Alternative Energy Watch: Competition in Solar Equipment Manufacturing; A123 Gets a Boost; Another Setback for Wind (AMAT, SOLR, AONE, HEV)

Today’s alternative energy news focuses on new competition in the solar equipment manufacturing sector, an upgrade to a battery maker’s stock, and a hint that rare earth element production is off the mark in the US. We’ve also got a brief look at the issue of wind power in the US and connecting it to the grid.

US solar equipment makers like Applied Materials, Inc. (NASDAQ: AMAT) and GT Solar International, Inc. (NASDAQ: SOLR), have been competing primarily with German-based makers of the tools for manufacturing solar PV cells. As with just about everything else, though, new competition is springing up in China, according to Reuters.

The Chinese equipment firms are taking advantage of the growing capacity for solar PV cell manufacturing at the country’s largest suppliers. Through the end of 2012, Chinese solar PV makers are expected to build 2,000 new cell manufacturing lines, raising demand for furnaces and wafer-cutting machines. Analysts expect most of that equipment to be purchased from Chinese manufacturers able to offer prices as much as 30% below their US and German competitors.

Chinese solar PV equipment makers are also looking to expand outside China to markets in Taiwan, India, South Korea, and Japan. That will increase the pressure on Applied Materials, GT Solar, and the rest to reduce costs to get back in the game. There is also a strong possibility that we’ll see some consolidation to wring out costs more quickly.

An analyst at Goldman Sachs has boosted his rating on A123 Systems, Inc. (NASDAQ: AONE) from ‘neutral’ to ‘buy’ and maintained a price target of $9/share on the company’s stock.  Interestingly, the analyst sees EPS losses for 2011 thru 2013, although the projected loss in 2011 of -$1.50 is lower than a previous estimate of -$1.71. The ‘buy’ recommendation is based on a short-term opportunity related to some near-term positives.

Battery makers like A123 will continue to try to diversify from auto batteries to grid storage and other areas as they seek to grow. A123’s share price is up more than 9.5% near noon today, to $6.04, still at the lower end of the stock’s 52-week range of $5.21-$14.40. Competitor Ener1, Inc. (NASDAQ: HEV) is down nearly -5% to $2.62, after setting a new 52-week low of $2.60 earlier today.

Finally, further proof from the Pacific Northwest that all is not right with the integration of wind power into the nation’s energy grid. The regional transmission operator, Bonneville Power Administration (BPA), is likely to limit wind-generated electricity access to the grid because high water levels in the Columbia River are expected to lead to a large increase in the region’s hydropower generation. The grid can’t handle both more wind and more hydro at the same time.

Building out interconnections and increasing grid capacity sound like the right course of action, but building new capacity is very costly and only needed by wind power at relatively few periods of peak generation. There’s still a lot of work to be done to incorporate the nation’s wind capacity with the grid.

Paul Ausick