Chinese Solar is Failing

Energy and Capital's Weekend Edition

By Brianna Panzica
Saturday, August 18th, 2012

The solar industry is spinning out of control.

When Chinese panel companies started taking over the industry — pushing prices down with heavy subsidies, cheap materials, and export insurance — U.S. solar panel manufacturers began to suffer.

In 2011, U.S. solar companies began filing for bankruptcy. Evergreen Solar and the infamous Solyndra were some of the more popular (unpopular?) firms to circle the drain...

So the United States imposed anti-dumping tariffs on Chinese-made panels to turn this around.

These duties started off at 4.73% and more tariffs were added later on top of that — ranging from 31% to as high as 250%.

The U.S. companies wanted to be able to compete in a fair market, and that wasn't possible, they said, with Chinese companies like Suntech Power Holdings (NYSE: STP) and Trina Solar (NYSE: TSL) monopolizing the market...

But now the full effects of the duties are becoming apparent as a number of Chinese solar panel firms admitted this week they were bogged down with debt and needed help getting out of it...

This included companies the U.S. mentioned by name: Trina Solar and Suntech as well as others like LDK Solar (NYSE: LDK) and Yingli Green Energy Holding (NYSE: YGE).

Every one of these companies has watched its shares fall over the past six months:

Chinese Solar Companies Fall

Low prices have contributed to this, with the cost of manufacturing almost equal to the sale price.

LDK Solar has $6 billion in debt and only $244 million in assets. Suntech might be severely injured by $690 million in fraudulent bonds in addition to its $3.58 billion in debt. Yingli has $3.44 billion in debt. Trina — the healthiest of them all — has $1.08 billion in debt and only $490 million cash on hand.

These are some of China's biggest players; many smaller companies have been forced to stop production or shut down completely. They just can't keep up with the manufacturing costs.

And now they're stuck with an overload of product: U.S. imports of Chinese panels dropped by 60% in June from last year.

European nations aren't buying either, considering the debt crisis.

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Panel prices are low, but not low enough. And efficiency isn't quite cutting it.

The sun may be setting on China's rule of the solar panel industry...

Of course, the same story is unfolding for U.S. solar companies.

They've been hurt as well.

Surely you recall First Solar's (NASDAQ: FSLR) slump as it struggled and failed to keep up with analysts' estimates.

Even SolarWorld (XETRA: SWV), a German company whose U.S. branch led the push for tariffs on Chinese companies, saw a 70% decline in the past six months:

US Solar Companies Fall

But solar power is not dead.

Far from it.

Solar remains in high demand as many states and countries set renewable energy goals.

This may be hard to believe after the U.S., which was poised to become a solar leader, fell far behind China — and after China itself fell, too.

But a little-known company could reverse this.

It's not a solar company — but its revolutionary technology could remedy the ailing solar sector.

After solar panel leader China reported devastating blows to the industry, it's clear something has to change...

Once companies get wind of this special process that cuts costs in half and doubles solar's power output, share prices will skyrocket.

You'll want to own their stock before this happens.

Good Investing,

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Brianna Panzica

follow basic@brianna_panzica on Twitter

Energy & Capital's modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends. For more on Brianna, see her editor's page.

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