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Prospects Darken For Solar Energy Companies
Hugh Pickens writes "Although global demand for solar power is still growing — about 8% more solar panels will be installed this year compared with 2010 — bankruptcies, plummeting stock prices and crushing debt loads are calling into question the viability of the solar energy industry that since the 1970s has been counted on to advance the world into a new energy age. Only a handful of manufacturers are now profitable in the face of too much capacity, which has contributed to a plunge in prices as government subsidies have been curbed. Prices for solar panels started 2011 near $1.60 per watt, but a buildup of inventory forced manufacturers into a fire sale toward the end of the second quarter that has pushed prices to near $1 per watt now. 'The prices that we're seeing today are likely not covering manufacturing costs in many cases,' says Ralph Romero. With at least seven solar-panel manufacturers filing for bankruptcy or insolvency in the last several months and six of the 10 largest publicly traded companies making solar components reporting losses in the third quarter, public-market investors are punishing the solar sector, sending shares down nearly 57% this year. Although winners are expected to emerge eventually, the question is how much more carnage there will be before that happens. 'The fact of the matter is, nobody really knows which solar companies will be pushed out of business or be forced to merge,' writes industry analyst Rodolfo Avalos. 'Nobody also knows how long it will take for the solar industry to improve even when the forecasted solar global demand for the next 5-10 years is quite promising.'"
The summary does not mention the actual need for prices on solar panels to drop to make them more viable, only on the economic repercusions of the shift in the market.
I thought to myself one day that this was one of the necessary evils or events in a free market economy, prices must shift and therefore allow more efficient companies and technologies to emerge. Any real change requires chaos.
You wanted change? Here you've got it.
Only if we allow it to. Right now it can not, because the prices are being manipulated by government subsidy. Not just the solar energy prices, but those of coal, nuclear, and wind as well.
It is a lesson we continually fail to learn: Industries built on government subsidy suffer when those subsidies begin to go away, even if the product itself is sound.
How is this a long term bad thing? Either the industry will come up with an idea that will allow a marketable solar power system sans subsidies and thus thrive, or it will die and we can move on to the next idea instead of wasting engineering hours on a failed/NRFPT energy source. In either case we win.
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Get your facts straight. Fossil fuels are never subsidized, but instead heavily taxed by the governments.
Solar and wind power however are only possible with enormous subsidies yet still can't produce energy on their own and require 100% backup capacity by conventional plants.
Recall the workstation industry in the late 80s and early 90s?
Many companies, many failures, a few survivors.
Couple that with the suck economy, and anyone who guessed wrong on the timing of the recovery, is in a tricky place.
This is why you subsidize research, not production.
China flooding the market, specifically to destroy the competition IMHO, is just half the story. How are people supposed to buy solar panels for the house when they are not even able to make the house payments. Small business owners aren't going to throw up panels any time soon. They rent. Renters aren't going to put up solar panels, their customers are going out of business left and right. Manufacturers with large plants are too busy deciding if they are going to relocate. China needs to learn to let other people make money. A customer base requires someone has an income.
Having to work for a living is the root of all evil.
Don't worry, I'm sure the invisible hand of the free market will step in and all will be OK.
That would be true if there weren't actors like China distorting prices in the market by dumping government-subsidized-manufacturing-produced solar panels on the market at below-cost rates in order to destroy foreign competition.
Free markets only work where there is a fair market. When governments step in to "tip the scales" in order to influence the market, there is no "free market". Same thing applies with Capitalism. As can be seen with the US, when the government steps in to prop up certain businesses and tear down others in an effort to engineer certain outcomes and societal directions, the result is not Capitalism, it's "Crony Capitalism", and that hasn't worked out so well for US citizens.
Strat
Progressivism (aka US 'Liberalism'): Ideas so good they need a police/surveillance-state to enforce.
The sad thing is that everytime I bring up this massive scandal of enormeous proportions, I only get a shrug or something like "it's always been that way" as a response.
But in fact, Richard Nixon was impeached for far less and while certainly there was corruption before it seems to have gotten out of hand with the Bush/Obama bailouts.
