China was mentioned 59 times when Energy Secretary Steven Chu testified last month before a House subcommittee on the U.S. loan guarantee program for renewable-energy projects.
“Countries like China are playing to win in the solar industry,” Chu said.
“My big thing is that I worry about China,” said Rep. Brian P. Bilbray (R-Calif.).
“The Chinese are eating our lunch,” said Rep. John D. Dingell (D-Mich.).
Yet if Chinese solar companies are eating our lunch, they’re also choking on it. Growth in global solar manufacturing capacity is outpacing global demand, and prices of solar energy products are plunging. And while U.S. politicians portray Chinese firms as heavily subsidized rivals gobbling up global market share, Chinese solar companies are suffering from some of the same ills afflicting their U.S. competitors.
Some of China’s biggest companies are losing money, shelving capital expenditure plans and looking to conserve dwindling reserves of cash. To avoid going deeper into debt, they have borrowed only a tiny fraction of $34 billion in loans available to them from the China Development Bank.
For consumers, the cutthroat competition is a good thing. Wholesale solar panel prices have dropped as much as 50 percent this year, and retail prices are less than half what they were five years ago. Industry experts say that the day is near when solar can compete against other energy sources without subsidies. In certain places and at certain times of day, it’s already viable. Meanwhile, analysts say, if China wants to subsidize solar products, Americans can buy more of them.
For some U.S. companies, China’s expanding industry has meant more jobs. Cheap panels fuel greater sales — and installation accounts for more than half of U.S. solar industry jobs.
Moreover, the United States has a trade surplus with China in solar goods, led by exports of polysilicon, the raw material needed to make photovoltaic cells, which in turn are the building blocks for solar panels.
The United States also exports the solar manufacturing machinery. Applied Materials, which made its name in the semiconductor business, beat analysts’ expectations earlier this year thanks to sales of equipment for making solar cells. To promote sales, the Santa Clara, Calif., company has set up a research center in the Chinese city of Xian and moved its chief technology officer there. “Now we are doing for the green economy what we did for the Information Age,” the company says on its Web site.
GT Advanced Technologies, which sells furnaces and other equipment for making the polysilicon and ingots used in making solar cells, does 98 percent of its business in Asia, much of it in China. “We compete very effectively as a U.S.-based corporation in spite of the fact that my Chinese competitors sell at half my price,” said Tom Gutierrez, chief executive of the New Hampshire-based firm. “We beat them through technology and innovation.”
But U.S. solar panel manufacturers and people who believe that solar manufacturing can become part of a new “clean technology” economy are unhappy. They believe that the flood of Chinese solar cells is a textbook case of dumping — an economic term to describe when foreign companies overwhelm a market with cheap goods to drive competitors out of business. Later, after gaining control of that market, the foreign companies can jack up prices.
Chinese panels are selling for less than $1 a watt, while those made elsewhere sell for about 20 percent more, according to Bloomberg New Energy Finance.
China supplies nearly half of U.S. solar panel imports — 44.6 million units in the first eight months of the year, up from 3.8 million in 2008, according to an anti-dumping petition filed by a group of U.S. firms. Those sales rocketed to $1.69 billion through August of this year from $233.3 million in 2008.
The biggest of those panel makers, Suntech, promotes its products in ads that show two panels hooked up to an electric American flag. “Now Power America, from America,” the ad says, even though only 2 percent of Suntech’s manufacturing capacity is in the United States.
But volume doesn’t guarantee profits and for Chinese solar companies, it has been a painful rise to the top ranks of the global market. Suntech, JA Solar and LDK Solar, the top Chinese solar panel makers, reported losses for the third quarter and warned investors the outlook was grim. JA Solar reported operating losses and a writedown on the value of its inventory. Suntech, which lost $116.4 million in the third quarter, said it expected shipments to drop 10 percent in the fourth quarter.
“This will be challenging for all solar companies,” Suntech chief executive Shi Zhengrong said during a conference call with investors in November. Many of China’s more than 100 solar cell firms and 300 solar module companies with lower-quality products could close down.