So­lar com­pa­nies

Finweek English Edition - - INSIGHT: INTERNATIONAL -

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 re­cently), and is sad­dled with pay­ments on bil­lions of dol­lars in loans as it strug­gles to make money in a mar­ket f looded 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.

But there’s a good chance that Sun­tech, and many other com­pa­nies in China, will be bailed out by lo­cal gov­ern­ments, which would de­lay the much-needed re­duc­tion in pro­duc­tion ca­pac­ity. World­wide, so­lar com­pa­nies have the ca­pac­ity to man­u­fac­ture be­tween 60 and 70 gi­gawatts’ worth of so­lar pan­els a year, but de­mand in 2013 is only ex­pected to be about 30 gi­gawatts.

The world­wide glut of so­lar pan­els – which has lasted nearly t wo years – is partly the re­sult of big, government-backed in­vest­ments in fac­to­ries in China, where two-thirds of so­lar panel pro­duc­tion ca­pac­ity is lo­cated. The sur­plus has been good news for con­sumers and in­stall­ers, be­cause it’s helped drive a pre­cip­i­tous drop in so­lar panel prices. They’ve dropped 60% since

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