In the third quarter of 2010, venture capital investment in solar companies plummeted to $144 million from $451 million in the year-ago quarter, according to the Cleantech Group, a San Francisco research firm.
The paucity of capital and the sheer size of Chinese solar panel makers have proved particularly problematic for companies like Solyndra and MiaSolé, which make photovoltaic cells using a material called copper indium gallium selenide, or CIGS.
Unlike conventional solar cells, made from silicon wafers, CIGS cells can be deposited on glass or flexible materials, much as ink is printed on rolls of newspaper. Though the technology is less efficient at converting sunlight into electricity, the promise of “thin film” solar cells was that they could be made cheaply. But producing CIGS cells on a mass scale has turned out to be a formidable technological challenge, requiring the invention of specialized manufacturing equipment.
While Silicon Valley companies were working on the problem, silicon prices fell and Chinese companies like JA Solar, Suntech and Yingli Green Energy rapidly expanded production of conventional solar panels, supported by tens of billions of dollars in inexpensive credit from the Chinese government as well as other subsidies like cheap land.
Arno Harris, chief executive of Recurrent Energy, a San Francisco solar developer acquired by Sharp last month, said he chose to sign a supply deal with Yingli because the Chinese company offered low prices, quality products and financing.
“We realized that would enable us to bid competitive power prices from projects that could also be efficiently financed,” Mr. Harris said in an e-mail.
Chinese solar panel makers now supply about 40 percent of the California market, the largest in the United States, and the bulk of the European market, according to Bloomberg New Energy Finance, a research and consulting firm.
“We grow every year with double revenue and almost double capacity,” said Fang Peng, the chief executive of JA Solar, in a telephone interview from the company’s Shanghai headquarters. “At end of the year, we will have 1.8 gigawatts of capacity and will have grown from 4,000 employees at the beginning of this year to more than 11,000.”
By comparison, Solyndra expects to have a total production capacity of 300 megawatts by the end of 2011.
The competition from the Chinese prompted some Silicon Valley companies, like AQT Solar, to pursue new strategies to survive.