General Electric will acquire the major assets of the largest US-owned maker of solar equipment, in a move the solar power industry sees as a major vote of confidence in the business.
A federal bankruptcy court judge in Delaware on Friday approved GE's plan to buy the bulk of AstroPower for US$15 million in cash and an estimated US$3.5 million in debt, along with other liabilities to be settled when the deal closes at the end of the month. It would be the most decisive step yet by GE into the so-far unprofitable business of generating electricity from sunlight, a field in which GE researchers have dabbled for nearly half a century.
Previously, GE confined its growing interest in this field, known as photovoltaics, to modest increases in research spending and the quiet acquisition 18 months ago, for an undisclosed sum, of Railway Technology Inc, which makes a line of solar-powered railroad switches.
GE on Friday declined to discuss its plans for AstroPower. By GE standards, the acquisition is a modest bet. The cost will be but a half-day's earnings for the company, which had net income last year of US$15 billion on revenue of more than US$134 billion. But if the investment looks miniscule from a Wall Street perspective, it is still enough to excite many people involved with solar energy.
"It shows we are a mainstream industry, or moving that way," said Bob Kenedi, general manager of the solar systems division of Sharp Electronics, a US subsidiary of the Sharp Corporation of Japan.
Sharp has emerged as the clear market leader in solar power equipment, with a sixfold increase in production since 1999.
Worldwide, annual revenue from solar power equipment and installation, which reached US$4.7 billion last year, will climb to US$30.8 billion in 2013, according to a recent forecast from Clean Edge, a market research firm in San Francisco.
Solar energy is profitable in numerous niche markets, including powering satellites and providing electricity for oil rigs and devices like rural water pumps, road signs and emergency telephones that cannot be conveniently linked to power grids. But it is still regarded as too expensive to be widely adopted for powering homes and businesses now supplied by utilities. That has left even deep-pocketed manufacturers like Sharp, Sanyo Electric, the Kyocera Corporation and the solar subsidiaries of BP and Shell dependent on governments and power companies to subsidize sales.
None of the major players claims to be profitable, and some former participants in the industry remain dismissive about the potential of solar power. But analysts and solar manufacturers figure GE is responding to signs that rising prices for hydrocarbon-based fuels and improvements in solar products and manufacturing technology have laid the foundation for large-scale producers to finally start making steady profits -- even as major supporters like the Japanese government and California reduce subsidies to consumers.
"We're in line for our best year yet," said Steven Westwell, president and chief executive of BP Solar, which entered the industry 30 years ago and hopes to become profitable this year. Demand in California, the leading US market, is so strong that state subsidies for solar equipment purchases could be used up by September, he said.
Still, in an industry that has frequently disappointed its advocates, Westwell and analysts have no trouble imagining ways that trouble could strike again. By the end of the year, they said, the industry could be hurt by overcapacity because so many new solar cell manufacturing projects are under way. The industry also could be hit by rising prices for silicon -- the basic ingredient in most photovoltaic cells -- because manufacturers of the raw materials have been slower to add capacity. Most of them view supplying the solar industry as a sideline to making more expensive silicon products for the computer and consumer electronics industry.
GE's long-term goals for solar energy would make such concerns irrelevant. Its recent attention to photovoltaics grew out of research on light-emitting plastics. Feeding electricity into such plastics creates light, but researchers knew that they could also do the reverse -- use light to create electricity.
As they began to look more closely at developments in the photovoltaics market, GE researchers also realized that they had expertise to apply to silicon designs that could pay off even if the plastics project ultimately failed. And pursuing the technology supported the goal of Jeffrey Immelt, GE's chairman and chief executive, to become a leader in markets based on renewable-energy technology and energy efficiency, including wind power, fuel cells, hydrogen storage and microturbines.
"If you say you are doing renewables, and you are not doing photovoltaics, you are missing a huge part of it," said Anil Duggal, head of GE's light-energy conversion research program.
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