CHINA - Solar Industry Clouds

"Dark clouds gather over China's once-booming solar industry" by Malcolm Moore, The Telegraph (UK) 8/29/2012

China's push into solar energy was supposed to be a proud example of how the country was advancing into hi-tech manufacturing. But now the whole sector is on the brink of bankruptcy.

Two years ago, LDK Solar, one of China's largest solar panel makers, built a new, state-of-the-art factory in the central city of Hefei.

It sits in one of the city's industrial parks, a big LDK Solar logo on its wall, with the New York-listed company's slogan underneath: "Lighting the Future".

"It cost 2.5 billion yuan (£250m) to build, the majority of the equipment was imported from Germany, and it hired 5,000 staff," said Jie Xiaoming, a 30-year-old who works at the plant's quality control and packaging department.

Last month, however, 4,500 of the staff were put on gardening leave. They receive 700 yuan a month to stay at home. The factory has shut down 24 of its 32 production lines.

"There do not seem to be any orders. People are still turning up for work, but mostly just sleeping. The management has not said much, just that the United States has a new policy that is stopping our exports," said Mr Jie.

Since it was set up in 2005, LDK Solar, along with several other Chinese solar panel makers, has enjoyed heady growth. Solar power, along with biotechnology and aerospace, was declared a "strategic emerging industry" and was given grants and low-cost loans.

It funneled the cheap credit into an aggressive expansion, hoping to provide an entire industry chain of products and services.

Meanwhile, in Europe and the US, governments provided subsidies to buy Chinese-made panels as part of commitments to boost renewable energy.

But the incentives created a glut of suppliers, and since 2010, the price of polysilicon wafers has fallen by nearly three-quarters. The price is now below the production cost - in the latest quarter, LDK Solar's gross margin was -65.5pc.

Meanwhile, the debt crisis in Europe has cut government subsidies to the sector and the US imposed a 31pc tariff in May on Chinese wafers, complaining that manufacturers were being underwritten by the government.

In July a group of 25 European solar companies followed suit, filing an anti-dumping complaint with the European Union.

At the same time, the quality of the solar equipment being made by Chinese companies, even by the biggest companies, is often not export-grade.

While the Chinese government has promised to hugely increase its purchases of solar panels, there is a significant excess capacity in the domestic market that has kept prices low.

China's big five firms are all reporting disastrous trading and heavily indebted balance sheets. At the end of the first quarter, JA Solar listed debt and liabilities of $1.5 billion, Trina Solar had debts of $1.08 billion, and Yingli had debts of $3.44 billion.

Suntech, once held up as a model company, could have to pay $690m in collateral related to a possible fraud, and it also has a $541m convertible bond payment in early 2013. Its total debts are $3.58 billion.

In the first quarter, LDK lost $185.2m as sales dropped by nearly 75pc. "When they came to remove staff, they simply chose a percentage who would remain," said another worker outside the Hefei plant, who declined to be named. "The whole industry is doing badly, and LDK also had a strategy problem. There is no point in worrying now. It is simply a matter of time before the factory closes. I give it a maximum of six months," he said.

For the time being, the Chinese government is determined to keep LDK alive. The authorities in Xinyu, where it is headquartered, have announced they will roll 500 million yuan of the company's debts into their annual budget.

A bank official told Caixin, a Chinese magazine, that Xinyu government had set aside a total of 2 billion yuan to bail out the firm. Government officials, who boasted that they wanted to turn Xinyu into a "silicon town", are desperate not to lose face. But so far LDK is rumored to have laid off 10,000 workers and defaulted on payments of around 600 million yuan to 20 suppliers, according to Caixin.

"I don’t think we will close though. I think the worst situation we will be sold," said Mr Jie. "Apparently Sharp is interested."

Sharp's interest is unclear, and so far there has been no queue of buyers. Jiangxi Copper Corporation was rumored to be a possible bidder, on the orders of the local government, but Pan Qifang, secretary of its board of directors, summed up the general wariness of the market: "Our company is not familiar with the solar industry, so we cannot rush into it," he said.

LDK Solar declined to comment.

COMMENT: The question for me is, does China really know how to run a world free-market business or is this just the consequence of economic times?

ENERGY - Future of Solar Power 10/2011

"How Bright Is Solar Power's Future in a Post-Solyndra America?" PBS Newshour 10/18/2011

Excerpt

GWEN IFILL (Newshour): Next, the future for solar energy in the U.S., now clouded by the collapse of a California company backed by government loans.

NewsHour correspondent Spencer Michels reports.

