Massachusetts Outrage: Evergreen Solar's Exodus To China

[SiriuslyLong]

by Jessica Lillian on Tuesday 18 January 2011

Last week's announcement from Evergreen Solar that the company would close its PV module factory in Devens, Mass., sent an immediate wave of disappointment, criticism and even outrage through the solar sector and far beyond.

Citing an inability to compete with Chinese operations, the Marlborough, Mass.-based manufacturer - which touts its proprietary String Ribbon technology as more cost-effective than traditional crystalline-silicon structures - said its Devens facility would be closed by the end of the first quarter.

As U.S.-based solar equipment factories continue to face increasingly stiff competition from China and other low-cost locales, states across the country may see this factory closure as a painful lesson and begin rethinking their own methodologies in doling out incentives.

Once heralded as a leader of the U.S.' emergent clean energy economy, Evergreen Solar - along with government officials in Massachusetts - has become a textbook-ready example of massive tax-revenue waste, critics have claimed. Financial support provided to the company from Massachusetts agencies included $23 million in grants, up to $17.5 million in low-interest loans and a low-cost 30-year lease on state-owned property.

The manufacturer expanded its Devens factory in 2008, promising to bring its total of Massachusetts-based employees to 1,000 by the end of 2009. "Evergreen Solar is at the leading edge of our clean energy economy in Massachusetts," then-governor Deval Patrack, D-Mass., stated during a ceremony announcing the expansion.

However, during the course of 2009, it was China - not Massachusetts - that played a major role in Evergreen Solar's next round of expansion announcements. In early May, the company entered into a framework agreement with Jiawei Solar Co. for a major ramp-up in String Ribbon wafer manufacturing in Wuhan, China.

Seven months later, Richard M. Feldt - who was then the company's chairman, CEO and president - announced that declining module prices were "making it very difficult for manufacturers located in high-cost regions to remain cost-competitive." As a result, another manufacturing step - module assembly - was shifted to Jiawei's campus in Wuhan, China.

Given the none-too-sudden trajectory of Evergreen Solar's manufacturing move to China, Massachusetts' oversight - or lack thereof - of its investment has been pointedly called into question.

As company executives and Massachusetts agencies squabble over what percentage of its financial incentive package Evergreen Solar will be required to repay in the wake of its factory closure, some policymakers are advocating stronger measures to prevent such situations in the first place.

State Sen. Jamie Eldridge, who represents Massachusetts' Middlesex and Worcester district, called Evergreen's exodus "yet another sign that it’s time for Governor Patrick and the legislature to take a hard look at Massachusetts’ current job-creation strategy of giving large tax breaks to big corporations."

"At a bare minimum, we ought to ensure that every economic development deal our government makes includes a strong clawback provision," Eldridge wrote in his official blog. "Although there were some clawback provisions in the Evergreen Solar deal, they weren’t strong enough - and as a result, it seems we'll be getting very little of our initial investment back."

Consequently, Eldridge said he plans to re-file incentive-accountability legislation he introduced during the 2009-2010 legislative session.

"If we are looking to increase the efficiency of the state's economic development agencies, then we need to be collecting the performance management data that will allow us to make informed decisions and ensure that our economic development dollars [are] being spent as efficiently as possible," the bill states. "Quite simply, you can't manage what you can't measure."

Specific transparency requirements introduced in the bill would mandate that the Massachusetts Department of Revenue produce an annual unified economic development budget "detailing tax reductions, tax credits and subsidies for economic development, [and] including all line item expenditures for any state-funded entity, including quasi-public authorities."

Uniform reporting requirements would require all applicants to economic development programs to meet certain data-reporting requirements, including existing as well as proposed job numbers, benefit levels and salaries.

"The Commonwealth of Massachusetts invested almost $60 million in state grants, tax breaks and subsidized loans in Evergreen Solar to create approximately 800 jobs, translating into about $75,000 in taxpayer dollars being spent for every job," Eldridge wrote. "And of course, now even those 800 jobs are gone, and we aren't getting our $60 million back."

These measures would simply make Massachusetts' financial-incentive policy more aligned with that of its neighbors, according to the bill. But against the current backdrop of taxpayer outrage at states' funding corporate incentives, this local legislator's efforts to introduce more stringent oversight of tax breaks and grants offered to solar manufacturers may very well be an early sign of a larger national trend with potentially significant implications for U.S. solar module factories.

http://www.solarindustrymag.com/e107...p?content.7085

[SiriuslyLong]

Why Green Energy Can’t Power a Job Engine

By EDWARD L. GLAESER

Evergreen Solar announced last week that it was closing its plant in Devens, Mass., laying off 800 workers, and moving production to China.

Evergreen’s factory had received more than $40 million in subsidies, which led many to see the plant closing as lesson in the futility of green energy and industrial policy. But what does Evergreen’s story really teach us about solar energy, public subsidies and the future of American manufacturing?

