GE Scales Up on Solar

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It’s good news for solar advocates and bad news for competitors—General Electric is ready to break into the solar cell business in a major way. The $218 billion company announced today that it had built a solar module with the highest-ever efficiency rate for cadmium-telluride thin film—the most popular low-cost solar technology—at 12.8%, according to independent testers at the National Renewable Energy Laboratory.That announcement came as GE told reporters that it intends to manufacture those solar modules at a 400-MW factory—in what would be the biggest such facility in the U.S.—that is set to open in 2013. GE also completed the acquisition of PrimeStar Solar, the Colorado-based thin-film manufacturer, which will complement its recent acquisition of the power conversion company Converteam. Taken together, the news means that GE—which already has a $6 billion wind energy business—will be looking to scale up solar power to the tune of $400 million. “This is the beginning of what we see as a global competitor,” says Victor Abate, vice president for GE’s renewable energy business.

By placing its bets on cadmium-telluride thin-film, GE will be taking on industry leaders like Arizona-based First Solar, which use the same technology. First Solar is perhaps the most successful renewable energy business in the world, with worldwide distribution, more than 2,300 MW of manufacturing facilities and a shares that trade around $150. For now, GE’s own manufacturing capacity—including the new plant, which is expected to employ 400 workers and create an additional 600 jobs—would still make it at best a medium-sized player in the industry.

But GE can bring resources to bear on renewable energy than no other corporation can—and the growth of its wind turbine business is proof of its ability to get big fast. “Our wind business was just a couple of hundred million dollars in 2002,” says Abate. “Now it’s a $6 billion platform. GE knows how to scale.”

That’s exactly what the solar industry needs. Solar power had an excellent year in the U.S. in 2010, growing by a remarkable 67%, faster than any other energy source. GE expects the industry to grow by 75-GW over the next five years. But solar still provides less than 1% of U.S. power. For that to change—for solar to really make a difference—it has to get radically cheaper. Though GE won’t reveal its cost structure, the company is confident that it’s more efficient panels—and turnkey manufacturing—will rapidly bring down the cost of solar energy. “The leverage we have is our improving efficiency,” says Abate. “Once you have a leading technical position, you can scale up and drive down cost.”

That’s the hope, anyway. But the solar business in 2011 isn’t the same as the wind industry a decade ago, when GE began to place its bets. Chinese companies like Suntech Power and Trina Solar can undercut their American competitors, thanks both to rock-bottom labor costs and healthy government assistance. As I learned at the Fortune Brainstorm Green conference, renewable energy expansion faces a number of obstacles that extend beyond cost, including uncertain policies around carbon pricing and regulatory hurdles to siting large projects. For GE, the solution will be more innovation—Abate says the company expects to lower costs by 50% over the next several years. If they can, the solar industry may grow fast enough for everyone to benefit.

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