U.S. Solar Failures Give China Dominant Share

Aggressive government subsidies and the recent bankruptcies of major U.S. solar power companies make China the dominant player in the global market for solar panels, according to a recent New York Times article.

Solyndra LLC, heralded last year by President Barack Obama as an example of U.S. commitment to green energy, became the third U.S. solar firm to seek bankruptcy protection in the past month. The bankruptcy will result in the federal government being on the hook for $535 million in loan guarantees as well as the loss of 1,100 jobs from the closing of its Fremont, California plant.

The other two U.S. solar cell firms that filed for bankruptcy in August were Evergreen Solar of Massachusetts and SpectraWatt of New York. Yet another firm, BP Solar of Frederick, Md. had halted production last spring.

These failures represents nearly a 20% reduction in U.S. solar panel manufacturing capacity, according to GTM Research. The failures are attributed to a surge in solar panel manufacturing capacity in China and other nations coupled with demand that failed to meet projections, pushed down solar panels prices by more than 40% in the past year.

Last year China produced about 40% of the world’s solar panels. China’s leading solar panel manufacturer is Suntech Power Holdings which had the capacity to produce about 2.3 gigawatts of solar PV cells and modules per year as of the end of 2010. It enjoyed gross sales of $2.9 bil., a 71.4% jump over 2009, on shipments of 1.57 megawatts worth of PV cells. The only solar PV companies in the same league as Suntech are First Solar of the U.S., Sharp Solar of Japan and Q-Cells of Germany. China’s massive push toward green energy is helping to power Suntech’s continued leadership.

Ironically Suntech’s success is fueled in part by President Obama’s green-energy initiatives. The U.S. is second only to China as a market for Suntech. After winning the contract to build the western hemisphere’s biggest solar power plant at Nevada’s giant Nellis Air Force Base in 2007, a Suntech production plant was built in Arizona. Since its opening in October of 2010, Suntech has expanded its capacity aggressively. In mid-January a second shift was opened, increasing the number of employees to 78 from the initial 40. By mid-2011 that plant’s capacity will rise to 50 MW, and the workforce will expand to 150 by the end of 2011. That’s only a fraction of the 4,000 employees in China but it is becoming increasingly important as Suntech competes aggressively for U.S. projects.

The solar PV cell industry is likely to accelerate as its costs become competitive with other means of generating electricity. At the moment, PV cells remain substantially more expensive than other technologies. For plants entering service in 2016, the cost of generating a megawatt-hour of electricity using solar PV cells is estimated at $210.70, compared with $136.20 for advanced coal with carbon capture and storage (CCS), $97.00 for wind, $124.50 for advanced combustion turbine natural gas, and $113.90 for advanced nuclear, according to U.S. Dept. of Energy estimates using constant 2009 dollars.

Suntech’s success has prompted China’s media to anoint its founder and CEO Shi Zhengrong “The Sun God”. He has also become one of China’s wealthiest entrepreneurs, with a net worth estimated at around $2.9 billion in 2008. Suntech stock has suffered a big drop since then, due in part to the crash of 2008 and in part to the surge of competition inside and outside of China.

According to industry analysts, 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 helped transform firms like Suntech from minor players in the solar power industry just a few years ago into the industry’s most competitive producers. In 2010 alone China Development Bank extended credit lines to several solar firms totaling over $30 billion.

Last year the United Steelworkers Union filed a lawsuit asking the federal government to investigate China’s clean energy subsidies and to file a complaint with the World Trade Organization which strictly prohibit export subsidies. However, such lawsuits not only take years to resolve but rarely produce results that are dramatic enough to determine the outcome of global competition.

But Suntech and China’s other solar panel giant have no assurance of continued growth because it depends on steady efficiency improvements. The company has already installed production lines that incorporate its so called “Pluto” technology which raises conversion efficiencies to 19% on monocrystalline solar panels and 17% on polycrystalline solar panels in large scale production. That’s a significant improvement over prior generations of high performing monocrystalline solar panels that achieved 18% and polycrystalline solar panels with 14% efficiency. It has also installed a line to produce thin film PV cells which have efficiencies in the 10% range but are considerably cheaper to produce and easier to install. However, U.S. firms have also been aggressively innovating, contributing to a green-energy race that is likely to produce both more losers and aggressive new startups capable of changing the global solar panel industry virtually overnight.