* Demand for solar panels to grow to more than 35 GW in 2013
* Number of equipment makers has dropped to less than 150
* House owners, farmers emerge as winners in current turmoil
By Christoph Steitz
FRANKFURT, May 10 Planned European levies on
Chinese solar panels will only go some way to halt a rout among
equipment makers who face the paradox of a booming market but
falling revenues - and could suffer even more if a trade war
Huge European subsidies for solar power helped create
hundreds of start-ups building solar equipment. Those subsidies
are being phased out faster than expected, while greater
competition within Europe and the United States as well as from
China have pushed down prices and forced panel manufacturers to
"It's a storm that's even worse than feared, hitting
everyone unable to lower costs fast enough," said Bjoern Glueck,
fund manager at wealth management firm Lupus Alpha, adding any
firms that could not withstand the pressure were next in line.
Since its all-time high in December 2007, the FTSE 50
cleantech index of the world's largest renewable
energy groups is down 56 percent.
The rout has been broad. Data from research firm IHS shows
the number of companies making solar hardware - such as the
silicon used in solar cells, the individual energy-producing
cells themselves or the arrays of connected cells that form a
solar panel - has plunged to 150 from 750 three years ago.
Global revenue is expected to fall this year to $75 billion,
down from $94 billion euros in 2011.
But paradoxically, the fall in prices for panels which has
hurt manufacturers has helped sustain demand despite the
withdrawal of subsidies, meaning companies such as those that
install household solar equipment have continued to thrive.
Companies that assemble panels have been hit particularly
badly, as their products are much easier to replicate than those
of other firms involved in the industry, such as firms that
produce the polysilicon material used to make cells, or
manufacturers of inverters, devices that are used to hook panels
to the grid.
China's top panel maker Suntech put its main
manufacturing unit Wuxi Suntech into insolvency proceedings in
March, following Germany's Q-Cells, which filed for
insolvency last year and was then bought by South Korea's Hanwha
Even large and wealthy conglomerates like Germany's Siemens
and Bosch, have pulled out of solar,
pointing to the severe crisis that has gripped the industry for
SolarWorld, once Germany's largest solar panel
maker and long immune to the global industry woes, is also
struggling to strike a debt restructuring deal with creditors.
Sources say such a deal could hand ownership of the firm to
hedge funds and Qatar.
MORE DAMAGE AHEAD
The new proposed tariffs on Chinese solar imports could
backfire on Europe. China, the world's No.2 solar market behind
Germany in 2012, is expected to become the biggest market this
year, according to industry association EPIA, and Asia as a
whole could also overtake Europe.
Western solar panel maker have long been at odds with their
Chinese counterparts, accusing them of receiving credit lines to
offer modules cheaply in Europe while protecting their own
market, where European companies have made little headway.
European panel makers can little afford to be frozen out of
the growing Chinese market.
China has already threatened in the past to put punitive
tariffs on EU exports of solar-grade polysilicon, a move that
would hit companies such as Germany's Wacker Chemie,
the world's No.2 maker of the material.
"This situation is weighing on the market," the group's
Chief Executive Rudolf Staudigl said earlier this week.
Yet despite the bloodbath among companies in the
manufacturing sector, solar capacity is being sold and installed
at record rates. There are still good reasons to invest in
panels themselves, if not in the companies which make them.
Europe is still aiming to make 20 percent of its energy from
renewables by 2020, from about 13 percent in 2011.
This year, the volume of installed panels around the world
is expected to rise at least 12.5 percent to more than 35
gigawatts, according to data from electronics consultancy IMS
Research. That is still only equivalent to about 0.2 percent of
global electricity production.
"The conflicting trend of growing PV (photovoltaic)
installation volumes accompanied on the other hand by falling
revenues will challenge solar companies to continue to reduce
their cost structures," said Ash Sharma, director of solar
research at IMS parent firm IHS.
According to GTM Research, a green tech analysis firm, solar
panel production costs are expected to fall to $0.42 per watt by
2015, from $1.29 per watt in 2009.
Cost cuts are putting solar power further along the road to
"grid parity" - the ultimate goal of making it cheaper to
install solar power than to buy conventional electricity from
Solar companies have launched cost cutting programmes,
ranging from job cuts and factory closures to reducing of
investment into research and development.
The remaining production costs include polysilicon, the main
raw material for the industry, which is produced by groups
including Wacker Chemie and Hemlock Semiconductor, a joint
venture between Dow Corning, Shin-Etsu Handotai
and Mitsubishi Materials.
The solar panel glut and consolidation is reminiscent of the
computer chip industry, which suffered massive price drops as
Asian manufacturers took on U.S. and European incumbents.
The problems for solar equipment manufacturers have been
exacerbated by feasting on subsidies, only to see them taken
away as the market has taken off.
With costs still higher than coal or natural gas, demand for
solar power has been spurred by rules that subsidise payments to
those who generate power and feed it into the grid - so called
feed-in tariffs. But those subsidies have been withdrawn faster
than expected. In Germany, the biggest market, subsidies have
been cut by more than half in the last four years.
While companies that manufacture solar panels have been
losing out, the price of equipment has fallen fast enough to
keep demand strong despite the lower subsidies. Those who
installed solar equipment in Germany in a few years ago are
still earning returns on investment of about 15 percent.
More than a fifth of new European solar capacity last year
was in private households, good news for hundreds of small and
mid-sized companies that install it.
"That part of the market has done well in the past and
continues to do so," said Thorsten Preugschas, CEO of German
firm Soventix which helps home owners choose solar systems.