What will be the Future of the Solar Industry in US?
In the US, solar energy has been one of the fastest growing sectors of green renewable energy, backed both by government support and funding as well as a growing interest and buy-in from the general public. Over the last five years, many solar companies have experienced incredible growth, doubling and even tripling their profits every year. This unprecedented growth has been accompanied by the downfall of a number of prominent domestic solar manufacturers, who have been filing for Chapter 11 bankruptcy one after another over the course of 2011 and 2012. The primary reason for these massive failures has been the inability of American solar manufacturers to compete with their Chinese counterparts who have flooded the US market with under-priced solar panels and essentially made it impossible for many US manufacturers to stay afloat. The current situation raises many questions and concerns about the future of the domestic solar industry.
Will the government continue to show support and provide funding despite these failures? Will the domestic solar industry be able to continue growing despite stiff competition and become a real competitor to energy derived from fossil fuels? How will this affect consumers in terms of prices for solar panels and will solar energy become more affordable and available in the long run?
US solar panel manufacturers are going under in droves
The numbers of US solar manufacturers and companies going out of business is simply staggering. In April and May of 2012 alone, 4 prominent companies have filed for bankruptcy: Solyndra, SpectraWatt, Evergreen Solar and Solar Trust of America LLC. Solyndra was the 2009 beneficiary of the biggest federal subsidy ever granted to a solar company, and was touted by the Obama administration as the symbol of the U.S. commitment to the expanded use of clean energy. Currently, Solyndra is not only in the middle of bankruptcy proceedings but is also facing a political scandal and investigation into the reasons why a federal loan in the amount of $535 million was given in the first place to a company that seemingly squandered the money, since it filed for bankruptcy shortly after securing the loan. As a result of bankruptcy, Solyndra also had to lay off 1,100 workers.
Another very public and shocking bankruptcy is Solar Trust of America LLC. The company holds the development rights for the world’s largest solar power project: the 1,000-megawatt Blythe Solar Power Project in the Southern California desert. The multi-billion-dollar solar plant was supposed to be one of the world’s largest solar electricity generators. Running short on cash, Solar Trust filed for bankruptcy before the plant was even finished. Prior to these fresh cases many other companies were also forced to close doors, namely: Abound Solar, Energy Conversion Devices (UniSolar), Evergreen Solar, Bright Source, LSP Energy, Ener1, SunPower, Beacon Power, Ecotality, A123, Azure Dynamics.
The Unbeatable Chinese Advantage
So what is preventing so many US solar manufacturers form prospering if the demand for solar power continues to be a on a steady upward climb? The reason is quite simple: over the last few years the prices for solar panels in the US have significantly dropped while supply increased manifold, greatly outnumbering the demand, because the market got flooded with cheaper Chinese solar panels. Consider this, a Chinese-made solar panel with 220 to 240 watts of power costs $165 to $196 (about $.82 per watt), while an American-made one with 240 to 260 watts costs $240 to $288 (about $1.11 per watt). This is about about 36% difference in price per watt! (source).
In fact prices continued to drop while the supply of cheap Chinese solar panels continued to rise. Import statistics from China clearly reveal this trend: in 2009 Chinese manufacturers imported 26,876,000 solar panels valued at $639,528,000, in 2010- 46,084,000 solar panels were imported valued at 1,506,329,000 and in 2011- 93,292,000 solar panels were imported valued at 3,117,369,000.
These prices are so low, US manufacturers claim them to be below the cost of production, which is not a fair price to be selling at, and is very difficult to compete against. As a result, to fight against these practices employed by the Chinese manufacturers, a US company, SolarWorld Industries America Inc. filed a petition on October 19, 2011 with the US Department of Commerce calling for a anti-dumping investigation. After conducting the investigation, the Department of Commerce confirmed that Chinese producers/exporters sold solar cells in the United States at dumping margins ranging from 31.14% to 249.96%
(souece).
There were a number of factors that allowed Chinese producers to sell at these low rates which include: low cost of labor and materials, as well as significant use of low-cost loans from state-owned banks and state and federal subsidies that made it possible to undercut prices charged by companies in other countries. As a result of the financial failure of prominent American companies, China is currently left standing as the world’s dominant solar industry manufacturer, with nearly 60 % of the global production capacity.
By comparison, American companies have to price their products on the basis of higher wages, higher overall costs of production, materials and overhead, as well as lower rates of government subsidies. It is no surprise then that many of these companies were left with expensive inventory that they could not sell at a competitive price to recover their costs and to stay in business.
Levchik (Leo) is a renewable energy activist from Boston, MA, and has been involved with alternative energy and green construction since 2004.
In 2009, Leo and his green roofing company (CoolFlatRoof.com) sponsored Boston’s Solar Decathlon Team, providing materials and installation labor to install a cool white roof on the top of Curio home (Joint effort by Tufts University and Boston Architecture College) – more info about the project here.
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