Why We Need More Solar Companies to Fail
By Kevin Bullis
March 18, 2013
Suntech, a Chinese company that as recently as 2011 was the world’s largest producer of solar panels, is teetering on the edge of bankruptcy. It’s running low on cash, owes bond investors half a billion dollars (which it failed to pay Friday), and is saddled with payments on billions of dollars in loans as it struggles to make money in a market flooded with its product.
If Suntech fails and shuts down its factories, that might not be a bad thing. Some industry experts say that hundreds of solar companies need to fail to help bring the supply of solar panels back in line with demand. That would slow the fall in prices and, as demand recovers, allow companies to justify buying new equipment and introducing the innovations that will ultimately be needed for solar power to compete with fossil fuels.
I promise, I had nothing to do with the composing of this article! This shows what happens when government subsidizes something. The subsidy creates artificial, phony, demand. Companies respond by increasing supply. When the artificial phony demand resides, companies are stuck with product they can’t sell, and market prices for the product plummet. Making this particular situation worse, the government-created phony demand leads companies to focus on particular technologies and designs of products that are not truly viable. IOW, in addition to screwing up the marketplace, government subsidies also took $$ away from developing technologies that are progress toward viability, delaying that progress!