March 1, 2021

U.S. Solar Company Bankruptcies a Boon for China

Some U.S., Japanese and European companies still have a technological edge, although seldom a cost advantage, over Chinese rivals, according to industry analysts. But loans at very low rates from state-owned banks in Beijing, cheap or free land from local and provincial governments across China, huge economies of scale and other cost advantages have transformed China from a minor player in the solar power industry into the main producer of an increasingly competitive source of electricity.

“The top-tier Chinese firms are kind of the benchmark now,” said Shayle Kann, a managing director of solar power studies at GTM Research, a renewable energy market analysis firm based in Boston. “Pricing is determined by where they price, and everyone else prices at a premium or discount to them.”

In addition to Solyndra, Evergreen Solar of Massachusetts and SpectraWatt of New York also filed for bankruptcy in August. BP Solar shut down its factory in Frederick, Maryland, last spring. Those bankruptcies and closings represent almost a fifth of the solar panel manufacturing capacity in the United States, according to GTM Research.

“There is no question that renewable energy companies in the United States feel pressure from China,” said David B. Sandalow, the assistant secretary for policy and international affairs at the U.S. Energy Department. “Many of them say it is cheap capital, not cheap labor, that gives Chinese companies the main competitive advantage.”

China’s Big Three solar power companies — Suntech Power, Yingli Green Energy and Trina Solar — have all announced in the past two weeks that their sales in the second quarter were up between 33 and 63 percent from a year earlier. Yingli and Trina were also profitable in the quarter; Suntech posted a loss mostly because it broke a longstanding agreement to buy solar wafers, a step in the production process, from a Singapore affiliate of MEMC Electronic Materials of Missouri, in order to manufacture more wafers itself.

Shares in large and small Chinese solar power companies have mostly rallied in the past two weeks on the New York and Hong Kong stock markets as investors have welcomed their strong quarterly results and the prospect of dwindling competition from Western rivals; in addition to the bankruptcies in the United States, solar power companies in Germany, another big producer, have been laying off workers and retrenching.

The recent strength of Chinese solar stocks “truly reflects the low cost base of the Chinese solar manufacturers, and it is great to see their positioning, particularly relative to their American and European counterparts,” said K.K. Chan, the chief executive of Nature Elements Capital, a Chinese clean energy investment company based in Beijing. He attributed the Chinese industry’s low costs not to inexpensive labor in China, as solar panel manufacturing is a high-technology industry that is not very labor-intensive, but rather to free or subsidized land from local governments, extensive tax breaks and other government assistance.

Solar panel prices have plunged by 42 percent per kilowatt-hour in the past year as manufacturers have sharply increased capacity, particularly in China. Meanwhile, demand has been somewhat weak in the main markets in the United States and Europe.

Costs for electricity generated by utility-scale solar installations now approach costs for natural gas in some markets, like California’s, when subsidies of as much as 30 percent of the price are included. However, costs remain well above the cost of electricity from coal.

The United States and the European Union have tried to build demand for solar power by subsidizing buyers of solar panels, but increasingly those subsidies are being used to purchase solar panels from China. Chinese government policies have differed in that they have been tightly focused on building the competitiveness of the country’s manufacturers; China exports 95 percent of the solar panels it produces.

Article source: http://www.nytimes.com/2011/09/02/business/global/us-solar-company-bankruptcies-a-boon-for-china.html?partner=rss&emc=rss

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