Solar survival of the fittest, as global shakeout continues

The ongoing solar market saga of panel oversupply and policy uncertainty has hit Chinese solar stocks, sending them onto sharp falls on the New York Stock Exchange.  Yingli Green Energy lost 11 per cent, Trina Solar sank to a three-year low after cutting its forecast for second-quarter shipments, while Suntech Power Holdings also tumbled, the world’s largest solar panel maker falling 15 per cent after revealing it may have been the victim of fraud involving a €554.2 million ($US680 million) financing guarantee it extended in 2010.

Of course, the overcapacity plaguing the global solar industry is in no small part due to what Technology Review recently described as the “Chinese solar machine.” In February, TR noted, Chinese manufacturers were making about 50 million solar panels a year – over half the world’s supply in 2010 – and the country was home to four of the world’s top five panel manufacturers. Effectively, this meant that while the industry elsewhere was doubling in size every two years, Chinese manufacturers were doubling their production roughly every year.

The effect of Chinese machine has certainly been felt in Europe the US, the latter of which introduced duties on PV panels from China in May that, according to Bloomberg New Energy Finance, stand to make them 27 per cent more expensive in the US market than those from comparable international manufacturers. And as Bloomberg reports this week, Germany’s Solarworld last week led a group of manufacturers asking the European Commission to investigate whether Chinese competitors sold products at below-market rates after the US imposed the tariff.

But while Suntech and other big-hitting Chinese manufacturers are starting to feel the downside of a business model that focuses almost exclusively on panel sales – thus exposing themselves to the 47 per cent plunge in prices in the past year – some international competitors, like US giant First Solar, are starting to investigate new and innovative ways to boost PV sales and make money.

Bloomberg reports that First Solar chairman, Mike Ahearn, has found the best way to make money from PV “is to sell whole power plants” to the likes of Warren Buffett and NextEra Energy, instead of competing with China on panel sales. First Solar is forecast to report the only profit in the second quarter among the 17 companies in the BI Global Large Solar index, according to Bloomberg estimates. The rest, led by Suntech, are predicted to have losses.

Ahearn has insulated First Solar by cutting production and expanding sales of the PV power plants, according to Sanjay Shrestha, an analyst at Lazard Capital Markets. And Buffett and NextEra are among the company’s best customers. “Their strong project pipeline is helping them weather the storm that everyone else is caught in,” Shrestha said in an interview with Bloomberg. “That’s buying them time while the rest of the industry scrambles for the next panel sale.”

And in Japan, electronics giants Sharp and Hitachi have today unveiled a finance deal to provide loans to homeowners and businesses, in their own innovative bid to boost sales of solar PV. Using an approach that’s rapidly gaining traction around the world – even in Australia! – BusinessGreen reports that Sharp Solar and Hitachi Capital will offer UK customers a series of financing options, which are expected to be rolled out across Europe over the coming months. Basically, this means that businesses and homeowners installing solar PV using Sharp-certified installers will be able to apply for loans from Hitachi Capital.

BusinessGreen reports that the minimum transaction for business customers using the finance deal will be £25,000, for terms of between seven and 10 years. The minimum transaction value for domestic customers was not revealed, but private households will have access to a shorter loan period of three to 10 years.