GE Decision a Telling Indication of the Importance of Innovation

Thin film Solar Panel

General Electric Company (GE) has announced that it is halting construction of its Aurora, Colorado thin-film solar manufacturing plant for at least 18 months. The $300 million facility was planned to be the country’s largest solar factory. The decision is bad news for the construction workers attached to the project, but it is not necessarily bad news for GE. On the contrary, GE made the right call in signaling that it doesn’t want to jump the gun on an uncompetitive technology and instead wants to go back to invest in more innovation. The company deserves credit for having the foresight to make that hard but prudent decision.

GE’s need for more innovation comes down to two simpler needs: the company’s solar panels need better performance and lower costs. Thin-film solar panels – a promising technology made possible by years of federal government investment and development – are flexible and can thus be applied to a variety of surfaces. By using a cadmium-telluride compound in lieu of traditional silicon, thin-film panels are also cheaper to make than conventional panels. But while cheap panel for panel, thin-film also have lower solar conversion efficiencies than traditional silicon-based solar panels. So on a cost per watt basis, thin-film is less competitive. Companies like GE assumed that they could make up some of this cost difference by implementing relatively lower cost manufacturing practices and economies of scale. “The only barrier, or so these companies thought,” MIT Technology Review notes, “was scaling up production enough to achieve the right economies of scale.” Unfortunately for thin-film proponents, the price of silicon panels has continuously fallen in recent years – due in no small part to Chinese green mercantilism. So even with economies of scale, thin-film still couldn’t compete with silicon-based solar panels, to say nothing of fossil fuels.

In stopping construction of its Colorado plant, GE has thus come to recognize that simply scaling up production is not a feasible way to make thin-film panels competitive. “You can’t rely on low-cost manufacturing alone,” Danielle Merfeld, head of renewables at GE Power and Water, stated in the aftermath of the announcement. “You also need high-performing panels.” Indeed, what is needed is thin-film panels that are both cheap and energy efficient and only robust technological innovation can accomplish that. Fortunately, GE recognizes this too: “We are banking on the fact that with the technology improvement and our investment in technology today,” Merfeld also noted, “we will put out more competitive products coming out of that factory.”

Ultimately, the GE decision is a telling indication of how economies of scale and the subsidies driving it are often not enough to make clean energy competitive in the energy market. GE is lucky to be a large enough company that it can afford to return to the lab after seeing the writing on the wall, but smaller companies do not have that luxury. Now more than ever, there is thus a pressing need for 1) government support for clean energy companies as they innovate and seek to bridge the technology development valleys of death, and 2) greater public and private sector recognition of the primacy of innovation in clean tech competitiveness.

Photo credit: Wikimedia Commons

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About the author

Clifton Yin is a Clean Energy Policy Analyst at the Information Technology and Innovation Foundation. Prior to joining ITIF, he earned a Master of Public Policy degree with a focus on environmental and regulatory policy from the Georgetown Public Policy Institute. His master’s thesis sought to use statistical analysis to evaluate the effectiveness of California’s Renewable Portfolio Standard on encouraging in-state renewable energy generation. While a graduate student, Clifton served as a policy fellow at Americans for Energy Leadership and interned at the Environmental Defense Fund and the American Enterprise Institute.