September 4, 2009
We have been following the news stories about the precipitous fall in the price of PV panels. And now there may be another explanation. A New York Times article set off a fire storm of protest by suggesting that one of the major solar PV manufacturers was selling panels in the US at below its marginal cost. Why would a manufacturer want to incur a loss on selling its products? The simple answer is to garner market share and drive its competitors out of business. This practice is known as dumping and, if harm can be shown to domestic producers, is illegal. This is what the New York Times article originally said:
"Chinese companies have already played a leading role in pushing down the price of solar panels by almost half over the last year. Shi Zhengrong, the chief executive and founder of China's biggest solar panel manufacturer, Suntech Power Holdings, said in an interview here that Suntech, to build market share, is selling solar panels on the American market for less than the cost of the materials, assembly and shipping."
Oops, on further reflection, Suntech's executive realized that he probably should not have been so candid, as reported by the New York Times on the following day. "Shi Zhengrong, the chief executive and founder of Suntech Power Holdings, said in a telephone call Wednesday that he had misunderstood the question when he said twice in a recent interview that his company was selling panels in the United States below the marginal cost of producing each additional unit."
But the rabbit was already out of the bag and the damage had already been done. And indeed Suntech's strategy appears to have had some success as it will likely overtake Q-Cells this year to become the second largest PV manufacturer. The glut of PV and price decline has hurt Q-Cells substantially. As reported by the Wall Street Journal, "The second largest PV manufacturer Q-Cells became the latest major European solar firm to announce production and investment cuts as manufacturers struggle to remain afloat amid a glut of solar panels. The company said 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 cut €100 million of investments and save €200 million via cash management."
And this report just in today about what other PV manufacturers may do to respond to the Chinese threat. Reuter's reports that:
"German solar firms Conergy and Solarworld have voiced strong concern about the pricing practices of Chinese panel makers -- who undercut their German peers' products by around 20 percent. Chinese modules sell in Europe at about 1.70 euros per watt, according to a UBS report.
"Germany's BSW solar industry association is looking into allegations of dumping by Chinese rivals as Conergy rallies support to call on the European Union to examine Chinese pricing tactics."
Whether these protests amount to anything more than posturing remains to be seen, but what is clear is that the slide in PV prices will continue until demand picks up and prices can stabilize.