Europe's solar energy companies are feeling the pinch of the global
downturn and cutthroat competition from China, dimming prospects for an
industry that once dazzled.
Particularly damaging to the global market for photovoltaic
solar panels, which directly transform the sun's light into
electricity, has been the collapse of demand in Spain, after the paring
down of previously generous government aid.
Last year Spain accounted for more than 40% of all new solar
panel installation globally, installing 2.7 gigawatts - five times the
2007 figure - out of a global total of 5.6 GW. According to Spain's
photovoltaic industry association Asif, the country's market was worth
EUR16.38 billion.
This year it's a different story. After the Spanish
government changed its overly generous aid scheme and introduced a more
complicated approval process, so far this year there has been no new
installation in Spain at all.
Unsurprisingly the global industry is feeling the pinch.
While the introduction of more eco-friendly energy policies in other
countries, particularly the U.S., might take up some of the slack, the
demise of the Spanish market has led to overcapacity, factory closures
and job losses in Europe.
New U.S. measures aren't expected to arrive in time to shore
up battered demand this year. And while China has pledged support for
the solar industry via economic stimulus packages, support is likely to
primarily benefit its own low-cost producers that have easy access to
credit from state-owned Chinese banks.
Second quarter results painted a bleak picture of the problems faced by Europe's solar power companies.
Q-Cells SE (QCE.XE), a German maker of solar cells - the key
electricity-converting component of a solar panel -Thursday announced a
second-quarter net loss of EUR305 million compared with a net profit of
EUR27.6 million a year earlier, while Norwegian integrated solar
company Renewable Energy Corp. ASA (REC.OS) Tuesday reported a
second-quarter net loss of 684 million Norwegian kroner ($110.0
million), compared with a profit of NOK496 million in the same period a
year ago.
Q-Cells became the latest major European solar firm to
announce painful production and investment cuts as manufacturers
struggle to remain afloat amid a glut of solar panels.
The company said Thursday it will shut down four production
lines at its Thalheim plant in Germany, slashing 500 jobs and 25% of
output costs. It also plans to slash EUR100 million of investments and
save EUR200 million via cash management.
"The financing situation for [solar] projects remains
difficult," Q-Cells' Chief Executive Anton Milner said at a conference
call Thursday. "Over-capacities have become a big problem."
As European firms idle production and slash costs and jobs,
Chinese firms such as Suntech Power Holdings Co. (STP) or Yingli Green
Energy Holding Co. (YGE), however, continue to increase solar cell
production in a global contest for market share, Henning Wicht, senior
director of the iSuppli consultancy in California said in a press
release earlier this week.
As a result, global production of solar panels is actually
set to rise 15% this year to 7.5 gigawatts, from 6.5 GW in 2008, and
will add to oversupply, Wicht said.
But Wicht expects new solar installations to dwindle to only
3.9 GW globally this year. That would be 30% less than the 5.6 GW
installed last year according to data by the European Photovoltaic
Industry Association.
"This inventory glut will have a long-term impact on the
solar business, with panels set to remain in a state of oversupply
until 2012," Wicht said.
As a result, Suntech will push Q-Cells aside and become the
world's biggest producer of crystalline cells in 2009, iSuppli says.
Milner said overcapacity and price pressure were likely to
continue for the rest of this year and next, despite rising sales
volumes.
Solar companies have already cut prices to around half of
last year's level, with a well-known German or Japanese manufacturer
now selling crystalline silicon modules at around $2.4 a watt, and a
well-known Chinese manufacturer selling at around $2 per watt, Jenny
Chase, head of the solar team at London-based consultancy New Energy
Finance, said.
Earlier this week China's QS Solar was selling thin-film silicon modules for $1 a watt, she said.
Smaller European solar energy companies are the hardest hit by
oversupply and price pressures. Spain's panel maker Solaria Energia y
Medioambiente SA (SLR.MC) earlier this week said it is temporarily
reducing the working hours of 403 workers by 85% at its main panel
factory in Puertollano, Spain.
BP PLC's (BP.LN) solar subsidiary in a recent shakeup closed manufacturing units in several countries, among them Spain.
Manufacturers in Spain have been especially hard hit as the
home market has been at the epicenter of the recent meltdown in demand.
The collapse in Spain's photovoltaic sector has been so drastic that
jobs plunged from a peak of 41,700 early last year to 13,900 in the
spring of 2009, Asif said.
Spain's market is liable to be only a shadow its former
self. "We'll add at most between 200 and 250 new megawatts this year,"
Javier Anta, president of Asif, said in June.
As Spain's photovoltaic industry suffers, China is
vigorously backing its own domestic producers. Part of the Chinese
expansion drive came ahead of an announcement in July by the Chinese
government that it will subsidize half of the construction costs of
on-grid solar power plants. The government targets a solar power
capacity in China of between 10 and 20 GW by 2020.
While the Chinese expansion plans are likely to mostly
benefit cheaper-producing Chinese manufacturers, moves to increase aid
for renewable power elsewhere, in particular in the United States, may
eventually bring about a global recovery in the sector.
But that may not come fast enough to compensate for the standstill in Spanish installations, Chase said.
"Although there's growth in the U.S., the stimulus packages
are taking a lot of time to come through and probably won't impact 2009
demand," Chase said. "So while the U.S. might easily double in market
size, it won't pick up the slack of Spain."
In 2008, the U.S. bought 350 megawatts of modules, while
Spain installed more than seven times that capacity. Under optimistic
scenarios the U.S. will see 830 MW of new installation in 2009, 1.7 GW
in 2010, and 3.6 GW in 2011, Chase said.
It will take at least until 2011 before the oversupply in
solar panels from recent years is absorbed, said Carlos Segura, partner
at the renewable energy consultancy Eclareon.