Made in the shade if supply lines and subsidies hold

Jul 30, 2008 | 01:23 PM |

As the world scrambles for clean energy technologies, it appears that solar's day in the sun has finally arrived. But converting sunlight into electricity through photovoltaic cells is still an industry in its infancy, and the growing pains are acute.

One major problem had been getting enough polysilicon into the hands of solar cell and module manufacturers. Silicon producers quickly whipped out plans for output expansions and many other new projects were announced. Those same producers are now concerned that too many of them have signed up to fill the void. The degree of any oversupply will depend on demand, of course, but that side of the equation is notoriously hard to predict, in part because solar installations—still an expensive proposition compared with other energy sources—are highly dependent on government subsidies.

Particularly key will be how the two countries at the forefront of employing solar installations—Germany and Spain—will adjust future subsidies. German legislators in late May reached a tentative agreement to cut the so-called feed-in tariff—basically, a fixed-income security in which the government buys electricity from solar installations at a fixed rate that is far above the grid cost—by about 10 percent next year. It wasn't a welcome development for the solar industry, but the tariff cut was a lot less severe than originally feared.....

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