The chief executive of Evergreen Solar said today his company decided to close a state-subsidized manufacturing facility in Massachusetts and shift its focus to China because of that country’s overwhelming dominance of the world’s solar industry and its dramatically lower costs.
Michael El-Hillow, Evergreen’s president and chief executive officer, told lawmakers on Beacon Hill that his company eagerly accepted $21 million in direct state aid to help build its manufacturing plant at Devens, but then was forced to abandon that plant and lay off 800 workers when China steamrolled the market.
“We tried. We really tried,” El-Hillow said of the company’s efforts to build jobs in Massachusetts.
But he said the Wall Street meltdown precipitated a dramatic shift in solar manufacturing. At the time Evergreen negotiated its deal with Gov. Deval Patrick, El-Hillow said 20 percent of worldwide solar manufacturing was in low-cost regions of the world, while 80 percent was in Europe, Japan, and the United States. A few years later the situation was reversed, with 80 percent of solar manufacturing located in low-cost regions, primarily China. El-Hillow said the rapid turnaround happened because China pumped massive amounts of money into its solar industry while capital markets in the US, Europe, and Japan dried up.
Evergreen opened a manufacturing facility in China last November and closed its Massachusetts plant in January. The company, which has never reported a profit, still employs 125 people in Massachusetts, who work at the corporate headquarters and on research.
El-Hillow said China was hard to resist. He said the country supplied a construction loan for two-thirds of the cost of Evergreen’s facility there, with no interest or principal payments for five years. El-Hillow said Evergreen pays its Chinese employees $2.50 an hour, one-tenth the $25 an hour it paid to its US employees. He also said China is graduating more engineers than the US and the cost of employing them is far less.
“There’s no way an American company can produce for less,” he said.
The final straw for Evergreen’s Massachusetts facility was a tariff imposed by the US government that drove up the cost of solar module frames imported from China. El-Hillow said the cost of a frame pre-tariff was roughly $15 to $25, but rose to $200 after the tariff was imposed. He said the higher frame costs meant the company was producing solar modules at its Devens facility for $400, while most competitors were charging $350 and Chinese manufacturers were producing them for $250.
“Every panel we made was losing money,” he said.
Evergreen has since gotten out of the solar module market and is selling the solar wafers it produces to module manufacturers in China.
Sen. Mark Montigny, the chairman of the Senate Post Audit and Oversight Committee, called the hearing to publicize the dangers of state government trying to pick winners and losers in various industries. He called in El-Hillow from Evergreen and Ronald P. O’Hanley, a top official at Fidelity Investments, which recently announced it was closing an office complex in Marlborough and relocating 1,100 workers to nearby offices in Rhode Island and New Hampshire. Mutual fund companies like Fidelity benefited from a law passed in 1996 that lowered their taxes.
Montigny, a New Bedford Democrat, said such deals rarely benefit taxpayers, but he said if the state continues to award tax breaks to companies the details of these arrangements should be fully disclosed so that policymakers can evaluate their effectiveness.
Top Patrick administration officials testified that they are moving in that direction, citing tax credits for life science companies that are voted on publicly with requirements that the money be returned to the state if the firm fails to deliver promised jobs.
By contrast, the state’s film tax credit is open-ended and far less transparent. Anyone shooting a film or commercial in Massachusetts automatically qualifies for a tax credit equal to 25 percent of whatever they spend. The name of the film tax credit recipient and the size of the tax credit award are not disclosed and there are no job creation requirements at all, although a new law is expected to require greater disclosure next year.
Montigny called on Evergreen to pay back the money it received from the state when it sells its now-abandoned manufacturing facility in Devens, but El-Hillow said that wasn’t going to happen. In fact, he insisted the state made money supporting Evergreen. He said the state collected more in employment taxes from the former workers at the Devens plant than it paid out in grants to the company.
“This was not a bad deal. The citizens got their money back with some chance of an upside,” El-Hillow said. “Unfortunately, it didn’t work out.”
Gregory Bialecki, the governor’s secretary of housing and economic development, disputed some of El-Hillow’s figures but added that when all the numbers are crunched the state probably didn’t lose any money on its Evergreen investment.
