IMAGE: SOLAR CELLS ON ROOFTOP
Pardee Homes  /  AP file
This San Diego home was built with solar cells that double as roofing material. The developer, Pardee Homes, wants to build a 2,450-unit community that runs entirely on solar power. The boom in solar for homes and businesses has led to a shortage of primary material, however.
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updated 2/24/2006 12:19:47 PM ET 2006-02-24T17:19:47

In a state where tropical sunshine is near constant and electricity costs twice the national average, solar power seems an easy answer.

But with the panels that produce the electricity already popular abroad and a batch of new domestic tax credits just kicking in, solar suppliers locally and around the globe are scrambling for stock.

“Those of us with a long vision here aren’t jumping up and down,” said Rick Reed, who has witnessed the fickleness of government incentives for his industry for 25 years. “But we’re sure happy business is good.”

The problem is that while demand for solar panels is increasing, the ability to meet that demand hasn’t caught up, said Reed, president of the Hawaii Solar Energy Association.

The pressure could soon become even tougher in Hawaii as state politicians push for bigger incentives for residents to install the panels. Gov. Linda Lingle has proposed boosting the caps on credits for single family homes from the current $1,750 to $10,000. The caps for businesses would double to $500,000.

With a growth rate of almost 40 percent per year over the past five years, the solar panel industry is today worth $15 billion globally, said Rhone Resch, president of the Solar Energy Industries Association.

Bush push for solar
And the United States is beginning to catch on.

Citing soaring oil prices and the need for a more reliable and environmentally friendly fuel sources, a number of states and the federal government are pushing rebates and tax credits to encourage people to install solar panels on their roofs.

In a plan detailed earlier this month, President Bush outlined a strategy to increase domestic solar power capacity to up to 10,000 megawatts over the next decade. That’s up from a current capacity of about 175 megawatts, according to the Solar Energy Industries Association.

Homeowners in January could begin claiming federal tax credits for installing solar power for the first time in 20 years. And in a bold move earlier this month, California energy regulators approved a plan to provide $2.9 billion in rebates for solar panels between 2007 and 2016.

Add to that, major government programs in Germany and Japan have already got those countries’ markets humming — and demand has quickly outstripped supply.

At the same time, however, the solar panel industry is being forced to slow down. That’s because popularity has put a squeeze on the supply of the silicon used as the key ingredient in the panels — as well as the brains of computers and other high-tech gizmos.

Polysilicon shortage
The material used is known as polysilicon, a form of silicon refined to form crystals that are then sliced into wafers used to form the silicon cells for solar panels or the microchips in computers and cell phones.

In 2006 the solar industry is on track to use more of the silicon, known as polysilicon, than the entire semiconductor industry, Resch said.

“We’ve grown to such a point that there is no available polysilicon feedstock to continue to put into the solar industry so that we can grow at that rate,” he said.

Historically solar energy was only a third of the market for the polysilicon also used in microchips, said Lara Chamness, senior market analyst for the trade group Semiconductor Equipment and Material International.

“But the solar guys are using more and more of the polysilicon than ever before. So that’s causing a really tight supply situation and prices are going up accordingly,” she said.

Contract prices are coming in at $70 per kilogram, up from $30 per kilogram just two years ago, she said.

The big players on the microchip market, such as IBM and Intel, are aware of the problem, but they aren’t showing any fear, she said. A spokesman for high-tech giant Intel said his company has long-term contracts with its suppliers.

And those companies use very little of the precious material in each of their products, so they can easily pass on the higher prices to customers, Chamness said. By contrast, polysilicon is the main ingredient covering the coffee table-size solar panels.

So with stocks scarce and raw material prices high, the prices for solar panels have yet to drop.

Polysilicon makers are moving to boost their supply.

Hemlock Semiconductor Corp., which is majority-owned by Dow Corning Corp., is the top supplier of polysilicon to the solar market. It is now working to double its capacity in the next two years with a $500 million expansion at its Michigan facility.

Just startup pains?
The unforeseen government incentives for solar energy as well as the microchip industry’s recovery after the dot-com bubble burst added to the unpredictability, said Marie Eckstein, vice president of advance technology and venture business at Dow Corning.

She said that for now the shortage is compelling the solar energy industry, which is still striving toward maturity, to find different ways to use silicon — including less of it.

“I think we’re just in startup pains,” she said.

Reed said he’s seen excitement for solar before. He’s also seen it quickly fade when oil prices drop or when the White House changes hands.

But there are signs that the industry is maturing, he said, and the ups and downs aren’t what matters anyway.

“At the end of the day, we’re saving the world one roof at a time,” he said.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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