Solar technology maker warns of tough times

Norwegian solar products maker Renewable Energy Corporation (REC) has reported a smaller than expected rise in earnings for the third quarter and admitted that the credit crisis could affect demand for solar energy projects.

The company announced earnings of 711m Norwegian krone (£63m) in the three months to the end of September which was up from 643m in the same quarter a year ago.

However, according to Reuters reports, the Q3 results were below the 789m (£70m) estimate forecast by a poll of analysts.

The company is one of the largest producers of solar-grade silicon and wafers for solar energy projects and is made up of three divisions: REC Silicon, REC Wafer and REC Solar.

REC said that long term the solar market still looks strong but admitted renewable projects require significant upfront investment which could be impacted by the global downturn.

“Solar project investments are capital intensive and could be impacted by cost and availability of financing,” the company said in statement.

The lack of available credit could hit the demand for photo-voltic (PV) cells in the future, REC admitted.

“The current turmoil does impact short/medium-term availability of credit/financing and increases the risk related to medium-term industrial demand, and consequently also the demand for PV,” it said.

REC said it is monitoring the situation and will take relevant action to respond to market conditions including “restructuring its capital expenditure programs”.

Despite the warnings from REC, the solar sector appears to be weathering the downturn fairly well. Two recent deals seem to indicate that investors are still willing to back the technology.

Soliant, a solar firm that focuses on solar concentrators, recently scored a major funding round from investors including GE. Meanwhile, a private equity firm consolidated two solar integrator companies to make what it says is the largest solar integrator in the north eastern US.

However, a recent survey from Goldman Sachs seemed to indicate there could still be dark times ahead for solar projects. The company claimed that price drops on solar panels are likely to be more dramatic than some analysts expected because of the tough economic conditions, with governments in Germany and Spain reducing subsidies for solar.