Chinese Solar Companies Losing Money

Chinese Solar Companies Losing Money
January 4, 2012

Cheryl K. Chumley

Cheryl K. Chumley (ckchumley@gmail.com) writes from Northern Virginia. (read full bio)

Chinese solar power companies reported larger-than-expected losses in the third quarter of 2011, with few buyers lining up to purchase solar power equipment. The Chinese companies are trying to stay afloat by selling excess inventory at below-production costs, which has the Obama administration claiming the Chinese are engaging in unfair trade practices.

Exports Collapsing
Solar power accounts for only one-hundredth of 1 percent of China’s electricity generation. Nevertheless, China produces 30 percent of the world’s solar power equipment, which is sold almost entirely for export.

With the European Union cutting back on alternative power subsidies and the United States declining to subsidize and mandate as much alternative power as the renewable power industry would like, Chinese solar power companies are stuck with growing inventories and no buyers on the horizon.

Shipments at Suntech Power Holdings, the world’s largest manufacturer of solar power equipment, have fallen 20 percent during the past year. Other solar manufacturers report similarly declining sales.

“Liquidation is leading to suicidal pricing,” solar power analyst Hari Chandra Polaverapu told Bloomberg News.

“Demand has not lived up to expectations and pricing has collapsed over the last three quarters,” added analyst Aaron Chew, according to Bloomberg.

U.S. Cries Foul
The U.S. International Trade Commission in early December voted 6-0 that solar producers in the United States have been adversely harmed by Chinese manufacturers dumping product at below-cost prices, setting the stage for further trade showdowns between the competing nations.

In the wake of the U.S. International Trade Commission’s ruling, the U.S. Commerce Department will now investigate whether China has been unfairly subsidizing its solar energy sector and subsequently selling panels and cells in the United States at unfairly low prices. China, in the meantime, has similarly condemned the United States for allegedly engaging in protectionist market policies.

Obama Administration Irony
Climate scientist Patrick Michaels, a senior fellow for environmental studies at the Cato Institute in Washington, DC, says it’s ironic the Obama administration is complaining about China subsidizing its solar power industry.

“The fact of the matter is we subsidize solar in the United States,” just as the Chinese subsidize solar panel productions, Michaels said. “It’s fairly obvious we have subsidized the production of panels, too—unless you don’t count the government guaranteeing loans as a subsidy. So it sounds like we have been doing the same thing.”

The hypocrisy of the United States protesting Chinese subsidies isn’t the real problem with solar, however, Michaels suggested.

“Solar is an extremely expensive form of energy,” he said. “It’s about four times more expensive [than conventional electricity], … especially when you realize that for all the solar panels you put up, you have to have increased backup generating capabilities, because the sun does not shine at night.”

Solar power is a simple example of “green politics,” he added, saying not enough solar energy reaches the earth for it to be economically viable.

Cheryl Chumley (ckchumley@aol.com) writes from northern Virginia.

Cheryl K. Chumley

Cheryl K. Chumley (ckchumley@gmail.com) writes from Northern Virginia. (read full bio)