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When solar companies fail, the result is BETTER technology.

Why More Solar Companies Must LITERALLY Fail.

Many solar manufacturing companies, like Suntech are struggling to make the sales and business that they need, but what many don’t know is that hundreds of these companies will have to die for the industry to move forward.

New innovations and inventions are required for the solar industry to keep up with the fossil fuel industry, but the current conditions of the market are stifling new technology.

Solar generators: Workers at a Suntech factory in Wux, China assembling panels.   As recently as 2011 Suntech was the largest producer of solar panels in the world, and today it is on the brink of bankruptcy. It has little cash, has a half billion dollars in debt to bond investors whom they’ve recently failed to pay, and has billions of dollars of loans while it is struggling to make a profit in a market with an excessive amount of its product.

Suntech’s failing, however, may not be a bad thing. Some experts in the industry think that there literally must be hundreds of failures from solar panels companies to bring the supply of these panels back in line with the demand. This would keep prices from falling further, and will allow surviving companies to justify new purchases or equipment, inventions, and innovations to match up with the fossil fuel companies once the demand for solar has recovered.
However, there’s a good chance that companies like Suntech in China will get bailouts from the local governments to delay their demise and subsequently the greatly needed reduction in production capacity and the balancing of demand and supply. Around the world solar companies have the ability to manufacture between 60 and 70 gigawatts of solar panels, yet the demand in 2013 is only going to be about 30 gigawatts.

The overproduced amount of solar panels around the world, which has gone on for nearly two years now, is largely the results of bailouts and government investments in solar panels in factories in China, the location of two thirds of solar panel production in the world. This surplus has been good for customers and for installers, as it has led to a precipitous fall in the price of solar. Since early 2011 solar prices have dropped by 60%. Eight years ago solar panels would sell for about $4 per war, now you can often find them at 78 cents per watt according to Jenny Chase of Bloomberg New Energy Finance.   Still, this decline in prices has been very detrimental to the producers and manufacturers. With falling prices these companies have had to bring down costs due to the falling prices of materials while making small improvements in the equipment that they have. However these costs haven’t gone down quickly enough to maintain the falling price rate of their panels, bringing down profits and making the new technologies and equipment needed difficult to ascertain and invest in.

Originally the Chinese government supported quick growth in solar manufacturing capacity, but it now acknowledges that the current situation and the balance of supply and demand in the current markets are not sustainable and plans to let the lesser companies fail. “Beijing is aware that you cannot have 500 different module makers all in China, which is the current situation” says Chase. However this acknowledgment has often not been made by investing local governments, who don’t want companies to fail and lose thousands of jobs.

This environment has stagnated and caused the delay of advanced and newer technology that would require new equipment in manufacturing. Suntech has been claiming for years that it will increase production of its Pluto solar cells, which were in part designed by the University of New South Wales and that have broken records for efficiency and effectiveness in relation to traditional panels (see “The Chinese Solar Machine). However, recently this technology was delayed as well.

Starts and companies with new technologies have especially been struggling due to the oversupply of affordable and lower quality panels. New plans and innovations have had to be canceled because of insufficient demand. GE has been developing an alternative to the conventional silicon solar panel, but they recently announced that this has also been delayed due to the slowdown in the market (see “GE Stalls Solar Factory Construction). It’s reached the point that even companies whose sole purpose was to help silicon solar manufacturers bring down costs are hurting because their equipment is not being purchased, and some have gone out of business because of it.

The solar market will recover at the same speed that these ailing companies are allowed to fail. The recovery will also depend on the expansion of the market around the world. The falloff in prices for solar have opened it to new markets, especially ones with lots of sun access like Chile where there are high electricity prices. The growth and stability of these markets are currently unclear.

Certainly if a company like Suntech failed it would have serious consequences. But it’s undeniable that those companies which survive would be best suited to get the technology and innovations that are required to move the solar panel market forward. Chase says that the market will best decide which technology and innovations are best.

 

Article written by Jennifer Coleman of Sun Source Solar Energy Brokers, providing solar brokering, brokerage, and solar energy consulting services in Santa Rosa, Marin, Sonoma, Napa, Solano and San Francisco Counties.  For more information, please visit www.SunSourceSolarBroker.com.

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