Q-Cells to lay off 500 staff as solar price slumps

Fears that the solar industry will prove less resilient to the global recession than other renewable energy sectors appear increasingly well founded this week after three leading solar firms posted sizable losses.

However, experts maintain that there are already signs of recovery on the horizon, while some solar outfits continue to record impressive growth despite a slump in the price of solar panels.

The bad news was led by German manufacturer Q-Cells, the world's second-largest producer of solar panels, which announced yesterday that it is to lay off 500 jobs after recording an operating loss of €47.6m (£41m) during the first half of the year.

The company reported that sales for the first six months of the year fell more than 36 per cent year on year to €366.2m, while overall losses soared to almost €700m after the company undertook a write-down of more than €600m from the sale of its shares in solar firm Renewable Energy Corporation.

Q-Cells said it was embarking on a major restructuring exercise designed to cut production costs by 25 per cent and increase its focus on emerging thin-film solar cells. Under the plan, about 500 staff are to be made redundant while the company will also shut down its older production lines at its factory in Thalheim.

The company's management said it would also increase its focus on its thin-film subsidiaries Solibro and Calyxo, adding that it had requested that Calyxo proves its technological potential in mass production by the end of this year.

Several of Q-Cells' main rivals fared only a little better this week, with China-based ReneSola and JA Solar both posting second-quarter losses of $3.6m and $28.5m respectively.

After scaling up rapidly in response to strong demand during 2007 and early 2008, falling demand has seen the solar market hit by a glut of silicon, the raw material used in most panels, and solar panels themselves. As a result, silicon prices have dropped by as much as 40 per cent in the past year, while panel prices have fallen by about 20 per cent, making many older production lines unviable.

A report earlier this week from analyst iSuppli warned that the glut is now so severe that it could take until 2012 for stockpiles to be run down.

However, while analysts have been warning for more than a year that the solar sector has become overheated, the bleak picture is far from universal, with several leading players bucking the trend and posting solid financial results.

For example, US-based First Solar, the world's largest solar manufacturer, recently reported that it saw second-quarter profits more than double year on year to over $180m, while SunPower posted net profits of around $24m during the same period, reversing the loss it recorded during the first three months of the year.

Moreover, optimism remains that demand for solar panels will rebound strongly as the global economy recovers.

Many manufacturers anticipate growth during the second half of the year, and the sector received an encouraging long-term endorsement from the boss of German energy giant E.ON this week, when he informed shareholders that he intended to establish the company as a major player in the solar market.

In a letter to shareholders, chief executive Dr Wulf Bernotat underlined the company's commitment to the Destertec consortium, which was launched earlier this year with the ambitious goal of developing solar farms in North Africa to provide energy for Europe.

"Our objective is to develop solar energy into a strong second pillar of our renewables business along with wind energy," he wrote. "A visionary project ca lled Desertec shows the potential of solar energy when it is operated on a global scale."

The letter came as the company posted half-yearly results showing that while overall gross earnings slipped one per cent to €5.7bn, the importance of the firm's Renewables division continued to grow, with renewable energy power sales worldwide rising 17 per cent and gross earnings almost doubling year on year to €122m.