Solar's future doesn't look quite so sunny

MINNEAPOLIS-ST. PAUL, MINNESOTA - The solar industry, whose future seemed so bright just a few months ago, suddenly looks as if it's headed for a shakeout.

Falling oil prices, supply issues and the evaporation of financing for solar projects have moved in like clouds over the industry, just as it was poised for unprecedented growth.

Even as new solar factories opened recently in Austin, Texas, and greater Atlanta, several big solar companies in China and Canada warned that they'll pull back on expansion plans and preserve cash after customers canceled projects and credit markets dried up. Shares of many publicly held solar companies have fared even worse than the overall stock market.

Industry analysts, meanwhile, are predicting that there may soon be a worldwide glut of solar panels and silicon — the key ingredient for solar cells — amid the industry's recent buildup.

"I have no doubt [solar's] time is coming, but at the energy costs we're seeing today, [it] has a very hard time competing," said Miroslav Begovic, a solar and electrical engineering expert at Georgia Tech in Atlanta.

Even with declining prices for silicon and other materials, plus tax incentives and advancements in technology, the cost of generating juice from solar is still two or three times the cost of generating electricity through traditional sources, Begovic said.

In a recent report, market research company iSuppli predicted that, as a result of the recent buildup of the solar industry, the supply of silicon for solar panels will outstrip demand by 2010, driving down prices sharply.

Of course that could be good news for consumers waiting to install solar power systems, which can cost $13,000 to $30,000 for a typical house before government rebates.

"If you're a consumer, this is a good thing," said Wen Kuo, a research associate with Lux Research in New York.