Behind the Scenes at Struggling PV Module Maker Abound Solar

Can Abound draw down on DOE loans and VC funding to make its transition to higher-efficiency panels and more revenue?

Eric Wesoff March 19, 2012

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

Last month, Abound Solar, a solar panel manufacturer working in the cadmium telluride (CdTe) materials system, made some troubling announcements.

Abound is halting production of its first-generation, 10.5-percent-efficiency CdTe PV module in order to transition to building its next-generation, higher-efficiency module. That transition will result "in the temporary reduction of approximately 180 permanent jobs" from its production facilities, according to a release and FAQ from the firm, which was the beneficiary of a $400 million DOE loan guarantee -- only $70 million of which has been drawn down.

According to sources close to the company, the layoff numbers were for Abound Solar employees only. Approximately 75 contractors who worked on the line and in other positions in the company were also let go.

Most of Abound's production chambers are turned off. Last week, the firm ran experimental panels on its production equipment. This week, Abound will not be running anything, and next week, Abound will be producing standard panels for a potential client.

The firm is looking to lower its burn rate from $2 million per week to $2 million per month, according to sources close to the firm. The sources have indicated that there is roughly $7 million in the bank, a painfully short runway, and that vendors are being paid in a very selective manner.

The firm awaits $10 million from the DOE and $10 million from its investors but has a bit of a chicken-and-egg problem. Our sources inform us that the DOE is waiting for the investors and the investors are waiting for the DOE. Abound's venture investors include DCM, Technology Partners, GLG Partners, Bohemian Companies, and Invus. The DOE money is milestone-based and comes with very specific spending covenants.

Abound's management finds itself in a very sticky spot -- locked in a survival race between burn rate and ramping up the factory to run at high enough utilization to lower costs and generate revenue and eventually profit. Add impatient investors, a flinchy DOE, and a media faction hungry for Obama DOE scandals -- and it's a queasy mix.

Our sources tell us that Abound is taking advantage of this transition period to re-examine not only its end-product but also the entire corporate process, from design to process control to inventory management to IT systems. If Abound can make it through this harrowing time, it could emerge a better and leaner manufacturing company. We'll know more in the coming weeks.

Abound shipped 25 megawatts in 2010 and approximately 45 megawatts in 2011.

Abound builds 2-foot-by-4-foot CdTe PV panels (as does General Electric), inspired by the dimensions of First Solar's panels. Within the CdTe materials systems, there's no standard process. First Solar uses a vapor transport deposition (VTD) process, while Abound Solar and PrimeStar/GE use a close space sublimation (CSS) process for CdTe manufacturing.

Abound has to compete with thin film leader First Solar. First Solar's 87-watt CdTe panels have a 12.2-percent conversion efficiency and a cost of $0.73 per watt, with expectations of reaching the mid-$0.60 range this year or next. If Abound is not approaching that cost-per-watt trajectory, the firm can't survive. First Solar is having its own struggles.

GTM Research estimates that Abound's current costs would be just above $1.00 per watt if the company was running at full utilization -- which it clearly is not (see chart below and the upcoming Thin Film PV report from GTM Research).

At least half of Abound's shipments came from projects installed in India supported by the Ex-Im bank. We have voiced the idea that the success of the CASM trade claim might be a boon to Abound, keeping Chinese panels from being sold at allegedly below-cost prices in the U.S.