The Fight To Harness The Sun

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So who needs the smaller solar companies? Why can't the oil-backed and oil-owned solar manufacturers hold up the U.S. world market share all by themselves? They probably could, if they wanted to, but building solar-powered water pumps for Egyptian farmers is not ARCO Solar's idea of a big market. "We just want to build and sell modules, not systems," says the company's chief scientist, Elliot Berman. When U.S. electrical utilities are ready to start switching from oil, coal, and nuclear fuels to solar cells, ARCO Solar and its sister companies want to be there.

Meanwhile, the U.S. solar industry could lose the Third World market. The new, small, independent companies designing solar systems for the market can't get financing, have had their federal R&D funds slashed, and must compete unaided with those on trade ministry vouchers.

What to do? Roger Little, chairman and chief executive officer of Spire, has neither the wisdom of Solomon nor the patience of Job, which is to say that he doesn't pretend to know how the U.S. industry ought to work out its problems. Neither can he wait for someone else to resolve the sticky issues -- of government's proper role in R&D, in trade subsidies, and in policing free-trade restrictions -- that such problems raise. Spire needs sales today.

Little founded Spire in 1969 to do consulting and research on energy beams and particle physics for the aerospace industry. By 1973, Spire had developed new manufacturing techniques for the solar cells being used on spacecraft, and when the oil embargo opened the terrestrial market to photovoltaic technology, Spire was already a leader in designing manufacturing technology and equipment.

As the solar-cell market slowly developed, Little watched oil companies take over the cell-manufacturing end of the business. He watched the small systems makers fight the government-supported marketing efforts of foreign competitors in developing countries. He watched federal R&D support for the fledgling industry flow and then, under Reagan, ebb. He watched such Japanese electronics giants as Sharp and Sanyo begin collecting resources to enter the fray. And he decided that, although his little company couldn't compete directly with any of them -- the ARCOs, the Europeans, or the Japanese -- he could outfox them all by selling what none of them was interested in selling, not product but know-how -- production equipment, technology, and supplies. "We are," Little says, "the only company in the world that exists to put other people in the photovoltaic business. We want to be the McDonald's of solar cells."

It is a simple idea. Spire will sell Third World countries what they really want to buy, which is not a box marked "Made in U.S.A.," but the equipment, training, and raw materials to create their own photovoltaic industries.

For a few hundred thousand dollars, Little says, he can sell to a local joint-venture partner a turn-key plant capable of producing 100 or 150 kilowatts of solar-cell modules annually. Spire might contribute its equity in the partnership in the form of training. When the plant goes into business, Spire will supply the solar cells from which the modules are made. When the local market has expanded enough to support several more of these small module plants, Spire will help its local partner integrate backwards into cell manufacturing. At that point, Spire will sell to the partnership the unprocessed silicon wafers from which the cells are made. The plan appears to deal with most of the conditions keeping small U.S. photovoltaic companies from growing and the conditions that have cut the U.S. share of the world market.

Spire and its local joint-venture partners in the developing world will be doing business behind a protective tariff barrier. "Of course they'll erect a tariff," Little says. "They'll want to protect their national photovoltaic industry." The tariff will give Spire a substantial cost advantage over its European competitors, offsetting the advantage European company-government combines have had since World War II in selling to their former colonies.

Another edge is what Spire's manager for photovoltaic operations, Sanjeev Chitre, calls local-market enhancement. "Because they've got their own company," he says, "each country will help it find applications and develop the local market. You wouldn't expect them to sell ARCO's modules with the same enthusiasm as they'd sell their own. We think this enhancement will mean an additional 20% growth in each of those markets."

This plan also keeps Spire out of head-to-head competition with the major oil companies whose volume tends to make them the low-cost producer of cells. In fact, instead of a competitors Spire becomes a buyer of cells. "We provide our joint-venture partner with his solar cells," says Little, "which we get from the big production houses on a cost-competitive basis." Eventually, when the annual volume of cells shipped by Spire to its Third World joint-venture partners exceeds two megawatts, it might make economic sense for Spire to produce its own solar cells. "But today it doesn't," Little says, "not when I can get them from ARCO."

Spire has sold module-making plants to Brazil and India. Deals are pending in Pakistan and Tunisia. But Little considers his biggest coup to date to be the agreement he signed early this year with a Saudi Arabian company. The Saudi company, he explains, "got the license to manufacture photovoltaics in Saudi Arabia, but it needed a partner. ARCO was crawling all over the place to find a way into a joint venture. Everybody wanted to work with that Saudi company. ARCO wanted to ship modules in. 'Later,' ARCO said, 'maybe we'll teach you how to assemble modules, but we'll never teach you how to manufacture cells." So these guys, after looking over the entire U.S. technology base, ended up with Spire because we said, 'Hey, we'll give you everything.' We got a piece of the license, and our part of the equity comes from cost-sharing, which means I don't take fees on things. We've got other deals going, one in Egypt, for example. And they all want the same thing: continuing photovoltaic technology. Nobody wants to be just a rep for ARCO."

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