Wednesday, June 30, 2010

Why Recruiting Solar Panel Manufacturers is a Bad Idea

When Evergreen Solar (ESLR) announced plans to build a 160 Megawatt solar panel factory in Devens, MA, the state bent over and handed over $58 million in incentives and credits. The facility required $430 million in capital construction costs, and produced about 580 full-time jobs, or about $800,000 in capital outlay per operating job, a level of spending per job created that's common in modern manufacturing across all industries

But 18 months after opening the facility, the company announced it was sending some of those jobs to China. And with competitors First Solar (FSLR) and SunPower (SPWRA) expanding in Malaysia and the Philippines, reducing labor costs was a business requirement for Evergreen. But it brings the value of the incentives into question.

I've covered alternative energy manufacturing in my consulting business, and strongly believe that no sensible region should be offering large recruitment packages to solar manufacturers. In spite of all the green jobs hype they can generate for your city, they cannot compete with coal and natural gas prices without lowering labor costs and increasing productivity. This means any job they create domestically is setup to last six months. Moreover, they hire fewer finance, marketing, and managerial staff than most software or computer hardware companies. Hopefully, other states will learn from Massachusetts' mistake with Evergreen Solar.

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