BP shutting solar unit as industry struggles
By STEVE GELSI
After prominently featuring solar panels in its brand advertisements and at some of its gas stations, BP is planning to shutter its BP Solar operation, according to reports on Wednesday.
BP said global economic challenges have impacted the solar industry, making it difficult to sustain long term returns, according to an internal BP email cited by press reports. The move will affect 100 jobs.
BP, which has been in the solar business for decades, had featured solar panels prominently in its Beyond Petroleum advertising campaign.
BP said the solar business, which has been flooded by excess supply from China, has become commoditized.
A phone call and email to BP by MarketWatch was not immediately returned. BP will hold on to other alternative energy businesses, including wind.
BP inked a supply contract with JA Solar (JASO) in 2010 as it started scaling back its own solar panel factories and trimming jobs.
Sam Wilkinson, senior market analyst of IMS Research, said BP's decision comes as global photovoltaic module manufacturing capacity reaches 50 gigawatts, while demand is expected to total only 24 gigawatts this year. Average prices are now 44% lower than they were one year ago.
"Rapid manufacturing expansions have coincided with a slowdown in the growth of global demand," Wilkinson said in a statement emailed to MarketWatch. "The result has been intense competition and a fierce price war, and not enough demand to support all of the industry's hundreds of suppliers."
The move comes just days after First Solar (FSLR), the only pure-play solar panel maker in the S&P 500 (SPX), issued a profit warning for 2012 and said it'll refocus its business toward large-scale utility projects, rather than residential solar panels.
Meanwhile, other big players have upped their investments in solar power in the face of more affordable prices in the business.
Just this week, Google and Kohlberg Kravis Roberts & Co. teamed up with Recurrent Energy to invest in solar photovoltaic facilities in Sacramento, Calif.
"The investment is a clear demonstration of solar's ability to attract private capital from well-established investors like Google and KKR," said Arno Harris, CEO of Recurrent Energy. "This transaction provides an example of the direction solar is headed as a viable, mainstream part of our energy economy."
Berkshire Hathaway's MidAmerica Energy unit recently set plans to invest in its first solar power plant in a deal with NRG Energy and First Solar.
Earlier this year, Total invested more than $1 billion to by a majority stake in SunPower Corp. to become the largest player in solar energy among big Western oil firms.
Meanwhile, BP appears to be more focused on its core business - finding oil - as crude prices hold over $100/bbl and deepwater exploration returns to the Gulf of Mexico after the company's 2010 Deepwater Horizon explosion that killed 11 workers and triggered the largest offshore oil spill in US history.
On Tuesday, for example, BP confirmed it gained access to five more deepwater exploration and production blocks offshore Angola to give it a leading position in the African country.
Dow Jones Newswires
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