Arise’s founder Ian MacLellan, who recently resigned from the company’s board, said a central problem is the massive expansion in Chinese supply. Chinese firms got lots of low-cost financing from quasi-government sources, he said, and thus were able to build new plants at a furious pace. “Some of our Chinese suppliers and competitors have access to phenomenally huge amounts of cheap capital,” he said.
U.S. manufacturers are so upset with the wave of cheap solar devices that has come into their market from China that seven companies asked the government to slap anti-dumping tariffs on Chinese solar products.
And weak European economies – Europe is by far the largest market for solar power systems – are so strapped for funds that their subsidies to the sector are threatened. “With governments running out of money, how long will the subsidy schemes last?” said Day4’s Mr. Rubin.
Still, Mr. Rubin said, the industry will eventually thrive, even if there is a shakeout in the short term. Low prices for solar panels means the sector is increasingly competitive with other forms of power generation. “With the rapid reduction in solar hardware prices, the industry overall is rapidly getting into that coveted territory of ‘grid parity’ in some pretty large markets,” he said.
Mr. MacLellan sees the current difficulties as part of a boom-bust cycle that hits many new technologies. An industry restructuring will be similar to that of the personal computer market in the 1980s and ’90s.
The solar energy business will succeed over the longer term because there is “huge demand for free energy from the sun,” he said. “It is just at the beginnings of becoming a very massive industry … This is the oil of the 21st century.”
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SOLAR STOCKS
Investors who have put money into shares of solar manufacturers in the last couple of years have been severely burned by the downturn in the sector. Most solar stocks – Canadian, U.S. or overseas – have taken a beating.
“It’s a bad time to be an investor in just about any solar company out there,” said Khurram Malik, a clean technologies analyst at Jacob Securities Inc. in Toronto. “We’ve been telling investors to avoid the space completely for a long time now.”
The industry is faced with a severe structural problem, Mr. Malik said, partly because there is so much solar panel production in China. “There is way too much supply on the market [and] the demand is not picking up because of global economic issues.” Around the world, some companies have suspended production, others have gone bankrupt, and there will be more consolidation, he said.
So when will it be time to jump in and take advantage of the next upward cycle? Mr, Malik says existing inventories of solar panels won’t be used up until early next year, and even then the industry will take time to recover. “I wouldn’t even touch it until the second quarter of next year, at the earliest.”
The only exceptions, he said, might be some small high-risk firms that are developing new technologies, or developers that are taking advantage of cheap panels to build power projects.
Richard Blackwell
