China may soon stop flooding the world with cheap solar panels

March 23, 2013

Over the past few years, China has utterly dominated the global solar industry. Firms like Suntech, Trina, and Yingli have received hefty government subsidies to sell photovoltaic panels at ever-shrinking prices and capture 80 percent of the global solar-manufacturing market.


In trouble. (AP)

But in the process of flooding the world with cheap solar panels, many of those manufacturers were taking on big losses. And now there are signs that the Chinese government won't prop up those ailing companies indefinitely.

This week, the main Chinese subsidiary of Suntech, the world's largest solar manufacturer, was forced into bankruptcy court. The company had missed a $541 million payment to bondholders and owes roughly $1.4 billion to China's state-owned banks. The manufacturer had been struggling in the face of an oversupplied solar-panel market and new tariffs imposed by the United States. (There were also accusations of mismanagement.)

So what happens now? Suntech, which employs some 10,000 workers, will face some sort of restructuring. On the whole, the Chinese solar-manufacturing industry will likely have to shrink and consolidate so that some companies can still survive. An endless frenzy of subsidized overproduction and cut-rate prices isn’t sustainable. According to a recent report by GTM research, 54 Chinese solar firms may disappear by 2015.

In the near term, that means the recent rapid decline of solar prices could slow or even reverse. As Todd Woody of Quartz reports, Chinese manufacturing has helped drive solar photovoltaic prices down 75 percent since 2007.

"The Chinese solar expansion set off a boom in Europe and the US as installers took advantage of cheap solar panels to expand their business," Woody writes. "The collapse of Suntech and other Chinese manufacturers could leave installers like SolarCity on the hook for hundreds of millions in warranties."

Not everyone is convinced that China's solar consolidation will be a terrible thing, though. Here's Kevin Bullis of MIT Technology Review: "That could be a good sign for the solar industry and for innovation. We need more companies to fail [in order] to reduce oversupply, stop prices from plummeting, and allow companies to start buying more equipment and implementing new technologies that are needed long-term for solar to compete with fossil fuels."

In other words, the glut of cheap Chinese panels has helped bolster the rooftop solar market in recent years. But if solar power is ever going to become a truly widespread technology, we may need to see newer, more efficient technologies or even alternatives to conventional silicon panels. In some key ways, Bullis explains at length here, China's onslaught was standing in the way of that.

Further reading:

--Solar is getting cheaper. How far can it go?

--A prescient story from last year by my colleague Steve Mufson about how China's growing share of the solar market was coming at a steep price.

--Back in May, the United States imposed a 31 percent tariff on imports of silicon photovoltaic cells from Suntech and other manufacturers in response to allegations of dumping.

--The best reporter on the Suntech bankruptcy is Todd Woody, who's following the story as it progresses at Quartz.

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