China's Solar Panel Manufacturing Industry Takes Global Lead Amid Solyndra, Other Problems

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Researched by Industrial Info Resources (Sugar Land, Texas)--Solyndra's recent bankruptcy filing has proven to be a problem for the solar panel manufacturing industry and could be a bigger problem for the "green" energy industry as a whole, as it has made any future government stimulus for green energy a bit shaky. China has leapfrogged the West in the last two years to emerge as the world's largest manufacturer of solar panels. Due to cheap labor within its economy, China also vaulted past competitors in Denmark, Germany, Spain and the U.S. last year to become the world's largest maker of wind turbines and is poised to expand even further this year.

As the result of cheap labor elsewhere, two other prominent solar companies, Evergreen Solar Incorporated (Marlboro, Massachusetts) and SpectraWatt Incorporated (Hopewell Junction, New York), both U.S. manufacturers, have sought bankruptcy protection in August of this year. Both companies said that they could not compete with solar manufacturers in China, which receive considerable government and financial support. Due to the bankruptcies of the three U.S. solar power companies, China's industry has a dominant sales position, with almost three-fifths of the world's production capacity and rapidly declining costs, although U.S., Japanese and European solar companies still have a technological edge.

Chinese firms receive loans at very low rates from state-owned banks in Beijing, and receive cheap or free land from local and provincial governments across the country. Huge economies of scale and other cost advantages have transformed China from a minor player in the solar power industry into the main producer of an increasingly competitive source of electricity in just a few years. Interest rates are as low as 2% for bank loans, a result of a savings rate of 40%, and some government policies steer loans toward renewable energy. China's biggest advantage may be its domestic demand for electricity, rising 15% a year. According to statistics from the International Energy Agency, China will need to add nearly nine times as much electricity generation capacity as the U.S. to meet demand in the coming decade.

Amid all the closings and bankruptcy filings by some of the key players in the solar panel industry, companies such as First Solar Incorporated (NYSE:FSLR) (Tempe, Arizona) and SunPower Corporation (NASDAQ:SPWRA) (San Jose, California) are thriving. First Solar, the largest U.S. solar panel manufacturer, uses a different technology but has its biggest factory in Malaysia, while SunPower is much smaller but is an industry leader. The efficiency with which SunPower's panels convert sunlight into electricity allow them to sell at a premium to Chinese panels. Both companies have found a way to stay competitive and remain key players in an industry that has a rough future.

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