Solar manufacturers like Suntech are struggling. Hundreds need to die for the industry to recover.
By Kevin Bullis on March 18, 2013
Suntech, a Chinese company that as recently as 2011 was the world’s largest producer of solar panels, is teetering on the edge of bankruptcy. It’s running low on cash, owes bond investors half a billion dollars (which it failed to pay Friday), and is saddled with payments on billions of dollars in loans as it struggles to make money in a market flooded with its product.
If Suntech fails and shuts down its factories, that might not be a bad thing. Some industry experts say that hundreds of solar companies need to fail to help bring the supply of solar panels back in line with demand. That would slow the fall in prices and, as demand recovers, allow companies to justify buying new equipment and introducing the innovations that will ultimately be needed for solar power to compete with fossil fuels.
But there’s a good chance that Suntech, and many other companies in China, will be bailed out by local governments, which would delay the much-needed reduction in production capacity. Worldwide, solar companies have the capacity to manufacture between 60 and 70 gigawatts’ worth of solar panels a year, but demand in 2013 is only expected to be about 30 gigawatts.
The worldwide glut of solar panels—which has lasted nearly two years—is partly the result of big government-backed investments in factories in China, where two-thirds of solar panel production capacity is located. The surplus has been good news for consumers and installers, because it’s helped drive a precipitous drop in solar panel prices. They’ve dropped 60 percent since the beginning of 2011, according to GTM Research. Solar panels sold for $4 per watt eight years ago. Now it’s common to buy them at 78 cents per watt, says Jenny Chase, an analyst at Bloomberg New Energy Finance.
But the rapid decline in prices has been hard for solar manufacturers. As prices have dropped, they have been able to lower costs because the price of materials has been falling and they’ve made incremental imprvements to existing manufacturing equipment. But in many cases costs haven’t fallen fast enough for companies to keep up with the falling prices for their panels, eliminating profits and making it difficult to invest in the new equipment needed to keep reducing costs.
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Wow…this makes so much sense..
Hate to have low pricing for consumers too long….