Outsourcing is becoming vogue in thesolarequipment business.

BP Solar is shutting down some of its production lines in the United States and Spain, and it is looking for manufacturers to produce panels using BP's components and bearing BP's brand.

The company announced on Tuesday plans to close its solar panel assembly center in Maryland and said it would lay off 140 people out of a 600-person workforce. It plans to continue to manufacture other crystalline silicon solar equipment components at the Maryland complex.

BP is also closing its solar cell and panel-manufacturing complex in Madrid, where it will let go 480 out of 575 employees. Marketing and sale staff will continue to work in the Madrid office.

BP decided to close these plants down in order to cut operational costs during the economic downturn, which as led to softened demand for solar energy equipment, the company said. Yet it expects to bring more BP solar panels to market than before. In fact, the company said it expects to sell up to 320 megawatts of panels in 2009, doubling what it did in 2008. 

How? Contracting with manufacturers to make BP-branded solar panels. Some of the materials and parts that go into making the panels will come from BP.

"We are negotiating now with potential global suppliers who can provide us with high volume and high quality module assembly from regional manufacturing centers," said Tom Mueller, a BP Solar spokesman.

Mueller declined to name these contract manufacturers, saying negotiations with the companies are still taking place. Some of these partners could likely be Asian companies that can keep manufacturing costs low. BP canceled a $97 million plan to expand its ingot production center in Maryland last year mainly because of the growing competition from Asian companies (see BP Solar Nixes Factory Expansion).

Although BP is closing the panel assembly plant in Maryland, it plans to continue to make silicon ingots, wafers and solar cells on the same site. It has a joint venture with Tata in India and Sun Oasis in China to make and market its panels.

Besides making its own silicon wafers and solar cells, BP has inked deals to buy those components from other companies. It's buying wafers from China-based ReneSola and solar cells from JA Solar, which is headquartered in China.

Aside from making solar energy equipment, BP also develops solar power projects. 

More solar equipment companies could embrace contract manufacturing. Evergreen Solar (NSDQ: ESLR), for example, is in talks with companies to turn its silicon wafers into cells and panels and sell the panels to Evergreen's customers (see Evergreen Considers Contract Manufacturing).

Outsourcing manufacturing would allow solar technology companies to focus on research and development and not worry about raising millions of dollars to build a factory. This approach already made Asia the center of computer manufacturing (see Will the Solar Industry Become Like the PC Industry).


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