By Lux Research

The winners of $2.3 billion of clean energy manufacturing tax credits funded by the U.S. American Reinvestment and Recovery Act of 2009 (ARRA) were announced on January 8, 2010 (see the Lux Research February 18, 2009 LRSJ/LRPJ). The purpose of the tax credits is to spur manufacturing of clean energy goods in the U.S. by accelerating the construction of factories to build them. Clean energy goods in the tax credit are broadly defined and include items from bio-fuel production equipment to electricity storage and from carbon capture equipment to solar and wind equipment.

Advanced vehicles received some funding, with Tesla Motors gaining $16.9 million and Volkswagen Group of America's Chattanooga Operations receiving $150 million, unofficially but apparently for a facility already under construction in Tennessee. However, there was no direct support for lithium ion battery production, most likely an indication that the most attractive lithium ion battery projects were already funded in earlier stages of ARRA. Moreover, it's also potentially a good strategic move as electric vehicle adoption will be slower than originally anticipated and over-subsidized lithium ion battery production could produce a glut of batteries in the future (see the Lux Research report "Unplugging the Hype Around Electric Vehicles"). GEMx Technologies (a part of GE) took home $25.5 million and already has plans underway to build a $100 million factory to produce hybrid sodium metal halide batteries in Schenectady, NY for hybrid trains and grid storage. Two zinc bromine flow battery companies were given awards with ZBB Energy receiving $14.8 million (and stating in the press that they do not have any immediate plans for the new facility they will be building) and Premium Power receiving a modest $3 million; this disparity is surprising as ZBB does not have a clearly better technology. Ice Energy also picked up $1.5 million to expand a facility for producing its systems that store energy as ice. Finally, the major data-oriented smart grid investment made was $5.1 million in Itron to re-equip an existing facility to produce residential smart meters.

In addition, several solar firms won significant credits towards their manufacturing facilities. Polysilicon leaders led the pack with REC Silicon in front, receiving a whopping $154.8 million tax credit for the expansion of its Moses Lake, WA facility, followed close behind by Hemlock – $141.9 million for expansion to a 19,200 MT facility plus $27.3 million for silane production by Dow Corning – and Wacker – $128.4 million for a new facility in Tennessee. Notably, several start-up companies racked-up huge tax credit approvals, including Miasolé ($91.3 million and $10.5 million), CaliSolar ($51.6 million), AE Polysilicon ($44.9 million), Nanosolar ($43.5 million), Stion ($37.5 million), Xunlight ($34.5 million), Solaicx ($18.2 million), Abound Solar ($12.6 million), Amonix ($5.9 million), Suniva ($5.7 million and $3.6 million), and Konarka ($4.0 million). The staggering sums approved for these firms shows the willingness of the ARRA to bet on yet-unproven technology (see the Lux Research August 6, 2009 LRSJ). Overall, these bets should be takenwith a grain of salt – since the final realization of these approvals will depend upon factory financing and completion. While the small facilities by Abound Solar and Amonix are likely to go to completion, some of the other U.S. start-ups may have difficulty proving to investors that they can compete effectively – and essentially from scratch – at huge scale while under strong price and brand competition, regardless of the tax credit.

In contrast to U.S., start-up firms, industry leaders in cell and module manufacturing received far less ambitious tax credit approvals overall, including: SolarWorld ($82.2 million to expand from 100 MW to 500 MW), DuPont ($50.7 million to expand Tedlar production), Schott Solar ($33.0 million), Jabil Circuit ($20.4 million), First Solar ($16.3 million for the announced capacity expansion in its Perrysburg facility), BP Solar ($11.7 million), SunPower ($10.8 million, or four awards of $2.7 million), Yingli Green Energy ($4.5 million for a module assembly facility), Spire Corporation ($2.0 million), and Sharp Electronics ($1.7 million for module manufacturing expansion). In addition, DuPont ($50.7 million for Tedlar manufacturing, plus $11.5 million and $3.5 million), and Dow Chemical ($17.8 million for BIPV cell and module fabrication and $2.2 million for encapsulant manufacturing) all received tax credit approvals for solar material expansions. The more modest applications by well-established firms suggest that they will use the credit to address the specific demand of the North American market, rather than whole-scale expansion. Thus, while these tax credits will certainly create jobs in the U.S. solar market, the long-term bulk will remain in lower-cost manufacturing regions.

Lux Research – January 2010