After a difficult year in 2011 for the solar power industry, 2012 looks to be even worse. Key problems include management uncertainty about the future viability of government subsidy programs, high inventories, reduced European demand, and pricing pressures due to overproduction and increasing dominance of Chinese manufacturers.
In recent years, a dozen American solar manufacturers have gone bankrupt, closed down or downsized, and that trend has accelerated in 2012.
First Solar, the world’s biggest thin-film manufacturer, announced on 4/16/12 that it’s closing a German plant and idling four production lines in Malaysia. The company will cut 2,000 jobs, or 30 percent of its workforce.
SunPower also will be shutting down part of its overseas operations. On Monday 4/16/12, San Jose, Calif.-based SunPower announced it was closing a 125-MW capacity manufacturing facility in the Philippines.
On 4/2/12, Solar Trust for America declared bankruptcy, despite a year ago receiving a conditional commitment for $2.1 billion in loan guarantees from the Department of Energy -- "the largest amount ever offered to a solar project," according to Energy Secretary Steven Chu -- for a massive project near Blythe, Calif.
In mid-April 2012, BrightSource Energy, a start-up formed to build solar thermal power plants, was forced to cancel its initial public offering of shares just hours before trading was to begin. It could not find the market it wanted for its stock.
Q-Cells, one of the biggest solar cell manufacturers in Germany and the world, announced on 4/2/12 it has filed for bankruptcy. It’s the fourth German solar energy company to go bust in recent times, including Solar Millennium AG.
Edwin Mok, an Equity Analyst with Needham & Company, said 2011 was a year to forget for solar investors, and that 2012 will be a very challenging period of slow consolidation. Ultimately, Mok attributes the state of the industry to the unintended consequences of subsidizing both supply and demand. A feedback loop resulted, creating unsustainable growth. He expects more losses as prices remain depressed by weak demand and production overcapacity. Some suppliers will go out of business, but China is likely to keep larger solar enterprises afloat by loaning them money.
Assisted by technological innovation and years of government subsidies, the cost of solar power has fallen sharply in recent years. Solar companies are telling Congress that they cannot be truly competitive and keep creating jobs without a few more years of government support. In 2009, backed by ample stimulus funding and solid political support, federal clean tech spending, including everything from energy to electric vehicles, reached $44.3 billion. That spending has dropped steadily to an estimated $16 billion this year. By 2014, the federal government will spend $11 billion, or about a quarter of what it did five years earlier, on clean technologies.
Concerns about the rapidly growing US federal debt are making lawmakers more skeptical about any new tax breaks for business in general. And taxpayer losses of more than half a billion dollars on Solyndra, a bankrupt maker of solar modules that defaulted on a federal loan, has tarnished the image of renewable power in particular. Solyndra was financed under a now-expired program, part of the 2009 stimulus package, that provided government loan guarantees for clean-energy projects, some of which administration officials expected to be risky.
President Obama, a steadfast supporter of clean-energy programs, has already begun making a case for new government investment in clean energy projects as a way to foster both energy independence and employment. Given the recent track record of the solar power industry and the massive federal budget deficits, that will be a tough sell.
For further details onthe current difficulties facing the solar power industry, see the following:
http://emergingmoney.com/china/solar-energy-will-be-challenging-in-2012-analysts-say-ldk/
http://www.renewableenergyworld.com/rea/news/article/2012/04/first-solar-closing-plant-30-percent-of-workforce-cut
http://articles.businessinsider.com/2012-04-04/europe/31285529_1_q-cells-renewable-energy-solar-power-industry
http://topics.nytimes.com/top/news/business/energy-environment/solar-energy/index.html
This article was partially excerpted from publically available information, and was authored by Rick Wilson, Acacia Environmental Group LLC. Any opinions expressed in this article are those solely of the author, and are not intended as legal or professional guidance to any specific readers. For more information on the author see here.
