9 ms·

Party is over for dirt-cheap solar panels, says China executive

242 points by howard941 8y ago

sneakernets 8y ago
Until the next cost-reduction tech scales up, and so on, and so on...
dak1 8y ago
Translation: Foreign competition has now been driven out of business by subsidies, time to raise prices.
- sephamorr 8y ago
  While there is certainly some truth to your statement, the subsidies being referred to in the article are on installed panels. Prices on panels were held high by subsidies, and their removal resulted in a market supply glut. This 10-15% raise is just the correction from the previous ~30% fall.
- chillacy 8y ago
  The article says Chinese solar is 30% of the world production, not sure if that’s enough to jack prices.
  - benj111 8y ago
    It isn't so much that, as many producers were selling very low to get money coming in. These producers have now gone bust/ been bought up. Now that those forced sellers have gone there isn't anyone willing to undercut everyone, so theres some support to prices.
  - danmaz74 8y ago
    30% referred to total installed capacity, not production.
- rfinney 8y ago
  ... or drop the quality of the current products. aka "The Walmart Playbook".
- thinkcontext 8y ago
  That had already occurred. This article was talking about a glut due to China dropping local installation subsidies. Demand dropped in China so all those panels were dumped on the international market. The party being referred to was had by nonChinese developers, as they were getting panels cheaper than anticipated. That meant more profit for them.
- throwaway-oid 8y ago
  Embrace, extend, and extinguish
ChuckMcM 8y ago
Always over until it starts again. Note that the party is over (in this case) because it is threatening smaller businesses, not because there is a lack of capacity or that the "big guys" couldn't still make money at the reduced rate. In every industry where I have been aware of this this situation coming up (voluntary reduction in production in order to shore up prices), it works for a while and then people "cheat" and ramp up their production to make a bit more money with their now dormant capacity. And then more people cheat, and the party is back on again. The Chinese are notoriously fierce in their desire to make a buck and so I give this one about a 5% chance of lasting through the end of 2019.
- philipkglass 8y ago
  The solar industry is evolving fast enough that most dormant capacity left behind by bankrupt smaller producers probably isn't worth reactivating even if module prices rebound. These producers don't just have smaller annual capacities. They also have less sophisticated quality control, less automation, and older, slower generations of the automated tools they do have. Module assembly is simple enough that some of those lines could be reactivated in response to demand, but module assembly has always been the easiest part. Smaller wafer and cell manufacturers that go bust probably won't see their equipment resurrected anywhere. Newer capacity from the likes of JinkoSolar, LONGi, and GCL yields more wafers per ingot and more efficient cells from wafers, more consistently, at lower costs.
  - lightedman 8y ago
    Jinko's polycrystalline cells are so thin as to be almost impossible to keep from breaking, something on the range of 150um. I've got a few sitting here on my desk. Even an ultra-low pressure vacuum pick and place breaks them half of the time.
    - philipkglass 8y ago
      The mechanical fragility of thinner silicon has broadly stalled the progression toward even thinner wafers/cells. It's a pity since the optically/electronically optimum thickness would be thinner than is common now, and thinner wafers would yield more wafers per ingot. Do you know how Jinko is handling such thin wafers when they assemble their own modules? If they're making cells of such thinness they presumably have found a way to do it; nobody can afford to accidentally break half of their cells on the way to modules.
deleted 8y ago
[deleted]
tossaccount123 8y ago
no shit, this is what everybody with a brain has warned about China's MO is to subsidize Chinese businesses, restrict foreign competition internally, and steal foreign companies IP until they are bankrupt, while simultaneously being allowed to export their goods to those same countries with no penalty. Then they jack up the prices when all the competition is gone Everybody criticized Trump for the steel and solar tariffs because they don't think beyond next quarter earnings report. What happens in 20 years when China has a monopoly on steel, solar, and other key industries and they decide to jack up prices? The rest of the world won't be able to do anything about it because they are junkies and China is the supplier
- jayd16 8y ago
  Tariffs hurt US consumers and doesn't help US companies compete globally. Its just not good policy. Besides, Trump just wants to prop up Russian steel, not help the US.
  - wolco 8y ago
    But it helps local businesses raises wages, etc. Tariffs are important to keep certain industries alive locally.
    - jayd16 8y ago
      There's no incentive to raise wages. At best it forces Americans to pay more for certain goods but the idea that that money goes to workers is indirect. These Chinese tariffs just increase the cost of Chinese goods so unless the US is second in cost, they cut into US profits but increase the profits of other global entities. In the case of steel, Russian imports are up. It's not just John Q Public that sees increased prices either. Increasing steel costs hurt US manufacturing jobs that use steel. Because tariffs don't bring in any new money abroad, it's US companies that are footing the bill. The net gain to the US is zero or even less if there are less manufacturing jobs because of increased resource costs. Less manufacturing ripples back into less profit for steel.
  - porpoisely 8y ago
est31 8y ago
Perhaps more worrying than this change is the recent focus on expanding China's coal plants [1]. China already now is responsible for 45% of the global coal electricity. Just look at this diagram [0]. And with their one-belt-one-road initiative, they are building coal plants around the world. [0]: https://www.carbonbrief.org/mapped-worlds-coal-power-plants https://www.carbonbrief.org/mapped-worlds-coal-power-plants [1]: https://www.forbes.com/sites/judeclemente/2019/01/23/coal-is-not-dead-china-proves-it https://www.forbes.com/sites/judeclemente/2019/01/23/coal-is...
- reitzensteinm 8y ago
  China is still only a moderate emitter per capita, though it's caught up to Europe in recent years. Considering the wealth disparity it's a little hard to criticize.
