Why We Need More Solar Companies to Fail


#1

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!


#2

Economics of solar panels and restoring the natural market aside, we need a bunch of them to fail so that they stop sucking on the government teat at taxpayer expense.


#3

Shoot, if I could get them cheap enough, I’d be happy to put them on my roof.


#4

Just to note, the story specifically says that prices are falling because there is to much supply vs demand and what is needed is to have the companies fail so to reduce supply and stop the falling of prices. To quote:

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

In other words, if your hoping prices to fall more than they are, they are betting on the exact opposite. It almost seems to me like they think reducing the supply and increasing the cost will spur demand. I don’t follow this logic at all.


#5

Not sure if I have it right, but it seems to me that the idea is that the artificial glut caused by the artificial propping up of the industry causing the artificial low cost has satiated the market, and companies offering unsubsidized stuff are taking a beating because now there’s no demand for them at a natural market price. I didn’t read the article itself, so maybe I’m full of hot air…


#6

Chinese Solar Panel Giant Declares Bankruptcy
by Wynton Hall


26 Mar 2013

Chinese solar panel giant Suntech declared bankruptcy last week after it missed a $541 million payment to bondholders.

Suntech, once the world’s largest solar panel maker, previously received a $2.1 million tax credit from the Obama Administration to open a plant in Arizona. Now, the plant is closing and its 43 jobs are being terminated.

“Suntech’s problem was the same problem facing the whole industry: Materials costs are going up, and solar panel prices are going down,” writes Tim Carney. “The diagnosis is easy: overproduction. The cause is obvious: oversubsidization.”

Beyond the Obama Administration’s $2.1 million tax credit, Suntech received a $1.5 million Arizona tax credit, along with another $500,000 from the city of Goodyear, AZ for job training.

According to the Wall Street Journal, China’s State Council plans to stop subsidizing unprofitable domestic solar panel companies and “indicated it would bar local governments from supporting struggling companies and allow the market to determine who survives.”

This is what happens when government - the US, China, State of AZ, and the city of Goodyear (and Chinese provinces and cities?) mess (putting it nicely) with the marketplace. Artificial “profits” and demand lead to over-production and -investment. When government is forced to pull the subsidy plug, the over-producing companies crash and burn, and the money, materials and talent invested in production facilities and equipment - money, etc., that could have been invested profitably - gets flushed down the sewer.

Anyone who lived through, was awake and willing to acknowledge what they saw in the 1970s could have foreseen this outcome! For similarly situated technology workers (like me; I’ve been predicting this from the start of Obama’s ***MAL***Administration, not because I’m brilliant, but because I paid attention and wasn’t blinded by the enviro-hype), this was a predictable outcome! And there’s more to come! Electric cars, wind power and ethanol are all at least several technology generations and decades away from being economically practical (assuming they ever can be!). Willy-nilly government subsidies can’t short-cut decades of R & D!