What's the Real Cost of Cheap Chinese Solar?


Photo: Ryan Pyle / New York Times
Cheap Chinese Photovoltaics Are Hurting China Too
The sinking price of solar panels may be good for consumers looking for good solar deals, like this guy profiled by the Times who paid a cut-rate $77,000 to cover his home in photovoltaic panels.

But cheap solar -- a good deal of it coming from China, which exports nearly all of its photovoltaic production -- not only takes a toll on the environment. It threatens solar companies everywhere, including those in China.Is China Dumping Solar on Us?
Thanks to a fast drop in solar subsidies and feed-in tariffs and demand, the world is seeing an oversupply of solar panels and, as a result, plummeting prices -- and profits.

But is Chinese dumping to blame too?

Typically, answering question that would involve a thorough investigation. But Shi Zhengrong, the CEO of China-based Suntech, the second largest solar supplier in the world behind Arizona-based First Solar, seemed to save investigators that work this week, when he suggested as much to the New York Times.

The company sells panels overseas, wrote Keith Bradsher, "below the marginal cost of producing each additional solar panel--that is, the cost after administrative and development costs are subtracted."

But then Suntech backtracked. The New York Times explained in a follow-up piece:

Asked twice in a recent interview in Wuxi, China, whether Suntech was selling below "marginal cost" in the United States, Dr. Shi replied that the company was doing so to build market share. Those comments were reported in The New York Times on Tuesday and prompted Dr. Shi's call, in which he said, "I misunderstood your question."

Bradsher points out that Dr. Shi is fluent in English. The tone of the follow-up article is cool, but you can almost see him narrowing his eyes in a "yeah, sure" look.

To be clear, Shi explained that the company's losses this year could be attributed not to selling at a loss but rather to slower sales and its modest U.S. operation, which will soon involve a solar assembly plant either in California or Arizona.

Solar Overproduction = Cloudy Forecast?
The impacts of the glut of cheap Chinese solar hitting global markets are not just felt among European and American solar manufacturers -- some of whom have have warned that China's low-priced cells could hurt US President Barack Obama's plans to promote the growth of renewable energy.

Chinese solar companies already benefit from an aggressive government support, which gives them cheap loans and subsidies in addition to already low electricity and labor (recent engineering graduates make $7,000 a year).

If they're selling below cost overseas, that's not going to help endear China and its growing renewable energy sector to U.S. lawmakers, especially at a time when climate cooperation is as tense as it is crucial.

And oversupply of panels from China won't help Chinese companies' bottom lines. Chinese Public Companies writes, total solar cell manufacturing capacity will be up more than 50% this year, and is projected to grow at an astonishing annual rate of about 50% for the next 5 years.

Meanwhile, global demand for solar panels is expected to drop nearly 20% this year.

Also not helping Chinese solar companies, or solar development in general: more threats of protectionism. After the first Times story ran, Frank Asbeck, CEO of Germany-based SolarWorld, said that Europe should adopt a "Buy European" policy for solar panels used in public projects, noting that the U.S. has a Buy American provision for construction projects supported by government stimulus programs.

A New Reason for China to Join Climate Treaty
One bright spot: if incentives for renewable energy grow in the US, that could not only help grow solar use but strengthen everyone's bottom line.

Already, Congress has threatened China that it will impose tariffs if Beijing doesn't join Washington in imposing carbon limits.

But maybe Congress doesn't need to go there. American negotiators at Copenhagen could whet China's appetites for a strong climate treaty by pointing out that putting a price on carbon in the U.S. would not only help lower both countries' carbon footprints but make solar more competitive -- without the need for any funny business.

Solar Power, China
China Readying Large Feed-In Tariff for Utility-Scale Solar Power

166 MW Solar Power Plant Will Be China's Largest
China Experiments With Centralized Thermal-Solar Power

Tags: Beijing | China | Renewable Energy