In late March Suntech, an 800-pound gorilla in solar panel manufacturing, ended up in bankruptcy court, becoming what the Associated Press (AP) called “the latest casualty of a painful slump in the global solar industry,” a slump which has also claimed the likes of Germany’s Q-Cells.
According to AP, “Suntech Power Holdings Ltd. said eight Chinese banks asked a court to declare it insolvent after the company missed a $541 million payment to bondholders last week.” Suntech declined to oppose the move, with Suntech CEO David King saying the company will “evaluate restructuring initiatives and strategic alternatives.”
Production, Yes; But No Demand.
This past year has been terrible for solar panel manufacturers, as production is far greater than demand. Suntech, founded in 2001, was particularly vulnerable when it was revealed last July that “a business partner faked $680 million in collateral for a loan Suntech had guaranteed,” according to AP.
AP also noted that the Chinese government’s decision to promote the solar industry as a way of weaning the country off its ravenous appetite for coal and imported oil and gas was much of the reason for the glut — “Attracted by tax breaks and subsidies, hundreds of small Chinese solar producers sprang up.” A hundred flowers bloomed.
And died. Even major players have reported heavy losses and have one foot in the grave themselves. Investment advice site Motley Fool wrote in early April that the entire solar industry is “in trouble,” specifically mentioning beleaguered Yingli Green Energy Hold. Co. Ltd. and SunPower Corp. as continuing to see drastic drops in their share prices.
The Fool passed along “reports out of China” that the country’s banking regulatory commission considers solar one of nine sectors presenting “undue risk,” which as the Fool explains “may make obtaining much-needed loans for the financially strapped companies all the more difficult — Yingli, a major player in the solar market, suffers from a tripling of its outstanding debts and collapsing profits over the past few years — and might prompt a concerned Chinese government to clean up by forcing companies to merge or shut down.
It’s Not Just China.
Not everybody’s blaming Chinese overproduction for their solar industry woes. India’s blaming the United States for killing its domestic solar industry. According to industry journal Renewable Energy World, last August New Delhi’s Center for Science and Environment accused the U.S. Export-Import Bank and Overseas Private Investment Corp. of abusing “a $30-billion fund, fast start financing, set up by the U.N. Framework Convention on Climate Change intended to help developing countries overcome climate change difficulties.”
Indian law says crystalline photovoltaic projects “must use India-manufactured products, while thin-film projects can use parts from other regions,” according to the journal. CSE says that the Ex-Im bank was offering “low-interest loans to Indian solar project developers that use U.S.-manufactured solar cells and panels,” benefiting American producers such as First Solar and the now bankrupt Abound Solar.
Those whose bread and butter isn’t solar are pulling out. Agence France-Presse (AFP) reported in late March that Bosch officials, blaming “global overcapacity,” said the German auto-parts manufacturer would drop its solar panel manufacturing business, issuing a statement that “Bosch is to discontinue its activities in crystalline photovoltaics… manufacture of ingots, wafers, cells, and modules will be ceased at beginning of 2014.” The company will also sell its shares in the Aleo Solar unit.
Stefan Hartung, Bosch board member and supervisory board head of Bosch Solar Energy, told AFP that the company tried everything they could to reduce manufacturing cost, but “were unable to offset the drop in prices, which was as much as 40 percent.” Other Bosch officials said the company’s Solar Energy Division lost about $1.3 billion last year.
But The Sun Will Come Out Tomorrow.
With all the carnage there are still those who see opportunities in solar. “Deep-pocketed Korean conglomerates are moving into the solar industry,” the AP reported. And frankly, there are those who see silver linings in all the gloomy news, who think that it means brighter days are ahead.
If the problem is overproduction, as seems to be the general consensus, many shrewd observers think that now with so many companies going out of business, that problem may have solved itself. Self-described “contrarian” Stuart Bernstein, who oversees Goldman’s renewables unit, told Bloomberg News that “it feels like the worst is behind us.”
He’s putting Goldman’s money where his mouth is, too. Bloomberg noted that Goldman was “the top arranger for renewable-energy stock offerings” in 2012, and is accelerating funding this year as “it anticipates a rebound in an industry that’s slumped every year since 2009.”
Bernstein explained that technologies now considered “emerging,” like solar, are inevitable, and that global demand must shift over sooner or later. At that point, he said, this “short-term volatility” will smooth out, and the technology will become commonplace and ultimately indispensable.
Goldman is planning to invest $40 billion in the solar industry over the next 10 years. Bernstein said he thinks worldwide investment in solar and other renewable energies combined will top $395 billion annually by 2020.
The solar industry could just be going through the sort of growing pains new industries go through. Think of the American auto industry. Back when it was young there were dozens and dozens of manufacturers — the Wikipedia page for defunct American car manufacturers lists hundreds and hundreds of companies, from ABC (1906-1910) to Zip (1913-1914). The vast majority of companies failed between 1900 and 1929, which equates to where the solar industry is now in its development.
We’ll see more failures as the industry consolidates, sure. But the demand for solar isn’t going away any more than the demand for cars in the United States did.
One Million Installations Can’t Be Wrong.
Picking one example almost at random, the Australian industry journal Smart Company reported this week that the solar industry “has reached a landmark moment with the number of panels installed on Australian homes now estimated to have cracked the one million mark.”
Citing research from solar consultancy SunWiz, Smart Company says “more than one million systems have been installed across the country,” and “rooftop solar panels now number more than 300,000.” Solar panels installed in Australian homes produce “more than 1 percent of electricity consumption” as well. Okay, it’s not earth-shattering, but the technology is slowly becoming accepted and expected.
Smart Company also said that with major producers like Suntech biting the dust, prices will go back up as production contracts. Which is Economic 101, but as John Grimes, the chief executive of the Australian Solar Council, told Smart Company, “the industry has increased very rapidly, and so, especially during the last year, there has been a significant take-up in technology.”
Grimes says he sees hope that panel prices and manufacturers’ margins are increasing, and that overall, “the price of the technology has dropped dramatically, but overall, things are good.”