Lessons from Evergreen Solar

Evergreen Solar Panel

Evergreen Solar is not sustainable—that is the conclusion of the Massachusetts Economic Assistance Coordinating Council, the Commonwealth board charged with overseeing tax breaks to business that voted May19, 2011 to end the 20-year, $15 million property tax break and terminate the $7.5 million in state tax credits for Evergreen Solar Inc., two months after the company shut its manufacturing plant in Devens, Massachusetts built with state aid and eliminated 800 jobs. Adding insult to injury Evergreen borrowed money to build a new solar manufacturing plant in China.

None of this should have surprised the Commonwealth of Massachusetts.  Evergreen Solar disclosed all of it in its 2009 Annual Report for all to see.

Evergreen must repay the current year’s tax break value of about $1.5 million out of the $4.5 million in tax breaks received to date.  Massachusetts has yet to decide whether any of the $21 million in other grants the company received to date must also be repaid.

In that 2009 Annual Report Evergreen Solar reported:

Although solar power can provide a cost-effective alternative for off-grid applications, we believe the principal challenge to widespread adoption of solar power for on-grid applications is reducing manufacturing costs so that the cost of installed solar panels is equal to or less than the cost of grid-generated electricity without impairing product reliability. This concept is known as reaching grid parity.” (page 14)

Many of our existing and potential competitors have substantially greater financial, manufacturing and other resources than we currently do. Our competitors’ greater size and, in some cases, longer operating histories provide them with a competitive advantage with respect to manufacturing costs because of their economies of scale, production facilities located in low cost manufacturing regions and their ability to purchase raw materials at lower prices. For example, those of our competitors that also manufacture semiconductors may source both semiconductor grade silicon wafers and solar grade silicon wafers from the same supplier. As a result, such competitors may have stronger bargaining power with the supplier and have an advantage over us in pricing as well as securing silicon wafer supplies at times of shortages.” (page 19)

We may need to raise significant additional capital in order to continue to grow our business and fund our operations, as planned, which may not be available on acceptable terms or at all.” (page 20)

“We must continue to invest significantly in research and development to support our unique wafer technology, and these efforts may not result in continued and necessary improvement in our technology.” (page 20)

“The success of our business depends on the continuing contributions of our key personnel and our ability to attract and retain new qualified employees, especially in China.” (page 24)

Evergreen Solar thus described its risk position as being unable to assure investors that its business will generate sufficient cash flows from operations, or that future borrowings will be available in amounts sufficient and on terms reasonable to support liquidity needs. If Evergreen is ever unable to generate sufficient cash flow to service debt obligations, it may need to refinance or restructure debt, including senior convertible notes, sell assets, reduce or delay capital investments, or seek to raise additional capital. It may incur additional indebtedness. If it does so, increased debt service requirements may adversely affect the ability to meet payment obligations on currently outstanding senior convertible notes and otherwise successfully grow and operate the business.

Lessons from Evergreen Solar

  • Massachusetts wanted to be a true believer and 800 jobs promised in the recession was too good to pass up.  But we’re learning that being green does not mean being sustainable.  Evergreen Solar expanded just as the solar market was reeling from feed-in-tariff subsidy cuts in Spain and later Germany the then hottest markets in the world.  Those FiT cuts were caused by rising and unsustainable costs to the Spanish and German governments seeking, just as Massachusetts had done, to prop up local business and create jobs when they were needed most.  Good intentions but solar energy is governed by global markets for commodity prices—and few play that game better than China. So when China saw the luscious FiT subsidy being dangled in Europe it undercut the prices of local manufacturers for photovoltaic panels and took both market share and FiT subsidy Euros and sent them back to China.  The European solar manufacturers were—pardon the pun FiT to be tied—but they were also still screwed because they could not meet or beat the low Chinese prices and saw their business fade away as unsustainable in a market that had become dependent upon unsustainable government subsidies. These EU PV makers then dumped PV panels on the global commodity market at fire sale prices thus causing a worldwide problem of falling prices that swamped many solar players including Evergreen.
  • Feed-in-Tariffs are Risky Business. Th EU story of good intentions gone unfulfilled is also a lesson  unfortunately re-learned many times as disappointed results this time in Massachusetts remind us that when we seek to build entire new industries on a bed of sand (global commodity market prices) our business future (sales, revenue growth and supply chain channels) can be toppled by tremors in the markets half a world away.
  • Economic Development must be Economic. The other lesson is state governments are running out of our money for tax breaks seeking to steal business from other states in a zero sum game of subsidy chasing that was never good business.  If a business prospect is not sustainable (read: competitive) without subsidies and tax credits it is unlikely to be sustainable (read: profitable, tax-paying and job creating over time) and no shower of cash from politicians seeking good press will make it so.
  • America’s Sustainable Energy Policy is Reliability. It is also true that transforming America’s energy policy by promoting the use of clean renewable energy is a worthy goal, but we better not kill off the traditional, conventional, reliable sources of energy until we are certain that the new supplies from these clean renewable sources are sustainably sustainable. One profoundly sobering statistic is to consider that the sum of all global solar energy capacity installed to date (8 GW) is slightly more than the amount of coal-fired power generation the proposed US EPA emissions rules (5 GW) would force into retirement as uneconomic—in the Midwest ISO market alone.

The next time you consider making any energy investment—-read the fine print carefully.


  1. This can entirely happen.Building facilities of scale is the way out.Also systematic research to improve the effeciency.There is definetly a point where grid parity is achievable- it at some 60% of present costs. But giving support till that happens is also important

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