  - adventured 8y ago
    The earth doesn't care, so to speak, about whether it's per capita or not, it only cares about the total global output. The consequence of having 1.4 billion people in your society, is that you don't get to pollute at the rate of a nation with one million people that outputs 10x more pollution per capita. Is that unfair? No. I don't think per capita equality of pollution is the most important factor in this. As a society China has to bear the consequences of their immense population and its impact on the earth. Pre-emptively I'll note this isn't a defense of any other nation's high per capita pollution output level. Globally we have to take the China output very seriously, and we can afford to not be nearly so concerned about the 10x output of the one million person nation because it's not a dire threat to the planet (which isn't the same thing as not caring about their output, it's a difference of one threatening human existence and the other not; I'm far more concerned about North Korea's nukes & missiles than the localized authoritarian militia activity in a tiny nation - even though they might both be reprehensible governments, one is far more dangerous).
    - rmah 8y ago
      But what about the province of Sichuan? They have about the same population as Germany. Shouldn't they be allowed to pollute as much under your theory? After all, Germany is simply part of the EU.
gumby 8y ago
If you want to invest in or speculate in (i.e. time your installation on your house) it looks like the model to follow is the historical DRAM market: a largely undifferentiated commodity market that depend mainly on cap ex and scale, thus subject to boom and bust as technologies changed (or failed to). the fact that they are both silicon technologies I think is tangental
jartelt 8y ago
The price of the PV modules only makes up like 1/3 the cost of a utility scale solar installation and like 1/5 the cost of residential installations. A 10-15% increase in module cost will not slow solar adoption that much. The solar train will keep chugging along. We'll eventually get to a point where we generate 5% of the world's power with solar and people will still underestimate its impact and will still claim its too expensive to scale...
- tomasien 8y ago
  This is actually accelerating and there's no real reason it should stop. I think it's going to happen slowly and then all at once.
  - syncsynchalt 8y ago
    We're already there, now that solar+storage is cheaper than coal. Even my local electricity coop, which sends me climate change denial newsletters every month[1][2], is buying solar. [1] https://ulfheim.net/files/currentwv.pdf https://ulfheim.net/files/currentwv.pdf [2] https://ulfheim.net/files/CurrentWV3.pdf https://ulfheim.net/files/CurrentWV3.pdf
- osmarks 8y ago
  Really? What's the rest of the cost from?
viburnum 8y ago
China should continue to subsidize solar so they eatablish a completely dominant position, then use their navy to start sinking oil tankers. That's our best hope for salvaging Earth's climate.
- jonknee 8y ago
  That would also throw throw us into a world war that would devastate the planet, but hey.
- perilunar 8y ago
  Aren't most of the oil tankers near China supplying oil to China? In which case there's no need to sink them — just stop buying the oil.
baking 8y ago
Eli Yablonovitch has spoken extensively about this. Here is one talk (https://www.youtube.com/watch?v=u_K1URyarE0 https://www.youtube.com/watch?v=u_K1URyarE0) but I think he makes the point elsewhere that the central government in China told their regional governments that they would need to close down their smaller scale PV production with the result that they all added capacity to meet the minimum causing an even greater production glut. Edit: I found the source (cued up for 37:25) https://youtu.be/lDxJsa8miNQ?t=2245 https://youtu.be/lDxJsa8miNQ?t=2245
apo 8y ago
Solar panel prices tumbled around 30 percent last year after China, the world’s largest producer, cut subsidies to shrink its bloated solar industry, pushing smaller manufacturers to the brink of collapse. 1. Cutting subsidies should raise prices. I guess the subsidy cut could have offset a steeper decline, but the article is full of head-scratchers like this one. 2. When has China ever cut a major subsidy?
- Brakenshire 8y ago
  A poster below said these were installation subsidies, which makes sense. So demand fell, there was a supply glut, and prices fell. 55% of solar capacity installed in 2017 was installed in China, so a fall there is going to have a big impact on the global market.
- coredog64 8y ago
  Depending on the structure of the subsidy, it’s possible for a cut to lower prices. For example, EV buyers get a tax credit for their purchase. A big chunk of that surplus is captured by the seller. Without the tax credit, the natural price would drop. Compare the price of a new Fiat 500 EV to a used one. The latter is practically free, and it’s not the natural depreciation of a used car.
chrisbrandow 8y ago
30% price drop last year. Expected to climb 10-15% over two years. Doesn’t seem like the party has ended. Just cooled a bit.
Proven 8y ago
> Solar panel prices tumbled around 30 percent last year after China, the world’s largest producer, cut subsidies In other words, bulk of the State-organized theft of taxpayer money has been successfully completed. Similar story to Tesla's "success" with their taxpayer-subsidized products.
rrabsolne 8y ago
The most interesting part of the article is the seemingly perverse economic response where the government cut subsidies and then the prices _fell_. Is this an actual known pattern or just a strange side effect of this situation?
- jbay808 8y ago
  As other commenters have noted, it was an installation subsidy. Installation is a major cost of solar, other than just the cells themselves. That made it cheaper to move inventory out of the warehouse and into the field. With the subsidy gone, the inventory piles up in the warehouse and manufacturers get desparate to sell. So they drop their prices, but it's still more expensive to bring those panels online than it was when the subsidy was in force. It's possible that the price will keep dropping until the panels are cheap enough to move at their current production capacity. But it's also possible that the lost profits make this level of production unsustainable, and solar panel costs climb back up as manufacturers shut down their no longer profitable lines and supply drops. It depends partly on what their margins are now, and what cost reduction room they have.
echofavor 8y ago
Thanks for sharing. You can also share your ideas for free on www.echofavor.com