Only if we allow it to. Right now it can not, because the prices are being manipulated by government subsidy. Not just the solar energy prices, but those of coal, nuclear, and wind as well.
It is a lesson we continually fail to learn: Industries built on government subsidy suffer when those subsidies begin to go away, even if the product itself is sound.
B-b-b-but isn't MORE government control the solution to that?!?!?!
(Yeah, it's sarcasm for the "government-can-fix-ANYTHING" slashtards...)
Look, I WANT solar power on my home. I have a good location South facing, near full time sun during the day, am tech oriented, and I'm not dirt poor! I get HomePower magazine, I track the technology, I'm a buyer looking to do this.
So why don't I have it? Because my home like so many others is upside down and the cost of a solar install of decent size is looking like $30K or more which will be saving me something like $150 a month on my electric bill. How exactly does THAT make sense? Prices are down per watt? You could've fooled me! The price of raw cells on the wholesale market may have dropped some but the installed price is in the stratosphere IF you can even find a company local to you willing to do it.
There's a company near me advertising solar LEASING like crazy. They install and maintain the system and you pay them a monthly fee that's lower than your existing electric bill. Now this sounded possibly interesting despite my trepidation about anything that says "lease". I tried to sign up for an estimate - they don't service my area! Say what?! These guys are putting out printed ads and radio like mad here and then won't take my money? Kripes it's like trying to get high speed internet all over again! SolarCity -> asshats!
Now I know that my area isn't big on subsidies and it's also not someplace like Fla. where the sun roasts anything not moving but there's good potential in my site just no damned affordable way to do it no matter how much these guys claim to have reduced cost. Certainly installing solar makes huge sense in many ways but if the pricing is going to be $30K per house in a market where people are $40K upside down or more with a payoff measured in decades I think the reasons why few are buying are pretty damned clear! The local and federal Govt subsidies need to crank up, this is infrastructure we're talking about and it needs to be supported IMO. This is the technology that can take loads off our grid, why isn't there any incentive to go for it?
P.S. My neighbors just had to cut down all of their trees that used to shade the front of my home during parts of the day. It was awful but I now have no obstructions and full exposure but cannot take advantage of it. This sucks!
Build it, Drive it, Improve it! Hybridz.org
Well, it says that the projected increase is 8% for next year... wouldn't that be a sign of people wanting these thingamalings?
The company-killer is every player in the industry wearing very rose covered glasses thinking they individually will be the sole supplier for the entire markets growth.
The overall market is growing 10%? OK we'll borrow money to expand production by 10% of the world wide market. Later ... Oh sales only went up 10% yoy? Whoops, well I got my golden parachute, bye guys.
Assuming its not that bad, the finances kill them anyway. So, we need to expand production this year by 10% to keep up with demand and the other players. No problemo I'll ring up the bank... Bank says F-off because they make more money borrowing from the fed at 0% and issuing credit card debt at 29.99%. Well OK then we'll sell stock.... Whoops finance says forget that because the market is totally crooked and scheming so no one wants to buy a "real" investment, and due to SOX etc costs we actually cannot raise the money. Well then we'll self invest, raise our current prices so we clear enough additional profit to grow next year.. Whoops that killed our sales because the Chinese will govt finance at 0% and our higher prices killed our sales.
Fundamentally it comes down to
1) People are notoriously bad at making sensible investments during a strong growth phase
2) Corrupt and/or failing financial systems both here and abroad mean we can't get the dough to expand, no matter how much we want or how profitable it would be.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
Wouldn't it be great if the Solar Panel industry was able to succeed or fail based on the merits and the value of thier products, not be tossed about by the whims of politicians who shovel money into anything that looks "green" wihen they are up for re-election? The politicians, desperate to curry favor with certain constituant groups tosses obscene amounts of money into companies with trivial advancements.
The Government builds up manufacturing capacity with grants and low-cost, gov't backed loans, then they subsidise the purchase of solar panels by end-users to create demand for the panels, then they force utilities to pay well above market rates for whatever power the solar panel owner pumps into the electric grid, without allowing the utility the ability to manage the flow of electricity onto their grid.
