President Obama invests in America's future

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In President Obama’s news conference last night, he reiterated the top priorities of his administration.  Energy, education, health care, and investing in science and technology continue to remain his focus for ensuring long-term growth in America; these long-term priorities should not be confused with the short-term methods employed by his administration for stimulating stability.  While stabilizing the financial markets is a major part of an economic recovery, President Obama confidently spoke about a long-term arc of development that needed to be radically altered.

The concept he was speaking about was one that moved away from a bubble and bust economy and toward one based upon more stable, domestically-generated resources; for example, instead of depending upon foreign fossil fuels, America could develop its very own solar industry whose products were exported to the world.  The arc he was referring to was that of the deficit; he referenced bending the arc downward over the long-term and made the point that without investing in energy, education, healthcare, and innovation America’s GDP would not grow, and therefore, we would not be able to pay down the debt.  An educated, innovative workforce is the centerpiece of President Obama's vision of America's future.

When asked about a cap-and-trade market, he responded by stating that the longer-term objective of moving away from polluting energy sources toward cleaner energy sources was more important than the cap-and-trade concept.  If taxing carbon gets America innovating the energy sector, then so be it; but there are other ways of stimulating innovation.

This overall idea of moving toward cleaner energy sources is reflected in his budget and in the Recovery Act.  While working vigorously on the short-term solutions necessary to get the financial markets functioning again, he remains focused on the long-term solutions necessary to creating sustained economic prosperity.  President Obama’s $3.6 trillion budget plan focuses more on creating a clean energy economy than any other previous administration; and more on education and helathcare than any presidency of recent memory.

In his weekly address on Saturday, President Obama stated that a budget “must reduce our dependence on dangerous foreign oil and finally put this nation on a path to a clean, renewable energy future. There is no longer a doubt that the jobs and industries of tomorrow will involve harnessing renewable sources of energy. The only question is whether America will lead that future. I believe we can and we will, and that's why we've proposed a budget that makes clean energy the profitable kind of energy, while investing in technologies like wind power and solar power; advanced biofuels, clean coal, and fuel-efficient cars and trucks that can be built right here in America”.

In order to help get the clean energy economy going, the American Recovery and Reinvestment Act of 2009 contains nearly $60 billion of loan guarantees for certain renewable energy projects and transmission projects; it “includes $39 billion for the Department of Energy and $20 billion in tax incentives for clean energy”.  In addition, President Obama seems determined to continue generating suupport for his energy initiative.

The loan guarantee program of the Obama Administration falls under a similar program that was originally authorized by Congress in 2005. The original application process approved under the Bush Administration “has been hindered by bureaucratic inertia and lengthy reviews of hundreds of applications for more than $40 billion in loan guarantees”.

In addition to the $60 billion, “there is another $38.5 billion in unused loan guarantees authorized during the Bush administration”.  Energy Secretary Steven Chu has vowed to make the approval process more user-friendly, and he wants to ultimately reduce the amount of paperwork required. “I'm trying to scale the timeline down from several years to four months," Chu said, “We really think we can accelerate the process”.

The first application approved by the DOE recently was announced.  A solar company by the name of Solyndra Inc. received a $535 million loan guarantee. Solyndra “designs, manufactures, and sells solar photovoltaic systems comprised of panels and mounting hardware for large, low-slope commercial rooftops.  Solyndra's panels employ cylindrical modules that capture sunlight across a 360-degree photovoltaic surface capable of converting direct, diffuse, and reflected sunlight into electricity. The result is significantly more solar electricity per rooftop per year.  Solyndra systems are designed to provide the lowest installation cost per system and the highest annual solar electrical energy output”.  Innovation, even within the clean energy industry, is what the Obama Administration seems to be after.

According to the Solar Energy Industries Association (SEIA), “the total U.S. installed solar power capacity increased 17% in 2008”.  This is the third consecutive year of growth within the solar industry, and although many solar companies are reeling from the current recession, the solar industry figures to become a dominant player in America’s future energy matrix.

The past six months have caused a consolidation of sorts to happen within the solar industry.  Solar manufacturers “are increasingly gravitating toward utility scale solar parks and large-scale projects, like in Europe. Utilities can get access to capital to build these things, and many are under pressure to meet mandates for renewable power”.  Many small companies that had been contracted to build utility-scale projects have since run out of money and lost their credit lines and had to ultimately abandon their plans. Larger companies like First Solar and SunPower have swooped in and purchased the rights to the bigger utility-scale projects.

Much like the entire clean energy industry, the solar industry is going through an evolutionary period.  The slowing economy has simultaneously made silicon cheaper, speeding up the production of solar cells, while also creating a backlog of panels due to sluggish demand.  This surplus has resulted in many analysts like Sunil Gupta, from Morgan Stanley to make projections like “sluggish demand, large supply increases, and high excess inventory will cause losses this year and break-even conditions in 2010”.  “Capital market constraints and increasing uncertainty in the Eurozone will likely result in lower overall demand for solar PV products even as industry production increases on improved polysilicon supplies. Meanwhile, we don't expect stimulus-related spending on solar PV projects in the U.S. to drive new demand any time soon”, another firm by the name of ThinkEquity said.  President Obama’s strategy, however, seems to be based on a longer-term vision than these analysts.

How the solar industry evolves over the next decade cannot necessarily be predicted from our present position.  According to Michael Kanellos from Greentech Media, “we will likely see another element of this evolution come next year with solar fabs and more sophisticated contract manufacturers”. Fabs is short for fabrication facilities, and within the IT industry, fabs allowed chip makers to outsource manufacturing to regions of the world where labor and economic conditions were conducive for maintaining year over year growth.  American firms were then permitted to concentrate on the design of the finished product and sales. Kanellos argues that solar fabs could “become experts in crystalline silicon while others could specialize in cadmium telluride or CIGS”.

President Obama would like a different outcome in the solar industry than Kanellos predicts.  The Obama Administration’s strategy seems...

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