederick, Maryland, solar plant and cutting 320 jobs because of high costs and declining panel prices. The announcement came seven weeks after London- based BP said the division that includes solar and wind power was losing almost $183,000 an hour.
Solar companies are ramping up manufacturing in Asia even as they take government incentive funds to hire in the U.S. Suntech Power Holdings Co., which got $2.1 million to assemble panels at a 70-worker plant in Arizona, will employ 11,000 people in China to build components. Tempe, Arizona-based First Solar Inc. plans to do 71 percent of its manufacturing hiring in Malaysia after getting $16.3 million in federal funding to hire 200 people at an Ohio plant.
“We’re creating green jobs, for sure, but they’re in China or Malaysia or India,” Maryland State Senator Alex Mooney, a Republican whose district includes the shuttered BP factory, said today in a telephone interview. “We’re losing these valuable manufacturing jobs, and that’s a concern.”
The Obama administration predicted late last year that $80 billion in stimulus spending on renewable-energy initiatives would help create more than 700,000 jobs. Vice President Joe Biden said the stimulus package was contributing to “unprecedented growth” in the solar and wind industries, according to a December memo distributed to the media.
Jobless Rate
The U.S. unemployment rate was little changed last month at 9.7 percent, the Labor Department’s Bureau of Labor Statistics said on March 26. In Maryland, the jobless rate increased in February to 7.7 percent from 7.5 percent, according to the bureau.
Tax breaks and forcing utilities to buy a certain amount of power from renewable sources won’t be enough to stem the migration of solar manufacturing to lower-cost producers in places such as China and India, Reyad Fezzani, chief executive officer of BP’s solar unit, said today in an interview.
“These days the manufacture of relatively commoditized products will occur where costs are lowest,” Fezzani said. “Of course government incentives are part of the equation, but frankly, they weren’t the driving force in this equation. We just couldn’t make the economics of that factory work anymore.”
The closure of the Frederick factory means BP no longer makes solar panels in the U.S. The move followed the shutdowns last year of three Spanish solar facilities and one Australian plant, Fezzani said. The company is shifting production to joint ventures in China and India, he said.
Prices Tumble
The closures and other cost-cutting measures came after the recession slashed solar-panel prices by 40 percent to 50 percent, Fezzani said. He reiterated a prediction of 50 percent sales growth this year in BP’s solar division.
The WilderHill Clean Energy Index of 54 companies in the renewable-energy sector has fallen 9.8 percent this year after a 29 percent increase in 2009. The best-performing solar company in the index is China’s Renesola Ltd., which has advanced 19 percent this year.
Jeffrey Bencik, an analyst at Kaufman Brothers LP in New York, said BP’s Maryland plant shutdown didn’t dim his outlook for solar stocks, which he said are poised to rise as renewable- energy mandates stoke demand for panels.
“It doesn’t rattle anyone because BP was always pretty small on the solar side and they were never cutting-edge technologically and they were relatively higher cost,” Bencik said. “Besides, it always seemed more of a public-relations business for BP than an area of emphasis.”
U.S. Job Losses
The U.S. probably will continue to lose solar manufacturing jobs to lower-cost environs in Asia, said Bencik, who has a “buy” rating on First Solar shares. Germany also is competitive because of tax breaks, he said.
In Asia, “not only do you get cheaper labor but you also get major tax breaks just not happening here,” Bencik said. “They’re not getting the same incentives here in the states as elsewhere, and that’s pushing these positions overseas.”
BP acquired a 50 percent stake in the Frederick plant’s former owner, Solarex, through its 1998 takeover of Amoco Corp. BP bought the other half of Solarex from Enron Corp. for $45 million in 1999.
Closing the Maryland factory was the final step in a worldwide restructuring of BP’s solar business that reduced costs by 45 percent, the company said in a March 26 statement.
Cutting losses in solar will have little impact on the investment community’s view of the company as a whole, said Iain Reid, an analyst at Macquarie Bank Ltd. in London.
“I take very little interest in BP’s solar,” said Reid, who has a “neutral” rating on BP shares. “Talk to someone who cares.”
Royal Dutch Shell Plc of The Hague is Europe’s largest oil company.
--Editors: Tony Cox, Tina Davis.
Source: http://www.businessweek.com/news/2010-03-29/bp-s-solar-retreat-signals-exodus-of-u-s-renewable-energy-jobs.html
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