ARCO SOLAR INC.

Group Members:
Sneha Gupta (0121pg017) Rakeshor (0121pg022) Abhishek Bhandari (0121pg090) Amit Phogaat (0121pg105)

10th April 2013

PGDM 2012-14, Era Business School, Dwarka

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About ARCO

The oil crises of the 1970s hastened the development of modern solar panels by a second generation of PV firms, which focused on ground applications. Major oil and gas companies entered the field. Exxon underwrote the Solar Power Corporation. Atlantic Richfield Company(ARCO) purchased Solar Technology International and renamed it ARCO Solar in 1977. In 1966, transportation and marketing expanded into chemicals. By 1988, was a world leader in photovoltaic (PV) cells production. and renamed as Atlantic Richfield (ARCO). ARCO was one of the largest Integrated Petroleum enterprises. Established in 1870 as Atlantic Refining Company and was exclusively in oil and gas business , plastics and coal business.

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Company Overview

ARCO Solar Inc. ARCO subsidiaries also conducted oil and gas exploration merged with Richfield oil Corp. AC Co. but eventually sold them.

In 1967, which produces Uranium and Plutonium bearing fuels. ARCO ultimately decided to enter into Solar field. they started to look for energy alternatives to petroleum. Plant Cells Research Institute, as its price were declined to $17 till 1977. And purchased Solar Technology International and renamed it as ARCO SOLAR Inc. Natural & Renewable source of energy. As Photovoltaic (PV) cells which produce electricity from sunlight were already invented in 1954.
Also owned Newspaper. In abundance, when energy crisis happened in 1973-74, unexpectedly attracted ARCO to study solar energy potential . Birth Of ARCO Solar ARCO expansion in nonpetroleum business had limited success. Realized that Solar energy is the best alternatives.

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ARCO SOLAR INC.

Solar tech was incorporated in 1975 by J.W.Yearks ; main operation was to produce PV panels which was later on sold to ARCO for $300, 000 . By 1979 , the company had begun operations ; in 1980 , it became the first to produce panels generating more than a megawatt of power . And sale got doubled. To increase energy , the company installed a prototype power generation facility in New Mexico & Arizona. Several technical improvements leads to increase in output by 50% with even less no of trackers. Plant made a record as it was constructed in 6 months and under budget. It encouraged Company which rotates to follow the sun. Large enough to power 400 homes. output was boosted to 40 % than stationary panel. Project judged as success. To construct 16MW plant in Carissa Plain. California. started to move from research mode into marketing stage. Thus, 37% federal and state tax credit for solar installation brought the cost down.

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Continue.

With the new facilities up & running , a major hurdle came when ARCO announced it would sell silicon products named Genesis which generated electricity to maintain batteries in vehicles , cars & boats Genesis made ARCO the world leader , doubling its stocks and expanding it further . Genesis made ARCO the world leader , doubling its stocks and expanding it further. The companys sales doubled again in 1984. By 1986, the company sold 400 Genesis modules per month. By 1985, the companys researchers had a thin-film cell with a record of 13.1%. 1986, JVs with Showa Shell Sekiyu K.K and Siemens A.G. to manufacture and market ARCO Solar products in the Pacific and Europe.

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The PV Industry

By 1977 , many new companies had made competition tougher with Chevron , Amoco , Occidental Petroleum, etc. This Industry looked promising as oil prices were increasing and price of PV electricity falling. By 1970s , it was evident that solar energy was the need for the future . Worldwide sale of PV products rises from $11 million (1978) to $150 million (1983). As PV Industry seemed lucrative. Industry analysts forecasted $1 billion PV Industry by 1990 and PV electricity at half price of oil. But by 1980s , with oil prices falling consumers shifted back to old age technology ; demand for electricity fell below projections . Many companies bailed out of PV industry. Newly elected President Ronald Regan stopped funding the firm . By 1982, Gramm-Rudman-Hollings federal deficit reduction budget cuts to lowest level ever. Thus PV appeared unnecessary. The utilities wanted to expand established tech and were unwilling to invest in unproven technology started to cut non-military expenditures. Oil glut made the fossil fuel plentiful again.

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Continue.

A severe reduction in Federal Govt. oil prices began to fall. As Nation learned to conserve energy. But commercial tax credit were extended to 1986 after lobbying effort of solar energy industry. Federal tax credit get expired in 1985. By 1988, ceased its operation in 1983. Burden of financing solar energy research fell on the shoulders of industry alone. ARCO and AMOCO remained only US industry to continue its operation in PV industry. Exxons Solar Power Co. forced oil industry to curb down capital spending and lay off employees. PV market share of US fell from 80%(1981) to 35% (1987).

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Competition in PV Market

By 1985, started to invest 19% more in PV R&D than US Govt. Competition in PV Market . In 1985, Japanese used new type of Amorphous Si cells which was less efficient but cheaper than single crystal cells. They shipped 7MW silicon powered products. Japanese sold $100 million Si powered products. Lower production cost and economies of scale provided them competitive edge. Threat of global warming made PV industry to regain the momentum as consumption of fossil fuel had to be reduced significantly which used fraction of material and less labor to produce single-crystal cells at lower cost. A Ray of hope for US PV Industry Still profitable mkt. They used thin-film technology. US was trying to tap the opportunity by producing cells to generate energy at a price competitive with fossil fuels. Also 3 Mile Island and Chernobyl nuclear Accidents damaged the credibility of Nuclear Power Industry Thus Solar energy potential was once again seeming true.

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ARCO Solar Inc. in 1988

Competitive advantage due to CIS technology. It was world leader in PV Industry with 20% of $150 million market which was no degradable and had better efficiency than Silicon. Its revenue of $30 million was matched every 15 hours by its parent company. The Company was leaner with 350 employees. Sale forecasts were optimistic due to growing backlog of orders. Employee trust was shacking ; the headquarter was relocated 5 times ; six different presidents in 12 years ; a rumor was that an employee once held more than a dozen different job titles .

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ARCO ponders

With all the problems , ARCO decided to shift its corporate strategy ; with low oil prices the company cut its costs by $500 million . Chairman retired & CEO stepped down . ARCO was enjoying its share of goodwill with many companies opting out of competition . It made it hero in the industry. Yet , it had a decision to make ..should it sell its solar firm??