Oregon, which weathered the tech boom and bust, may be headed for bubble trouble in solar manufacturing.

PORTLAND — Oregon, which weathered the tech boom and bust, may be headed for bubble trouble in solar manufacturing.

Experts predict a worldwide glut of solar panels and a short-term shakeout of the U.S. sun-power industry that could slow investment in factories of the type state officials are scrambling to attract.

Some solar companies are laying off workers as U.S. and foreign government incentives approach expiration, and as manufacturers in China and elsewhere rush to meet rising demand.

Edwin Koot, a respected solar analyst in the Netherlands, recently issued a report predicting a global surplus of the panels, or modules, that convert sunshine into electricity.

"The industry simply is growing too fast compared to the demand side," says Koot (pronounced "coat"), founder and chief executive of SolarPlaza, a Rotterdam consultancy. "There are too many companies on the market."

No one discredits projections of long-term growth in demand for solar systems. But, as happens often in emerging markets, manufacturers apparently are flocking to the technology faster than consumers. In the next few years, experts suggest, they face a big hiccup.

To be sure, it's early to project with any certainty a bubble in a relatively tiny industry with comparatively high costs that stifle competition with conventional energy. Solar optimists also point out that a panel glut could force down prices and increase sales.

Tim McCabe, director of the Oregon Economic and Community Development Department, is unfazed by predictions of a panel surplus and slowdown in the bellwether California market, whose proximity helps his agency attract a growing number of manufacturers.

"The interest level in Oregon, with our business-energy tax credits, is extremely high with solar manufacturers right now," McCabe says. "We're talking to a lot of them."

A glut may strike Oregon panel installers as fanciful. Companies such as Portland's Tanner Creek Energy face a module shortage and record-high prices as they rush to erect solar systems before the 30 percent federal tax credit for solar-system owners expires at year's end. Solar advocates say such subsidies are crucial until new technology and mass manufacturing reduce costs.

Both installers and manufacturers are bracing for a severe slowdown.

California companies such as Akeena Solar Inc., a large Silicon Valley-based designer and installer, have shed workers, citing the fate of the federal incentive, the economic slowdown and tight credit for homeowners.

PV Powered Inc., a solar-inverter manufacturer in Bend with more than 50 employees, has laid off an undisclosed number — in the single digits — because of the tax credit, which Congress could still vote to renew this year.

"You've got to be proactive while you're going into a period of uncertainty," says Gregg Patterson, PV Powered chief executive.

Patterson, who hosted presidential candidate Barack Obama at PV's plant in May, expects either a Republican or Democratic administration to renew and enhance solar incentives. But he laments the intervening uncertainty.

"We are going to cede a lot of market opportunity to our overseas competitors just because we keep turning off this industry," Patterson says, "and it's a shame."

Grants Pass consultant Glenn Harris, a former PV Powered president, says the U.S. solar market "will just stop dead" once the federal tax credit expires. Commercial installations will tank, says Harris, chief executive of the SunCentric Inc. consultancy, and some factory investments will be canceled or postponed.

"If it does not get renewed, the U.S. market will shrivel up," says Christopher Dymond, Oregon Energy Department solar manager. But that won't bother most solar manufacturers considering plants in Oregon, Dymond says, because they are large companies planning for the long term.

The United States is only 10 percent of the world market, with Germany and Spain taking the lead. Subsidies are scheduled to diminish in Germany and expire in Spain, significantly reducing global demand.

Meanwhile, solar-cell production is exploding in China. Makers of polysilicon, the raw material for crystalline cells, are investing to overcome a shortage.

Manufacturers also are churning out new thin-film solar panels, which sell for less than the crystalline variety. Overall cell and module production will grow 57 percent worldwide this year and 83 percent next, predicts the Prometheus Institute for Sustainable Development, a Massachusetts research organization.

That's far more photovoltaic, or PV, capacity than the world can absorb, writes Koot in his report, "The Global PV Market: Fasten Your Seatbelts."

In 2009, he says, "the gap between supply and demand could be 3,500 peak megawatts, or 65 percent more supply compared to demand. An oversupply situation appears unavoidable."

The solar industry, Koot says, could enter a so-called hog cycle, oscillating between high and low prices and production in the classic pattern of the U.S. pork industry. But, he says, by 2012 solar production costs could fall, and conventional energy prices could rise to equal each other in sunny climates.

From that moment of "grid parity," subsidies will be unnecessary and sales will soar, Koot says, perhaps creating shortages again.

In North Portland, managers of a Solaicx Inc. factory, where almost 60 workers make silicon ingots for solar wafers and cells, are banking on that high-growth scenario.

John Sedgwick, co-founder and vice president of sales and marketing at the company's Santa Clara, Calif., headquarters, sees expiring subsidies and potential oversupply as "possible little temporary bumps in the road."

Sedgwick says the plant, which can produce enough material in a year to power roughly 28,000 Oregon houses, should be making more than six times that amount by the end of 2009. He expects Solaicx ultimately will need more factory space and will again consider Oregon for the state's experienced workers, relatively low labor costs and comparatively cheap, reliable power.

Sedgwick, who worked in the cell-phone industry's early stages, recalls skeptics who said mobile phones would be too expensive to catch on. But as with phones, he says, solar systems will reach a point where everyone will find them affordable.

"The costs will come down," Sedgwick says, "and then the market will explode."

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On the Net:

Oregon Economic and Community Development Department: http:econ.oregon.gov/

SolarPlaza: http:www.solarplaza.com/

Tanner Creek Energy: http:www.tannercreekenergy.com/

Prometheus Institute for Sustainable Development: http:www.prometheus.org/

Akeena Solar Inc.: http:www.akeena.net/cm/Home.html

Solaicx Inc: http:www.solaicx.com/

PV Powered Inc.: http:www.pvpowered.com/

SunCentric Inc.: http:www.suncentricinc.com/