242 points by howard941 8y ago

sneakernets 8y ago

Until the next cost-reduction tech scales up, and so on, and so on...

dak1 8y ago

Translation: Foreign competition has now been driven out of business by subsidies, time to raise prices.

sephamorr 8y ago
While there is certainly some truth to your statement, the subsidies being referred to in the article are on installed panels. Prices on panels were held high by subsidies, and their removal resulted in a market supply glut. This 10-15% raise is just the correction from the previous ~30% fall.
chillacy 8y ago
The article says Chinese solar is 30% of the world production, not sure if that’s enough to jack prices.
- benj111 8y ago
  It isn't so much that, as many producers were selling very low to get money coming in. These producers have now gone bust/ been bought up. Now that those forced sellers have gone there isn't anyone willing to undercut everyone, so theres some support to prices.
- danmaz74 8y ago
  30% referred to total installed capacity, not production.
rfinney 8y ago
... or drop the quality of the current products. aka "The Walmart Playbook".
thinkcontext 8y ago
That had already occurred. This article was talking about a glut due to China dropping local installation subsidies. Demand dropped in China so all those panels were dumped on the international market. The party being referred to was had by nonChinese developers, as they were getting panels cheaper than anticipated. That meant more profit for them.
throwaway-oid 8y ago
Embrace, extend, and extinguish

ChuckMcM 8y ago

Always over until it starts again. Note that the party is over (in this case) because it is threatening smaller businesses, not because there is a lack of capacity or that the "big guys" couldn't still make money at the reduced rate. In every industry where I have been aware of this this situation coming up (voluntary reduction in production in order to shore up prices), it works for a while and then people "cheat" and ramp up their production to make a bit more money with their now dormant capacity. And then more people cheat, and the party is back on again. The Chinese are notoriously fierce in their desire to make a buck and so I give this one about a 5% chance of lasting through the end of 2019.

