Getting back to my actual blog beat after a slew of entries I have made for classes.  Sorry there will be more or those.  But in the meantime, I want to get back to a discussion of a lot of coverage of China’s solar-industry-woes, as of late.  After some recent coverage of the probes into Chinese solar manufacturers suspected of dumping, the New York Times recently published a piece on the ‘glut’ of Chinese solar panels flooding into the global market.

Here is a quote:

“Though worldwide demand for solar panels and wind turbines has grown rapidly over the last five years, China’s manufacturing capacity has soared even faster, creating enormous oversupply and a ferocious price war.”

According to the article’s author, Keith Bradsher, Chinese solar panel manufacturers are losing as much as 30% on sales (up to $1 of every $3, to use his exact words).

This, a skeptic might say, might be bad for the Chinese solar industry, but for the rest of the world, so what?

This is bad, very bad.

Two reasons:

1.  Business in China is still tightly linked to (and funded by!) the Chinese government.  These tremendous losses for these firms are hitting state-owned banks in China hard.  NYT’s Bradsher reports that state-owned banks have supplied these companies with approximately $18 Billion in low-rate loans, while more local governments in China have supplied their own loans and sold land and capital equipment to these firms at steep discounts.

2.  A glut may give way to a famine–and famine prices.  At least for a period long enough to drive up prices.  It is still too early to tell, but consider the evidence so far. China has been slowly knocking out competitors in most of the few other countries that produce solar panels.  Hence the probes spurred by the complaints of European companies.  These reports are incomplete, and defenders of China’s solar industry challenge many of the claims against them. The EU (and some American) solar producers have alleged that Chinese companies are benefitting from big handouts from the central government, and are thus leveraging these subsidies to sell their products are prices well below market value.  If Bradsher’s $18B figure is accurate, than we can assume that they are receiving a fair amount of money from a government that wants to support a potentially key industry in the energy sector.  Even with subsidies (or subsidies in the form of attractive loan terms, cheap land and equipment

Chinese solar requires these subsidies if it expects to compete with Chinese coal–which is 30% of the price of solar, Bradsher reports.  The government would like to see consolidation in its wind and solar industry (and European countries–who make up the world’s largest market for solar panels, would like to see a more even field for their own producers).  This begs me to wonder, can Chinese solar companies compete without generous government support, and what will happen to solar panel production if China stops or shrinks panel and wafer production?

The name Solyndra comes to mind….or not