Readers! We were proud to learn yesterday that we had readers! At least one, and quite a thoughtful one, to boot. Commenter Dave Elbert, a FOB, as we say (friend of the blog), had some thoughts about my post on the solar market. Here’s Dave:
A quick question and a comment: First, why can’t the start ups maintain their profit margins in the face of dropping supply prices? Seems a reduction in supply cost would actually help by lowering end costs or actually increasing profits. Unless you have a lot of the older, more expensive inventory on hand and need to unload it at now out-sized prices.
Excellent point. After all, the solar industry has been desperate for prices to drop for decades. Only then, solar execs say, can we catch up to fossil fuels, which have traditionally been cheaper. But the problem, as Dave then gets at, is that lots of these companies – Solyndra, to take one example – made considerable capital investments when the returns looked high and promising. What’s more, lots of these companies based their business models on certain market indicators, including demand for panels and supply of silicon. When the floor dropped out on the latter (as in, a flood of new supply) the analytics of these solar companies went haywire. The good news is that many of them are agile enough to survive. But the real winners are China and Europe, which have really committed to solar energy in a big way–through massive government subsidies. The U.S. is still the world’s largest solar market, but on questions of innovation and new technology, we appear to be soon eclipsed.
Dave’s second comment was a particularly helpful clarification:
Technically (geologically!) silicon is not a rock. It is the second most common element in the crust of the Earth, but is always found in oxides (silicates) in the crust. The raw material (ore) is quartz mined either as quartz sand or crushed quartzite rock. The material is then chemically reduced (de-oxidized in this case) and melted in a high temperature furnace. Semiconductor grade silicon needs to be particularly pure and requires more processing than the silicon used in the metals industry.
Many thanks Dave. And a reminder to all to keep the comments coming.