Wednesday, August 17, 2011
Evergreen Solar: Manufacturing’s last gasp in Massachusetts?
I’m a little skeptical when anyone declares a “new economy.” Back at the turn of the century (it’s interesting to say that now) the new economy was comprised of a slew of dot-coms that seemingly broke the golden rule of the old economy: “Cash is king.”
No longer was cash flow the critical factor in determining success of a company. Growth in subscribers had replaced cash flow as the most important metric that drove share prices. It didn’t matter that companies were paying huge amounts of money to obtain new subscribers or to subsidize purchases of goods and services online.
Unfortunately for this new economy, the promise of eventual success was not enough to buoy businesses that were losing millions of dollars month after month after month. Eventually the bubble burst, shareholders lost billions in stock value, and we recognized once again that cash is king.
At this point, I’ll skip pointing out that the mortgage crisis traces its roots to an unrealistic expectation of people without sufficient cash flow to repay their mortgages.
Now we’re watching the latest “new economy” take some uppercuts to the chin. The “green economy” is supposed to move us from the fossil fuel stone age to the renewable energy renaissance age. Green jobs will replace oil field and coal mine roughnecking. It’s the future.
What are green jobs, by the way? After you get past the cheerleading jobs of advocacy groups, lobbyists, think tanks, politicians and bureaucrats, the rubber meets the road on the manufacturing plant floor and the installation of renewable energy systems.
Installers will be electricians, plumbers, engineers, and other skilled people required to erect a wind turbine, assemble a solar array, etc. These will be jobs that go mostly to local workers.
Manufacturing is a different story, as has been demonstrated by Evergreen Solar, based in Marlboro with a mothballed plant in Devens and one on its last legs in
. After receiving $58 million from the state of Michigan Massachusetts, Evergreen filed bankruptcy this week with the objective of reorganizing around manufacturing solar modules in . China
Wait a sec. I thought that the promise of green jobs included manufacturing plants sprouting up all over the country bringing us back to our heyday of “Made in
It doesn’t quite work that way. For the same reasons we lost our textile industry to the southeast states and eventually to offshore plants; for the same reasons we lost our heavy and most light manufacturing capacity to
Mexico and eventually to ; we cannot expect that renewable energy equipment manufacturing will magically buck the old economy rule: Cash is king. China
Fully loaded manufacturing labor cost in
—meaning wages, taxes, benefits and overhead—comes in at around $15 to $20 per hour. In Massachusetts , it’s about $1. On top of that, land is cheap, buildings are erected with $1/hour labor, electricity from the one-new-coal-plant-a-week generation program is next to nothing, and the government controls the value of its currency to ensure that these cost advantages remain in place. China
Do we want China-like conditions here in
? Of course not. Massachusetts
That begs the question, however:
How could we ever compete with for manufacturing jobs? Green manufacturing jobs? China
The answer is simple. We cannot.
Evergreen Solar’s advantage, for awhile, was that they had engineered solar panels that used less polysilicon. That reduced their cost of manufacturing and allowed them to be competitive as production was ramping up worldwide. When polysilicon prices dropped from $400 a kilogram to $55 a kilogram, Evergreen’s bill of materials cost advantage evaporated. At the same time, production of solar photovoltaic cells more than doubled in 2010 over the prior year’s output, pushing prices for solar modules down by about 30%, a typical result of supply starting to satisfy demand in a new technology arena.
All of this requires that we rethink the future of
in terms of an economic model that will be sustainable in the long run. Yes, we still have some pockets of success in manufacturing, medical devices being one of the more prominent of them, but how long will we be able to maintain our appeal as a viable host to manufacturers? Massachusetts
Categories: Losing America