philipkglass 8y ago
The solar industry is evolving fast enough that most dormant capacity left behind by bankrupt smaller producers probably isn't worth reactivating even if module prices rebound. These producers don't just have smaller annual capacities. They also have less sophisticated quality control, less automation, and older, slower generations of the automated tools they do have. Module assembly is simple enough that some of those lines could be reactivated in response to demand, but module assembly has always been the easiest part. Smaller wafer and cell manufacturers that go bust probably won't see their equipment resurrected anywhere. Newer capacity from the likes of JinkoSolar, LONGi, and GCL yields more wafers per ingot and more efficient cells from wafers, more consistently, at lower costs.
- lightedman 8y ago
  Jinko's polycrystalline cells are so thin as to be almost impossible to keep from breaking, something on the range of 150um. I've got a few sitting here on my desk. Even an ultra-low pressure vacuum pick and place breaks them half of the time.
  - philipkglass 8y ago
    The mechanical fragility of thinner silicon has broadly stalled the progression toward even thinner wafers/cells. It's a pity since the optically/electronically optimum thickness would be thinner than is common now, and thinner wafers would yield more wafers per ingot. Do you know how Jinko is handling such thin wafers when they assemble their own modules? If they're making cells of such thinness they presumably have found a way to do it; nobody can afford to accidentally break half of their cells on the way to modules.

deleted 8y ago

[deleted]

tossaccount123 8y ago

no shit, this is what everybody with a brain has warned about China's MO is to subsidize Chinese businesses, restrict foreign competition internally, and steal foreign companies IP until they are bankrupt, while simultaneously being allowed to export their goods to those same countries with no penalty. Then they jack up the prices when all the competition is gone Everybody criticized Trump for the steel and solar tariffs because they don't think beyond next quarter earnings report. What happens in 20 years when China has a monopoly on steel, solar, and other key industries and they decide to jack up prices? The rest of the world won't be able to do anything about it because they are junkies and China is the supplier

jayd16 8y ago
Tariffs hurt US consumers and doesn't help US companies compete globally. Its just not good policy. Besides, Trump just wants to prop up Russian steel, not help the US.
- wolco 8y ago
  But it helps local businesses raises wages, etc. Tariffs are important to keep certain industries alive locally.
  - jayd16 8y ago
    There's no incentive to raise wages. At best it forces Americans to pay more for certain goods but the idea that that money goes to workers is indirect. These Chinese tariffs just increase the cost of Chinese goods so unless the US is second in cost, they cut into US profits but increase the profits of other global entities. In the case of steel, Russian imports are up. It's not just John Q Public that sees increased prices either. Increasing steel costs hurt US manufacturing jobs that use steel. Because tariffs don't bring in any new money abroad, it's US companies that are footing the bill. The net gain to the US is zero or even less if there are less manufacturing jobs because of increased resource costs. Less manufacturing ripples back into less profit for steel.
- porpoisely 8y ago

est31 8y ago

Perhaps more worrying than this change is the recent focus on expanding China's coal plants [1]. China already now is responsible for 45% of the global coal electricity. Just look at this diagram [0]. And with their one-belt-one-road initiative, they are building coal plants around the world. [0]: https://www.carbonbrief.org/mapped-worlds-coal-power-plants https://www.carbonbrief.org/mapped-worlds-coal-power-plants [1]: https://www.forbes.com/sites/judeclemente/2019/01/23/coal-is-not-dead-china-proves-it https://www.forbes.com/sites/judeclemente/2019/01/23/coal-is...

reitzensteinm 8y ago
China is still only a moderate emitter per capita, though it's caught up to Europe in recent years. Considering the wealth disparity it's a little hard to criticize.
- adventured 8y ago
  The earth doesn't care, so to speak, about whether it's per capita or not, it only cares about the total global output. The consequence of having 1.4 billion people in your society, is that you don't get to pollute at the rate of a nation with one million people that outputs 10x more pollution per capita. Is that unfair? No. I don't think per capita equality of pollution is the most important factor in this. As a society China has to bear the consequences of their immense population and its impact on the earth. Pre-emptively I'll note this isn't a defense of any other nation's high per capita pollution output level. Globally we have to take the China output very seriously, and we can afford to not be nearly so concerned about the 10x output of the one million person nation because it's not a dire threat to the planet (which isn't the same thing as not caring about their output, it's a difference of one threatening human existence and the other not; I'm far more concerned about North Korea's nukes & missiles than the localized authoritarian militia activity in a tiny nation - even though they might both be reprehensible governments, one is far more dangerous).
  - rmah 8y ago
    But what about the province of Sichuan? They have about the same population as Germany. Shouldn't they be allowed to pollute as much under your theory? After all, Germany is simply part of the EU.

