Iron Range solar panel plant claims rugged niche

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MOUNTAIN IRON — The sun continues to shine on Minnesota’s fledgling solar panel industry even as high-profile bankruptcies in the business capture headlines and as China muscles in on markets.

More than 100 contractors, renewable energy experts, civic leaders and local residents toured Silicon Energy’s new solar panel manufacturing plant here on Wednesday to see how the Iron Range’s newest industry is growing. The event was sponsored by the Northeast Region Clean Energy Resource Team, an organization that promotes renewable and sustainable energy.

The Silicon Energy plant here started production in earnest in November and now employs 15 people assembling solar panels designed for homeowners, the military, small businesses and schools.

Silicon Energy started in 2007 with a home office and production plant outside Seattle and chose the Iron Range for their first expansion. So far they have weathered a slow economy and intense competition from inexpensive Chinese solar panels by promoting quality over cost.

While the race to produce the cheapest solar panels helped bankrupt three big U.S. manufacturers last year, Minnesota’s two panel makers say they have a plan for the long haul.

“Most of the (solar panel) industry is going down the road of cheaper, cheaper, cheaper. But we’re going in another direction,” said Gary Shaver, Silicon Energy president, at Wednesday’s event. “You can call it a niche market, if quality is a niche. But we’re trying to sell quality to everyone because in the long run it makes better economic sense.”

The company’s hallmark is durability, with the guts of the sunlight-to-electricity system sealed between two panels of glass. The panels are virtually unbreakable, withstand severe weather and shed snow faster than competitors’ units. The company claims to have the only 40-year durability rating in the business, with no exposed metal parts to rust or plastic to crack.

Their target market is the Twin Cities, but they also are shipping across the Iron Range and as far as Indiana.

“It’s the highest quality, best looking panel on the market,” said Rebecca Lundberg, a Twin Cities solar installation contractor. “You’ve got a local company that makes a beautiful product, and that’s good for Minnesota.”

Shaver said he’s pleased with the slow but sure startup to the company’s Minnesota expansion and vowed to grow the company at a sustainable rate, adding additional lines and workers as demand picks up.

Silicon Energy received ample public incentives to build the 25,000-square-foot plant here. The Iron Range Resources and Rehabilitation Board offered a $1.5 million loan. The IRRRB also approved a $3.6 million loan to the Economic Development Authority of Mountain Iron to construct the plant for the company. Silicon Energy is the first tenant in the city’s Renewable Energy Park.

The Mountain Iron plant is the second solar manufacturer in the state, behind TenKsolar that opened in Bloomington in August 2010.

Joel Cannon, chief executive officer of TenKsolar, said his business continues a “lumpy” pattern of growth despite an industry shakedown last year that saw Solyndra of California, Evergreen Solar of Massachusetts and SpectraWatt of New York all file for bankruptcy, with Solyndra’s $527 million federal loan package spurring public outcry.

Those companies may have been hardest hit because of the growth of low-cost Chinese panels, but also because their products didn’t stand out in the crowd, Cannon noted.

“The companies that saw problems, I think, didn’t really have a panel that differentiated them from anyone else. They also had very high capital costs and couldn’t compete with their high cost profile,” Cannon said. “This is a $60 billion industry globally and the growth is still there. It’s only going to get better for companies that have a product that stands out.”

TenKsolar had more than $10 million in sales last year and has grown from 50 to 140 employees in the Minneapolis suburb. The company specializes in compact units for rooftops of businesses and institutions. And TenKsolar officials say their system can produce 50 percent more energy per square foot of rooftop than conventional solar panels.

“We really don’t compete with Silicon at all. Our niche is flat roof installations and they focus on residential,” Cannon said.

Minnesota now has more than 700 solar electric systems installed across the state, up from just 50 in 2002, according to the state Department of Commerce. But the move to solar has been slow. The problem isn’t our weather. Minnesota has about as much solar energy as many southern cities when averaged across the year. And solar panels actually work better on cold, sunny days then on hot days, Shaver said. Snow also makes a good reflector.

Solar’s big drawback has been high startup costs and competition against Minnesota’s relatively cheap electricity rates. With most of Minnesota’s electricity coming from older coal-fired and nuclear plants, our electricity costs as little at 6 or 8 cents per kilowatt hour for businesses, Cannon said. That compares to as much as 18 cents in eastern states, 35 cents in Hawaii and as high as $1 in Los Angeles during peak times, Shaver noted.

“We’re competing well down into the low teens without subsidies. And we hope to have that down to about 8 cents by 2013,” Cannon told the News Tribune.

But when federal and state subsidies are included, solar can make sense even now. There’s a 30 percent federal tax credit for solar systems, and accelerated depreciation adds to the tax benefits. Moreover, Twin Cities’ based Xcel Energy offers a 60 percent rebate for made-in-Minnesota solar systems that helped lure both manufacturers to the state.

Other smaller utilities also offer lesser incentives that help bring the cost down, including Minnesota Power, which offers a $2 per watt incentive up to $2,000.

With zero emissions, local jobs and financial incentives, both companies say Minnesota is poised for solar growth.

“We think we can compete right now,” Shaver said. “Especially when you look at all the benefits of solar.”

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