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!