Friday, October 26, 2012

Collapse of Chinese Solar

The build it and they will come, is not working in the solar industry.

It is a little as if the 19th century industrial powers had decided to push railroad construction by pushing more steel development, and left the rest to fate.  Without the seed money for constructing, which in the 19th century came from a combination of government policy and support, and a huge stock bubble, the steel would just sit unused.

Glut of Solar Panels Poses a New Threat to China
Keith Brasher, New York Times, 4 October 2012 (Hat tip: MR)
BEIJING — China in recent years established global dominance in renewable energy, its solar panel and wind turbine factories forcing many foreign rivals out of business and its policy makers hailed by environmentalists around the world as visionaries.
But now China’s strategy is in disarray. Though worldwide demand for solar panels and wind turbines has grown rapidly over the last five years, China’s manufacturing capacity has soared even faster, creating enormous oversupply and a ferocious price war.
The result is a looming financial disaster, not only for manufacturers but for state-owned banks that financed factories with approximately $18 billion in low-rate loans and for municipal and provincial governments that provided loan guarantees and sold manufacturers valuable land at deeply discounted prices.
China’s biggest solar panel makers are suffering losses of up to $1 for every $3 of sales this year, as panel prices have fallen by three-fourths since 2008...      
 
The Chinese are hoping for some consolidations. 
In the solar panel sector, “If one-third of them survive, that’s good, and two-thirds of them die, but we don’t know how that happens,” said Li Junfeng, a longtime director general for energy and climate policy at the National Development and Reform Commission, the country’s top economic planning agency.
The problem is that once you built the railroad -no easy task granted- it was the cheapest land transportation.  That is not the case with solar panels.  They have come down considerably in price, but electricity generated by them is still three-times as expensive as fossil fuel alternatives.  That makes a duplication of the railroad, or more recent telecom, bubble difficult.

9 comments:

John D. Wheeler said...

I must admit, I'm confused by your statement -- once you've put up the solar panels, isn't the electricity generated by them free whenever the sun is shining?

PioneerPreppy said...

John - Simply put NO. The panels degrade. The actual overall cost of the panels and the lifetime output of energy they provide typically ends up costing more per kilowatt than buying it outright. In general as well it has been estimated that the total amount of oil or oil byproducts used to make a panel and everything else that goes with a solar system comes out to much more (as much as 50% more) energy going into solar production than you get back over the average lifespan.

I may in fact save money using my little solar back up system but the energy was paid for by someone before me so in the end it is a net energy loser.

John D. Wheeler said...

Um, PioneerPreppy, as far as I can see, everything you said applies BEFORE the solar panels are put up, so it appears that you are simply saying YES.

Besides, there is the matter of arbitrage. If the energy is put into producing the solar panels when it is cheap but is produced when energy is expensive, it still makes economic sense as a way to ease the descent from peak oil.

PioneerPreppy said...

Well what you are really doing John is paying the full price of the electricity up front. The total amount of energy you will get from the panels just costs you more on day one and you don't have to pay again. That is until something breaks I guess.

russell1200 said...

Sorry, I have had the little one to myself this weekend, so I have been offline.

John: The solar panels I wouldn't say are "free", but I would agree that most of the cost is front loaded. The degradation depends a lot on how you are using them and to what purpose. If you don't convert the DC power generated power to AC power, you simplify many of the maintenance problems. Unfortunately, DC power doesn't "travel" well, so it is a local only option.


Pioneer: Part of the problem with the various input/output equations is that parts of the process are out of our control - for instance how the aluminum framing is produced and shipped to market. And as John notes, there are certain arbitrage situations that are not captured well with the input/output quantification.

One of the biggest arbitrage situations that is almost always ignored (and yes I am getting a little off topic) is that electrical grids are always "on", and that the peak usuage is just about as important as the overall usuage. So if you can smooth out your loading, you can save a huge amount of overall energy usuage even if you "use" the same amount power.

One of the problems with the alternative sources is that they don't always combine well with peak usuage time frames. You would think solar would, but peak solar tends to precede peak usuage.

One point I think that John is making is valid. If you could get yourself a real mania-bubble in installing the solar panels (rather than just making the panels) you would have a whole bunch of relatively inexpensive energy. As with all bubble, the initial investors would take a bath, but that seems to be the common cost to getting a technology into fast heavy useage.

Dan said...

Do the Math blog, puts the payback at 3-4 years. Since they are rated for 20 or so years they are sustainable. Also I think the 20 year rating doesn't mean they are junk at the end of their service life, just that they have degraded to 80% of their rated capacity.

That is similar to my minivan that died last week. It had an expected useful life of 100k miles and 274k on the odometer when it finally died. Furthermore it is still repairable for around $1.5k in parts, it just wouldn't be worth that much after the repairs so it isn't worth it.

russell1200 said...

Dan. If you are using them as straight up DC sources, 20 years might work. But DC is very limiting and when you go to AC than your electronic components can go much quicker. Capacitors are often given an expectid life of 7 years - although that seems rather short to me.

The quick paybacks I have seen (and remember I work in the electrical construction industry) all have invovled a rebate from the utility.

Utility rebates can be a legitimate way for the utility to diversify its long term sourcing, but they make the straight up comparisons rather difficult.

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