Evergreen Solar’s story begins in 1994, when three alumni of Mobil’s solar division broke away to form their own company. They started in a 2,500-square-foot lab in Waltham, Mass., which has long housed innovative industry, including America’s first integrated textile mill and the Waltham Watch Company, which pioneered high-quality watches with interchangeable parts. Today, Waltham is a venture-capital hub that succeeds by providing abundant commercial real estate and easy access to the scientific community of greater Boston.

Proximity to cutting-edge ideas was surely an advantage for Evergreen Solar in the early days because its principals worked with Emanuel Sachs, a distinguished mechanical engineer at the Massachusetts Institute of Technology, who invented the “string ribbon” process for making solar cells.
“String ribbon” technology was Evergreen’s big idea; it offers the possibility of far more affordable photovoltaic cells. Evergreen began selling “string ribbon” solar panels in 1997 and moved to a much larger space in Marlboro, Mass., in 2000.

Evergreen proved adept at finding financing and global partners. The company went public in 2000, which provided funds to expand operations and repay the venture capitalists, like the Utech Fund, which placed an early bet on “string ribbons.”

An early infusion of $5 million also came from Kawasaki in 1999. In 2005, Evergreen and the European solar company Q-Cells came together to construct a production plant in Thalheim, Germany. Given Evergreen’s global reach, it shouldn’t be surprising that it is now producing together with Jiawei Solarchina.

Evergreen Solar’s move to China was supported by a $33 million loan from the Chinese government, and it has suggested that the Chinese production was cheaper because “solar manufacturers in China have received considerable government and financial support.”

But surely China’s skilled, low-wage labor force is a far more important source of its low costs. Japan’s success in the 1980s was also attributed to its activist industrial policy, but subsequent research found that government subsidies backed losers more often than winners.

Joshua Lerner’s superb book “Boulevard of Broken Dreams” (Princeton University Press, 2009) reviews public efforts to support start-ups and entrepreneurship worldwide and reminds us that “for each effective government intervention, there have been dozens, even hundreds, of failures, where public expenditures bore no fruit.”

I suspect few readers will really think that Evergreen Solar was shortchanged by American governments. The National Renewable Energy Laboratory contracted with the company in its early days. More recently, Massachusetts agencies gave tens of millions of dollars to the company.

Conservative critics, including Michelle Malkin, argue that the Devens closing provides a warning about green energy: “The myth that ’green jobs’ are a boon to the economy keeps getting pierced by failed green jobs boondoggle after failed green jobs boondoggle.” But it was always a mistake to think that clean energy was going to be a jobs bonanza, and we should be investing in green technology whether or not it produces jobs.

America has had many high-tech breakthroughs over the last half-century, but those innovations rarely provided abundant employment for the less educated workers who need jobs most. The Devens closing reminds us that even when ideas are “made in America,” production is almost always cheaper in China.

Failed public investments, like the money spent in Devens, reflect the fact that public officials are rarely skilled venture capitalists and that governments pursue many objectives that lead them away from solid investments. It’s easy to see why any governor would be excited about a green-energy manufacturing plant in a less prosperous area of his or her state. But the same forces that made Devens political catnip meant that it was unlikely to be a long-term success.

Manufacturing solar panels in Devens never played to Massachusetts’s core strength: the creativity that emerges naturally when smart people are clustered together. Forty years ago, greater Boston was suffering from the same deindustrialization that afflicted all older American cities. The region came back, buoyed not by renewed manufacturing plants, but by technological innovation, much of which was connected to the region’s rich research community.

Evergreen Solar’s early years were an example of the synergy between schools and start-ups, and greater Boston’s universities will surely continue to spin off new companies. Professor Sachs, for example, has moved on to 1366 Technologies, a solar company in North Lexington, Mass., financed by a Waltham-based venture-capital fund.

Massachusetts’s edge lies in ideas, not products. Those ideas are best produced in creative clusters, built around cities, where knowledge moves easily from inventor to entrepreneur. The only production that really needs to occur in greater Boston is the early-stage manufacturing that can be an important part of the research process. Mature companies, like Evergreen Solar, naturally move their factories to lower-cost areas.

Energy from the sun that doesn’t require vast carbon emissions or dependence on difficult allies is something devoutly to be wished. The main difficulty with solar energy has always been cost, which is why the falling price of solar panels that seemingly pushed Evergreen to close Devens is actually good news.

As long as solar panels are getting cheaper, we shouldn’t worry about where they are being produced. We should continue financing research on solar technology as long as that research continues to produce cost-cutting breakthroughs, like “string ribbon” technology, but we shouldn’t pretend that cheaper solar energy will end up employing millions of our less-skilled citizens.

For decades, local economic success has come from entrepreneurship and education, not large-scale manufacturing. The Devens closing doesn’t imply that there is anything wrong with clean energy, but it does suggest the difficulties inherent in trying to beat China at cheap manufacturing. In the long run, America will be richer than China only by having smarter citizens, and that requires the skills that come from schools and cities, not dispersed factories.

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Some how, some way, we need to employee OUR masses.

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