Solar energy firms struggling despite growth in renewables

By Nadine Murphy, and Daniel Schnettler Dec 1, 2011, 9:35 GMT

Frankfurt/New York - The promotion and support of renewable energy sources is high on the priority list of the governments of most industrialized countries - but low-cost competition from China means more and more solar energy companies are going to the wall.

'This is a year in which we'll see whether a company can also live through stormy times. Everyone can sail in fine weather,' says Frank Asbeck, head of Solarworld, a company that produces solar panels for the domestic and commercial market.

Asbeck's view is typical of the prevailing attitude in the renewable energy industry, which has for so long enjoyed boom times. Such issues will be discussed this weekend during the business summit taking place in Durban, South Africa, on the sidelines of UN climate talks.

Only last spring, market observers were talking of 2011 being a busy year for the solar industry. But higher profits have failed to materialize for many firms and optimism has been replaced by a fight for survival.

One of the main reasons for the sudden turnaround in fortunes is increased low-cost competition from China, which has had the effect of forcing the price of solar modules to drop by a third so far this year.

Some American companies have already folded while problems continue to mount for certain major German firms such as Q-Cells, Conergy and Solon.

Asbeck's Solarworld is also feeling the pain with the company registering a loss for the third quarter of 2011 because of losses in its American operation.

'The fall in prices in recent months has exceeded our expectations,' admits Carsten Koernig, chief executive of the German Solar Industry Association (BSW).

Substantial state aid programmes mean that Chinese manufacturers have easy access to finance with some firms able to rely on credit lines stretching to billions of dollars.

Solar energy companies outside China can only dream of that level of support and, according to Asbeck, Chinese companies are exploiting their competitive advantage to the full.

Asbeck claims that Chinese companies are offering products below cost to drive their competitors out of the market, safe in the knowledge that once the field is clear of competition, they can increase their prices once again.

Solarworld has launched a court case in the United States, complaining about what it considers unfair competition. Western firms are hoping that import duties can be imposed on Chinese-made solar modules to increase their price and slow down their growth in market share.

According to the US Energy Department, Chinese companies have increased their market share from six to 54 per cent in the past six years. Five of the world's 10 largest solar firms are now based in China.

The pressure from low-cost Chinese goods is felt particularly keenly in the US where Stirling Energy, Evergreen Solar and Spectrawatt have all fallen by the wayside, while the shockwaves following the insolvency of Solyndra reached all the way to the White House.

The US government gave the company permission to restructure its 535-million-dollar federal loan guarantee, which put private investors ahead of the government for some of the debt if the company was liquidated.

President Barack Obama also visited the Solyndra solar panel factory in California in May 2010 but a year later the company went bust with the loss of 1,100 jobs. To make matters worse for the US president, there is increasing evidence emerging that the catastrophe could have been predicted even before Obama's visit.

However, competition from China is not the only problem facing the solar energy industry with weak demand being compounded by an excess of available products.

Hopes of an upturn in the second half of the year have turned out to be illusory with industry observers predicting only slight global growth despite falling prices.

The ongoing European debt crisis has also put off investors, making it more difficult to raise the finance necessary for larger solar projects.