China Crushing the Solar Market

Brian Hicks

Written By Brian Hicks

Posted March 12, 2013

The solar energy market was a $77 billion dollar industry in 2012. And this year, China has decided to move in with a big game plan—one that will push solar energy through the roof. For the first time, China will make itself the biggest market in solar and send installations soaring.

Right now, China is the worldwide leader in carbon dioxide emissions, a title it desperately wants to relinquish, especially in recent light of the growing concern with Chinese air quality. There are simply too many people to support to continue on a path of toxic destruction.

Solar energy will be one major puzzle piece on the Chinese road to recovery lifting the world’s generation to 34.1 gigawatts, an increase of about 14 percent, according to Bloomberg. Compared to the 4.4 percent growth last year, it gives a good indication of how dedicated China will become to solar energy.

Germany no longer will reign supreme in the solar world with China’s onslaught of 2013.

With the support of an entire nation, solar companies are seeing to it that a coal-dependent nation diversifies its energy and turns to cleaner alternatives. New projects are underway, and new factories are popping up all across the Chinese landscape.

China is already overshadowing its own projected solar targets. With the capacity for production from new factories, China has slashed solar panel prices by 20 percent in just the past year, as Bloomberg reports. The drop in prices makes it that much easier for China to become the number one consumer of solar devices as it adds more and more new projects and installations.

The nation plans for 10 gigawatts of new programs this year, according to Bloomberg—double the initial target and three times that of last year. The overwhelming increase in production bumped the 2015 projected forecast of 21 gigawatts up to 35 gigawatts.

While China has been hitting the ground running, the playing field has also been skewed. Production is taking place so rapidly that it is driving down prices.

This is great news for consumers and installers who are reaping the benefits and can get everything they want accomplished for less money. Installation companies like SolarCity Corp. (NASDAQ: SCTY) and SunPower Corp. (NASDAQ: SPWR), both based out of California, have made huge gains this year, as Bloomberg reports.

But manufacturers like LDK Solar Co. (NYSE: LDK) of China and Norway’s Renewable Energy Corp. (STO: RECO) are on the opposite end of the spectrum.

Manufacturers in general are experiencing the downside of an overwhelming output in production. It’s evident in the Bloomberg Global Large Solar Index (BISOLAR), a good indicator of production, which showed just a 23 percent increase in the same period in which installation companies like SolarCity were thriving.

The prices have been driven down so much that they are cutting into manufacturer profit margins, stocks are dipping, and some companies—like Q-Cells SE—have been forced into bankruptcy, as Bloomberg reports.

Many factories are now slowing production rates and producing below capacity. Those that survive the present struggle, like China’s Suntech Power Holdings Co. (NYSE: STP), may see signs of a recovery as the year progresses.

While the solar industry finds balance, China will go ahead as planned by doubling installations. One factor—the stabilization of polysilicon prices (the raw material used in most solar power construction)—will aid in recovery; it fell 43 percent to an average price of $16.39 a kilogram in the past year, but experts say it will recover to as much as $25 this year, the Bloomberg report stated.

Warren Buffett also is making investments in the solar industry that will help boost in recovery.

Jenny Chase, head of solar analysis at Bloomberg New Energy Finance in Zurich, told Bloomberg:

“Solar demand is proving very resilient and will keep growing this year even as European markets slump. A further increase in installations driven by record- low prices, however, won’t do much to help manufacturers’ margins.”

Those slumping European markets are the result of many factors; France and Italy cut solar subsidies, for one. And the success of the solar market is often accompanied by price. Typically, if the price is down then demand is up. If you start cutting things like subsidies, consumers assume they missed the boat and look to spend money elsewhere. With low prices, the pendulum will naturally swing back the other way eventually.


Data collected by The Real Edge Magazine showed market performance of some major solar companies:

Suntech Power Holdings Co., Ltd. (NYSE:STP) was strong last week, but fell slightly Monday -0.11, ending at $1.15.

The company reached a settlement last week with GSF Capital. Also, the Bank of China Ltd. recently sued over a contract dispute.

The company’s market cap is $207.97 million. The stock had a 52 week low of $0.71 and a high of $3.68.

Trina Solar Limited (NYSE:TSL) fell -0.14 to close at $4.07 after an increase last week. It has generated revenue of $1.43 billion in the last 12 months.

First Solar, Inc. (NASDAQ: FSLR) continued gains from last week and closed on Monday at +0.30 to $26.59. First Solar recently received a glowing report by Bloomberg.

JA Solar Holdings Co., Ltd. (NASDAQ:JASO) fell Monday after an increase from last week to -0.09 to $4.73.

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