SPENCER MICHELS (Newshour): The solar industry boasts that it's growing fast, installing roof top panels that turn sunlight into electricity at a record pace. This year, it expects to create enough electricity to power 350,000 homes, double last year's rate. And that, say proponents, saves a lot of fossil fuel.

LYNDON RIVE, SolarCity: The average cost of electricity would be just under 10 cents.

SPENCER MICHELS: Lyndon Rive is the founder and CEO of the privately held company SolarCity in an industry that gets various forms of government subsidies, including tax credits and loan guarantees, that make it cheaper for companies to borrow money to expand.

LYNDON RIVE: The solar industry has grown 60 percent year on year. Last year, it grew 50 percent. This year, it's grown 60 percent. There's over 5,000 companies that are in the solar industry.

SPENCER MICHELS: His firm, SolarCity, operating in 11 states, is the largest solar installer in the U.S. with 1,300 employees, 500 of them hired in the last 12 months. Nationally, solar employs 100,000 workers.

Yet industry groups and leaders have seen trouble signs ahead for a while.

Dan Richer, director of Stanford's Center for Energy Policy, says the industry is at risk.

DAN REICHER, Stanford's Center for Energy Policy: We may not see the loan guarantee program extended. We may see a major cut in federal support for clean energy research and development. There's going to be a major battle next year over extending some key tax credits for clean energy.

COMMENT:

Another excerpt

ERIC EISENHAMMER, Coalition of Energy Users: The green energy industry involves a lot of hedge fund managers who are making a lot money off it. And a lot of these guys are also making large donations to politicians and then they're getting these massive taxpayer-funded subsidies in return. But it's for an economic model that doesn't really pan out.

Green energy is a few times more expensive than conventional energy. So, I don't believe that it really competes very well in a free market.

Note that "Coalition of Energy Users" is a conservative group.

Right, and the oil industry and "traditional" energy industry, are NOT making large donations and getting big subsidies?

Wonder where the "Coalition of Energy Users" gets much of its funding? Big-oil? Nuclear power industry?

Also, a NEW industries with new technology is supposed to have competitive costs?! ALL new industries, or new products, have high initial costs. The cost comes down as the industry, or product sales, grow.

ENVIROMENT - Italy's Last Reactor

"Italy’s Last Reactor Town Goes Solar in Fight Against Nuclear" by Alessandra Migliaccio and Flavia Rotondi, Bloomberg 4/17/2011

Montalto di Castro, the town where Italy’s last nuclear plant was built before a two-decade ban, is fighting against a return to atomic power and staking its future on solar energy by hosting Europe’s largest photovoltaic park.

“We’ve come up with a better idea,” Mayor Salvatore Carai said in an interview in his Town Hall office, which has views of the old reactor between the sea and acres of farmland. “The solar panels keep us self-sufficient. We haven’t used a single kilowatt of ‘dirty energy’ since December 2009.”

Italy, the only Group of Eight nation without nuclear plants, passed legislation in 2008 to return to generation and the country planned to build its first new reactors by 2020. That was before the accident at Japan’s Fukushima Dai-Ichi plant prompted the government to set a one-year moratorium.

As Italy debates whether to return to nuclear generation, Montalto’s mayor is organizing protests and supporting a national referendum to stop the construction of new plants, saying they would hurt agriculture and tourism.

“There’s concern people will abandon the land for fear of leaks,” Carai said. “No compensation they can offer could make up for that.”

The Montalto reactor, which never went into service, was dismantled after Italians voted in a 1987 referendum to end nuclear generation in the wake of the Chernobyl accident. The empty shell of the facility now sits next to a thermoelectric plant run by Enel SpA (ENEL), Italy’s biggest electricity producer.

Residents of Montalto are concerned that their town is a prime candidate to host new generators once the moratorium ends.

‘Top of List’

“We’re at the top of the list,” said Stefano Sebastiani, a spokesman for Montalto’s anti-nuclear committee. The Japanese accident has raised awareness on safety issues and made residents nervous about the prospect of new plants, he said. “Nuclear is like a pressure cooker and sooner or later the steam comes out and people pay the price.”

Experts agree that if plant construction goes ahead, the town of 9,000 between the sea and the hills of the central region of Lazio would offer an ideal location.

“Montalto is one of the places where it makes sense to restart nuclear,” said Giovanbattista Zorzoli, a nuclear engineer and professor at Milan’s polytechnic university. “It has the right conditions and a network already set up for distribution of the energy.” There’s also a canal connecting the area to the sea to allow for cooling, he said.