gumby 8y ago

If you want to invest in or speculate in (i.e. time your installation on your house) it looks like the model to follow is the historical DRAM market: a largely undifferentiated commodity market that depend mainly on cap ex and scale, thus subject to boom and bust as technologies changed (or failed to). the fact that they are both silicon technologies I think is tangental

jartelt 8y ago

The price of the PV modules only makes up like 1/3 the cost of a utility scale solar installation and like 1/5 the cost of residential installations. A 10-15% increase in module cost will not slow solar adoption that much. The solar train will keep chugging along. We'll eventually get to a point where we generate 5% of the world's power with solar and people will still underestimate its impact and will still claim its too expensive to scale...

tomasien 8y ago
This is actually accelerating and there's no real reason it should stop. I think it's going to happen slowly and then all at once.
- syncsynchalt 8y ago
  We're already there, now that solar+storage is cheaper than coal. Even my local electricity coop, which sends me climate change denial newsletters every month[1][2], is buying solar. [1] https://ulfheim.net/files/currentwv.pdf https://ulfheim.net/files/currentwv.pdf [2] https://ulfheim.net/files/CurrentWV3.pdf https://ulfheim.net/files/CurrentWV3.pdf
osmarks 8y ago
Really? What's the rest of the cost from?

viburnum 8y ago

China should continue to subsidize solar so they eatablish a completely dominant position, then use their navy to start sinking oil tankers. That's our best hope for salvaging Earth's climate.

jonknee 8y ago
That would also throw throw us into a world war that would devastate the planet, but hey.
perilunar 8y ago
Aren't most of the oil tankers near China supplying oil to China? In which case there's no need to sink them — just stop buying the oil.

baking 8y ago

Eli Yablonovitch has spoken extensively about this. Here is one talk (https://www.youtube.com/watch?v=u_K1URyarE0 https://www.youtube.com/watch?v=u_K1URyarE0) but I think he makes the point elsewhere that the central government in China told their regional governments that they would need to close down their smaller scale PV production with the result that they all added capacity to meet the minimum causing an even greater production glut. Edit: I found the source (cued up for 37:25) https://youtu.be/lDxJsa8miNQ?t=2245 https://youtu.be/lDxJsa8miNQ?t=2245

apo 8y ago

Solar panel prices tumbled around 30 percent last year after China, the world’s largest producer, cut subsidies to shrink its bloated solar industry, pushing smaller manufacturers to the brink of collapse. 1. Cutting subsidies should raise prices. I guess the subsidy cut could have offset a steeper decline, but the article is full of head-scratchers like this one. 2. When has China ever cut a major subsidy?

Brakenshire 8y ago
A poster below said these were installation subsidies, which makes sense. So demand fell, there was a supply glut, and prices fell. 55% of solar capacity installed in 2017 was installed in China, so a fall there is going to have a big impact on the global market.
coredog64 8y ago
Depending on the structure of the subsidy, it’s possible for a cut to lower prices. For example, EV buyers get a tax credit for their purchase. A big chunk of that surplus is captured by the seller. Without the tax credit, the natural price would drop. Compare the price of a new Fiat 500 EV to a used one. The latter is practically free, and it’s not the natural depreciation of a used car.

chrisbrandow 8y ago

30% price drop last year. Expected to climb 10-15% over two years. Doesn’t seem like the party has ended. Just cooled a bit.

Proven 8y ago

> Solar panel prices tumbled around 30 percent last year after China, the world’s largest producer, cut subsidies In other words, bulk of the State-organized theft of taxpayer money has been successfully completed. Similar story to Tesla's "success" with their taxpayer-subsidized products.

rrabsolne 8y ago

The most interesting part of the article is the seemingly perverse economic response where the government cut subsidies and then the prices _fell_. Is this an actual known pattern or just a strange side effect of this situation?

jbay808 8y ago
As other commenters have noted, it was an installation subsidy. Installation is a major cost of solar, other than just the cells themselves. That made it cheaper to move inventory out of the warehouse and into the field. With the subsidy gone, the inventory piles up in the warehouse and manufacturers get desparate to sell. So they drop their prices, but it's still more expensive to bring those panels online than it was when the subsidy was in force. It's possible that the price will keep dropping until the panels are cheap enough to move at their current production capacity. But it's also possible that the lost profits make this level of production unsustainable, and solar panel costs climb back up as manufacturers shut down their no longer profitable lines and supply drops. It depends partly on what their margins are now, and what cost reduction room they have.

echofavor 8y ago

Thanks for sharing. You can also share your ideas for free on www.echofavor.com