SOURCE: 3BL Media, LLC
China is having its Solyndra moment. Wuxi Suntech, a subsidiary of Suntech, one of the world’s largest makers of solar panels, has filed for bankruptcy. The Chinese news agency Xinhua says Wuxi Suntech owes $1.1 billion to nine Chinese banks. This bankruptcy comes after other solar panel manufacturers in the U.S. and in Europe have either failed or cut back production. The reason sounds like simple economics. Startup costs are high: the initial investment in building a factory to make solar panels runs to the hundreds of millions of dollars. And the market price for solar panels has dropped by 75%, due to a ten times increase in Chinese manufacturing capacity over the last four years. Prices dropped 31% in the last year alone. High costs plus low product prices equals negative return on investment, which results in bankruptcy. End of business case study, right? But nothing is simple economics in the new, still developing renewable energy category. For another lesson, let’s look at First Solar, the world’s largest maker of thin-film solar panels. How is that Arizona-based company dealing with the challenges of a volatile market? First Solar has announced a major shift in its business model, from manufacturing panels only to developing solar farms for utility systems. Under this strategy, First Solar earns revenue from providing solar power plants and supporting services that include finance, construction, maintenance and end-of-life panel recycling. The strategy also includes a focus on utilities markets that do not require subsidies to support the solar power business. The results? Sales for 2012 were $3.37 billion. Of course, this example of market-driven capitalism in action is no guarantee of success. First Solar’s stock is taking a beating as restructuring costs to execute its new strategy have cut into earnings. We'll know more when the company webcasts its 2013 Analyst Meeting on Tuesday, April 9th, to discuss its 2013 guidance and competitive positioning.
For more information on this and other stories, go to 3blmedia.com
KEYWORDS: solyndra, China, Wuxi Suntech, SunTech, solar power, 3bl Media, Energy, Energy Minute
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