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The East is Red Ink: Obama’s China solar model fails

By   /   March 27, 2013  /   News  /   1 Comment

CHINA COLLAPSE: Obama praised China's renewable energy efforts in 2011, but one of the country's top solar panel-makers is in trouble financially.

CHINA COLLAPSE: Obama praised China’s renewable energy efforts in 2011, but one of the country’s top solar panel-makers is in trouble financially.

By Dustin Hurst | Watchdog.org

President Barack Obama hoped 2011 would be a turning point year for the country, the start of something better.

In his State of the Union address to the nation that year, the optimistic president urged the country to move toward clean, renewable power and away from the energy of the past — such dirty power sources as coal, oil and gas.

Forward, he insisted, to emulate China, which the president extolled as a trailblazer in clean energy.

“They’re investing in research and new technologies,” Obama said. “Just recently, China became the home to the world’s largest private solar research facility, and the world’s fastest computer.”

This was the nation’s second “Sputnik Moment.” Much like the first, when Russia beat America into space with a satellite, China was besting America in a transition to renewable energy. Then came his Kennedy moment, when the president set a goal — not to land a man on a distant planet but to derive at least 80 percent of America’s energy from so-called clean sources by 2035.

Now, just two years later, the future for clean energy, solar in particular, isn’t as bright as the president hoped.

Just last week, China’s Suntech Power Holdings, once the world’s largest manufacturer of solar panels, quietly shoved its largest subsidiary into bankruptcy proceedings.

That company, Wuxi Suntech, missed a $541 million debt payment, forcing the move. Wuxi expanded much of its operations through borrowing. The company still owes creditors upwards of $1.1 billion.

Falling prices for solar panels and overproduction are likely to blame for Wuxi’s downfall. Analysts predict that more manufacturers will face similar problems. “We are entering a period of great difficulty for Chinese solar manufacturers,” Jenny Chase, head of solar analysis at Bloomberg New Energy Financetold CNN.

But it’s not just Chinese manufacturers that will struggle through the next few years as the industry shakes out weaker competitors. An industry report released last October by GTM Research predicted that as many as 180 panel-makers would be out of business by 2015. Some 54 of those, the documents projected, are based in China.

American solar manufacturers might also experience trouble, GTM warned, and panel production in the U.S. could cease by the end of 2013.

The U.S. has suffered setbacks in solar energy in recent years, some more embarrassing than others. Perhaps the most well-known downfall was Solyndra’s collapse in September 2011. Obama sang praises of the solar-panel manufacturer during a March 2010 visit, just 18 months before the company ceased operations. The U.S. government, which gave the business a $535 million loan through the Department of Energy, will likely only recoup about $142 million of that. California, Solyndra’s home state, gave the company $25 million in tax breaks.

Colorado’s Abound Solar, recipient of a $400 million loan through the DOE, went belly-up in June of last year. Abound only used about $68 million of its loan guarantee before the department halted the credit line. The federal government expects to recoup at least some of its money.

The reorganization is hitting Europe, too. One day after Suntech announced its bankruptcy proceedings, German engineering company Bosch said it plans to curtail production of solar-related products, seeing no way to make them financially viable.

Wuxi executives are desperately seeking restructuring options. The company employs about 10,000 workers, approximately half of Suntech’s labor force. China’s central government, which has enacted solar-friendly policies, including cheap loans, now seems unwilling to bail out the struggling enterprise.

The local government, on the other hand, might be a different story. Reuters reported just days ago that Wuxi Guolian, the local government’s investment venture, may take over Suntech’s solar-panel operations.

While China scrambles to save its flailing industry, America carves another path, a route reliant on natural gas. A relatively new process, hydraulic fracturing, or fracking as it’s more commonly known, has produced a steep drop in natural gas prices in the last few years.

The U.S. Energy Information Administration predicts that natural gas production resulting from fracking will jump from 7.8 trillion cubic feet in 2011 to 16.7 trillion cubic feet in 2040.

Natural gas produced 25 percent of America’s electricity in 2011, according to the EIA. Renewables, including solar, provided 13 percent of the country’s power that year.

Some important figures see natural gas as the energy of the future for America and others.

“The world needs to follow America’s lead and take full advantage of the cleanest-burning fossil fuel, and that’s natural gas,” Peter Voser, CEO of Royal Dutch Shell, counseled last week, according to the Boston Globe.

Voser isn’t completely cool on renewable energy, but believes natural gas can replace dirtier energy forms and reduce carbon emissions.

Obama, who isn’t necessarily opposed to natural gas development, tapped Ernest Moniz to lead the DOE in the president’s second term. Moniz, a physicist at the Massachusetts Institute of Technology, believes natural gas is a “bridge” to cleaner energy forms.

Contact: [email protected] or @DustinHurst via Twitter.