And what is the argument for investing ever more money into the solar panel industry? We have to keep up with "threat" of China's investments in their solar panel industry. Here's the problem - first off, solar panels are on their way to being a commodity, and China excells in that space (manufacturing commodity items), second, China has the money to invest in these projects we don't (we perversely are borrowing the money fo fuel our "green initiatives" from China!).
Solyndra was in the $3/watt solar panel business when the industry was going from $2.50 -> $1.60 -> as low as $1/watt solar panels now - Gov't shouldn't be in the business of investing in businesses it subsidies and regulates - it has the ability to create a false market, subject to the political needs of elected officials, not and real demand on the part of the consumer.
Ken
No, the lesson we refuse to learn is not that "gubment subsidy baaad mmmkayy!" It is that government subsidy needs to be A) predictable over the next decade and B) taper off gradually.
To the extent that the nations have done so, the intended stimulation of the solar industry has worked. Where they have pulled the rug out fast and early, they've caused uncertainty in the investment market. Sometimes intentionally, I would conjecture, given the rhetoric many of those responsible for policy are spouting and the incestuous relationships with established energy sectors many of them have.
Note, though, that a bunch of companies going bankrupt when a sector transitions from its initial phase to the established industry phase is well recognized by economists to be normal, with or without government subsidies. There really is basically nothing unusual to see here, just some trade rag journalists trying to keep their readers subscribed through exaggeration.
Someone had to do it.
It is a lesson we continually fail to learn: Industries built on government subsidy suffer when those subsidies begin to go away, even if the product itself is sound.
The lesson "we" continually fail to learn is that not everything is a vindication of one's favorite economic-religious theory. Every time there is an increase in demand for something, investments pour into the relevant industries far in excess of that demand, and most of those ventures fail before a handful of them succeed and become the dominant players. There's nothing magical about either the market or subsidies. Subsidies are just market forces, like weather influencing crop prices or international trade policy influencing imports and exports. The theoretical free market in which prices are not "manipulated" does not and cannot exist in the real world because it is ultimately based on human beings, and humans manipulate everything they can. It doesn't matter whether the influx of cash comes from subsidies or sales: companies benefit while the cash flows in, and they suffer when it stops flowing. Money is money.
Proud member of the Weirdo-American community.
The wind doesn't blow at any one place all day long, which means if you want 100 MW of reliable wind energy all day you need to install 300 or more MW in wind turbines all over the country so that at any given time at least some of them are receiving wind. That need for redundancy makes wind energy very expensive relative to natural gas and coal power.
The plain fact is that wind and solar both could get us off fossil fuels, but they would require even more government subsidies than they already receive to do it. Convincing voters to support more government spending when the US government already spent most of 2011 deadlocked over spending is effectively impossible. I would love to see it happen, but it won't.
All good examples. I was thinking US and not Europe. Europe tends to tax fuel much more than the US. The US taxes fuel too, but it also subsidies fuel at several stages. I do agree that government subsidies can alter the landscape in a negative way. But, in the US at least, ALL forms of energy are subsidized at some point.
I would also point out that nuclear plants have a very high decommission cost and risk. Even with very high taxes nuclear can be a net cost to governments.
So I think the energy picture is complicated and interwoven with many issues. There is not a single solution. And it is wise to put our eggs in many baskets.
Sorry, but there is no fucking way a company is going to lease me solar panels at anywhere near what I would save in electricity each month with no upfront cost.
Let's use a best case scenario here. You've got a $25,000 upfront cost for installation. I average about $120 a month on my electric bill. Now, with that $25,000 upfront, let's say they give me a VERY generous interest rate on that loan of 10% (not likely, but this is best case scenario). That's $2,500 a year just on the INTEREST--not even factoring in their maintenance costs, system depreciation, any payment on the principal, etc. So even if the system generated enough electricity to cover 100% of my electric bill (again, hardly likely, but we'll stick with the best case scenario), I would still only be paying them about $1,400 a year. That's $1,100 less than just the INTEREST on their upfront investment. There is no way any company in their right mind is going to do that. Unless the government is going to be subsidizing that upfront with a 0% interest rate loan, there is just no way to make those numbers work.
SJW: Someone who has run out of real oppression, and has to fake it.