Mon, Jun 17, 2024 page12

• China’s clean energy industry fights for survival

  • Bloomberg
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  Visitors to the world’s biggest showcase of solar power could be forgiven for not realizing just how dismal conditions are in China’s flagship clean energy industry.

  Hundreds of thousands of people descended on Shanghai’s largest convention center last week for the city’s annual solar gathering, where a carnival mood prevailed. However, behind the scenes, executives were fretting over the crisis engulfing the sector.

  In China, solar prices have collapsed after a breakneck expansion created far too much capacity, forcing many firms to sell at a loss. Abroad, China’s dominance of the world’s supply chains is being tested by an explosion in protectionism.

  

  Solar panel products are displayed at the Clenergy Technology Co booth at the International Photovoltaic Power Generation and Smart Energy Conference and Exhibition in Shanghai on Thursday.

  Photo: Bloomberg

  “We’re entering into a deep down-cycle,” Amy Song (宋贇波), vice president at solar material maker GCL Technology Holdings Ltd (協鑫科技控股), said in an interview on Friday with Bloomberg TV.

  “Barely anyone is making money right now,” Song added.

  Solar’s rise over the past two decades has been meteoric. The industry has grown from a niche sector for environmentalists to the planet’s dominant source of new energy. The world added 445 gigawatts (GW) of solar panels last year, more than all other power sources combined in any year of human history. Most of them were made in China.

  That has propelled the growth of multibillion dollar companies, which are now comparable to the giants of oil and gas. However, it has also created the conditions that have bedeviled commodities markets through the ages. China’s solar companies have boomed, and now they are heading for a bust that could eclipse earlier downturns in the industry’s fortunes.

  The rapid build-out is a typical tragedy of the commons.

  Companies looked out for their own interests without considering the overall impact if all their rivals acted the same way, said Gao Jifan (高紀凡), chairman of Trina Solar Co (天合光能), the world’s third-largest manufacturer of panels.

  They were helped along by local governments eager to meet their growth targets and banks hungry to make loans, he said.

  Gao was one of several executives who called last week on the Chinese government to intervene to help the industry get back on its feet. The menu of options presented included regulating which new factories can be built, cracking down on less-efficient facilities, capping price cuts and promoting consolidation.

  In the meantime, too many factories are bidding to supply too few projects, which has driven down prices to record lows and industry executives have warned that bankruptcies are in the offing.

  Solar’s biggest backer is Beijing. The industry is one of the Chinese government’s ‘new productive forces’ that it hopes would allow the Chinese economy to pivot from decades of growth driven by the property market, low-end manufacturing and state-led investment. Other clean energy sectors like batteries and electric vehicles are in the same stable.

  Beijing’s support, which in years past included generous subsidies, has helped deliver a world-beating industry. Chinese companies control more than 80 percent of capacity along every step of the supply chain. That has rankled foreign governments, which do not want to rely on a geopolitical rival for energy, and crave some of the industry’s jobs for their own people.

  US President Joe Biden last month toughened trade measures against solar equipment from China, and his administration is now targeting operations in Southeast Asia, which are viewed as fronts that have allowed Chinese firms to bypass tariffs. India has also imposed import duties, and there have been calls in Europe to follow suit.

  However, the issues faced by the industry are technical as well as commercial.

  China installed a record 217GW of panels last year — more than has ever been built in the US — and solar now accounts for 22 percent of the country’s total generating capacity. However, sunlight’s intermittency is straining the electricity grid.

  Hundreds of small cities have halted approvals for new rooftop solar projects, and panels across the country are seeing their hours of usage reduced as the grid rejects their electricity because there is not enough space for it during daylight hours.

  The broader solution is for grids around the world to build more power lines that can transfer excess clean power to where it is needed. More storage, mainly via batteries, is also required. However, adding those costs means solar power would need to keep getting cheaper.

  For now, the industry is focused on belt-tightening. Longi Green Energy Technology Co (隆基綠能), once the world’s most valuable solar manufacturer, earlier this year announced that it would lay off thousands of workers. Others have halted production. Smaller producers are being forced to delist their shares from stock exchanges.

  Wuxi Suntech Power Co (無錫尚德電力) chairman Wu Fei (武飛) likened China’s solar sector to the home appliance makers of 15 years ago, when 300 or so companies vied to sell washing machines, fridges and air-conditioners across the country. That industry has consolidated to just a handful of players and solar will likely follow suit, he said.

  “Today’s photovoltaic reshuffle has just begun,” he said. “The second half of the year will be even worse.”
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