Montalto has already moved on, said Raffaello Giacchetti, regional manager for SunRay Renewable Energy, a European solar power-plant developer and operator of the town’s main 45 megawatt photovoltaic field. Producing enough electricity to power 15,000 homes, it’s the largest field in Europe.

Economic Advantages

“Montalto and other towns in the area have understood that they’re not just getting economic advantages from the fields,” Giacchetti said. “They’re are also creating an alternative to nuclear power.” The town’s solar fields combine to provide 85 MW of power, which should rise to 120 MW by the end of this year, according to Mayor Carai.

Solar panel prices will likely fall to $1.50 per watt in the second half of 2011 compared with around $1.80 in 2010, Jenny Chase, a solar analyst for Bloomberg New Energy Finance, said March 29.

Demand for solar may be supported by a backlash against atomic generators after the Fukushima accident. The WilderHill New Energy Index has gained about 8 percent since the March 11 accident as governments around the world review their nuclear plans.

Electricity Prices

Some Montalto residents remain skeptical about whether solar power can have enough of an impact. “We pay too much for electricity,” said Quinto Del Papa, a retired farmer who supports nuclear power. “I think nuclear would help.”

Italian households pay 21 euro cents per kilowatt hour of electricity compared with 13 cents in France and 14 cents in the U.K., while Italian businesses pay 13 cents, compared with 7 cents in France and 11 cents in the U.K., according to Brussels- based research firm Europe’s Energy Portal.

Environment Minister Stefania Prestigiacomo said last year that nuclear power will help balance Italy’s energy mix, reduce electricity prices and cut dependence on imported energy.

Del Papa, who remembers Montalto as a boomtown that nearly doubled in population as the old plant was built, said new reactors “would also give us jobs.” As for the dangers of having a reactor in the neighborhood, he shrugged. “I’d live near it,” he said. “Those accidents are rare.”

Zorzoli, the Milan-based nuclear engineer, said he’s more skeptical about atomic energy since the Fukushima accident. “One should not be alarmist” about the country’s power requirements, he said. “Italy’s existing capacity and renewable development will allow us to face our needs.”

Bold text of headings mine

ECONOMY - China Competition Threatens U.S. Solar Industry

"Silicon Valley’s Solar Innovators Retool to Catch Up to China" by TODD WOODY, New York Times 10/12/2010

Excerpt

A few years ago, Silicon Valley start-ups like Solyndra, Nanosolar and MiaSolé dreamed of transforming the economics of solar power by reinventing the technology used to make solar panels and deeply cutting the cost of production.

Founded by veterans of the Valley’s chip and hard-drive industries, these companies attracted billions of dollars in venture capital investment on the hope that their advanced “thin film” technology would make them the Intels and Apples of the global solar industry.

But as the companies finally begin mass production — Solyndra just flipped the switch on a $733 million factory here last month — they are finding that the economics of the industry have already been transformed, by the Chinese. Chinese manufacturers, heavily subsidized by their own government and relying on vast economies of scale, have helped send the price of conventional solar panels plunging and grabbed market share far more quickly than anyone anticipated.

As a result, the California companies, once so confident that they could outmaneuver the competition, are scrambling to retool their strategies and find niches in which they can thrive.

“The solar market has changed so much it’s almost enough to make you want to cry,” said Joseph Laia, chief executive of MiaSolé. “We have spent a lot more time and energy focusing on costs a year or two before we thought we had to.”

The challenges come despite extensive public and private support for the Silicon Valley companies. Solyndra, one of the biggest firms, has raised more than $1 billion from investors. The federal government provided a $535 million loan guarantee for the company’s new robot-run, 300,000-square-foot solar panel factory, known as Fab 2.

“The true engine of economic growth will always be companies like Solyndra,” President Obama said in May during an appearance at the then-unfinished factory. But during the year that Solyndra’s plant was under construction, competition from the Chinese helped drive the price of solar modules down 40 percent. Solyndra rushed to start cranking out panels on Sept. 13, two months ahead of schedule, and it has increased marketing efforts to make the case to customers that Solyndra’s more expensive panels are cost-effective when installation charges are factored in.

“It definitely puts more pressure on us to bring our costs down as quickly as possible by ramping up volume,” said Ben Bierman, Solyndra’s executive vice president for operations and engineering.

Silicon Valley companies like Solyndra, Nanosolar and MiaSolé continue to receive hundreds of millions of dollars in customer orders and some plan to expand local manufacturing. But the rapid rise of low-cost Chinese manufacturers has made investors — who once envisioned the region’s future as Solar Valley — skittish about backing new capital-intensive start-ups.

An example of unfair competition from countries with governments who are willing to heavily subsidize an industry, and China is not the only one.