Alternative Energy Watch: Solar Outlook Fades; Battery Maker Slides; Methane Does Contaminate Groundwater at Shale Gas Sites (FSLR, STP, AONE)

Today’s alternative energy news leads off with a rather dim outlook for solar PV for the rest of this year and then looks at results from a US battery manufacturer. There’s also a comment on new research showing methane contamination in groundwater at shale gas wells in Pennsylvania.

Solar PV maker First Solar, Inc. (NASDAQ: FSLR) has announced a “strategic cooperation framework agreement” with a Chinese solar developer to “explore collaboration on solar PV projects in China and identify project investment opportunities … in the U.S. and other global solar markets.” There’s a lot less here than meets the eye.

First Solar gets a Chinese partner to help it sell more solar modules in China, something it desperately needs given the outlook for solar PV installations in Europe. The Chinese partner gets a supply of solar modules probably at a reduced price plus.

If the deal were limited to China, it might make sense for First Solar. But the company owns its own project development business and it’s taking on a partner to compete with it outside China? That smacks of desperation.

First Solar and Suntech Power Holdings Co. Ltd. (NYSE: STP) both filed a Form 10-K with the US SEC yesterday, and both are warning that cuts in European solar subsidies could slash both solar module pricing and demand. Europe has accounted for as much as 80% of global demand for solar PV, and if European demand falls substantially there’s no guarantee that the US, China, and India will make up the loss.

Lithium-ion battery maker A123 Systems, Inc. (NASDAQ: AONE) was not expected to post positive earnings in its first quarter, but the company’s loss was larger than expected. Analysts were expecting an EPS loss of -$0.46, compared with A123’s actual EPS loss of -$0.51. Revenue for the quarter totaled $18.1 million, compared with expectations of $18.16 million. Shipments also fell year-over-year, from 16.3 megawatt-hours to 14.3 megawatt-hours. About 80% of revenue came from sales to automakers, which is a big part of A123’s problem.

Sales of all-electric cars in the US are anemic, with just 573 of the Nissan Leaf and 493 of the Chevy Volt sold in April. In March, the Leaf sold 298 units and the Volt sold 608. The Toyota Prius hybrid sold nearly 12,500 units in the US in April.

Small batteries, like those in the Toyota Prius, keep the total cost of a car low, while large batteries for the Leaf or Volt or Fisker are expensive and depend on government subsidies to be cost competitive. A123 could face some tough sledding ahead.

We had a story yesterday on new research from Duke University that links natural gas drilling known as hydraulic fracturing (or “fracking”) with elevated levels of methane in nearby groundwater.  The study is the first to demonstrate that proximity to an active well results in higher levels of methane in groundwater that is the source for local drinking water.

The study notes that methane is not thought to be dangerous when ingested, but it is highly flammable and if it collects in an enclosed space poses a threat of asphyxiation or explosion. No evidence was found that indicated that the water produced from drilling, which could contain hazardous chemicals, were leaking into the groundwater. The study did not look for traces of the chemicals used in the fluids used to fracture the rock.

So far that has been no response to the study from the natural gas industry or any company that produces or drills for natural gas. The predictable response is a call for more research because the Duke study was localized and every natural gas play is different. And while we’re studying all this, we need to keep drilling like mad.

Paul Ausick