Tuesday, November 29, 2011

China's Solyndra? and Nathan Myhrvold Slams the Industry's Business Model(STP; YGE; TSL; JASO)

 While the story below references the September 2010 China Development Bank loans, we posted on the Chinese Government's financial support as early as 2009, links* below.
From Foreign Policy's Passport blog:
Money for clean energy is creating political messes all over. Of course, there are the Obama administration's ongoing troubles over loans to now-bankrupt solar manufacturer Solyndra. Now comes a report from Reuters saying that green energy loans to bolster China's businesses may be in danger of defaulting, due to falling demand from Europeans, their biggest customers.
From the report:
State banks provide easy loans to the sector amid the Chinese government's push to develop clean energy. Provincial governments that have helped build solar companies are also pressuring banks to continue lending, which may add to the woes of the struggling industry.
The glut of production and swelling inventories of the panels that turn sunlight into electricity have already driven down prices by about 40 percent so far this year. Analysts expect prices to slide by another 10 percent by early next year.
"Over the next six months, there won't be profits to be made," said CLSA's solar analyst Charles Yonts. He expects some companies to start defaulting on loans and put themselves up for sale.
"Balance sheets across the solar sector are already stretched to breaking."
This comes on top of other setbacks for China's green energy aspirations this year. In September, the Chinese had to shut down a solar panel plant following protests against the its pollution. Other economic concerns including the rising number of "ghost cities" amidst the Chinese property bubble, are rattling the markets and prospects for growth.

The Guardian reported in September that in 2010, the China Development Bank gave out nearly $30 billion in loans to the top 5 manufacturers of solar panels.  Several weeks ago, industry groups representing the U.S solar industry raised concerns to the U.S Commerce Department about possible dumping by Chinese manufacturers....MORE
From Bloomberg:
Energy Subsidies Stymie Wind, Solar Innovation: Nathan Myhrvold
This month, the U.S. Department of Commerce launched a formal investigation into complaints, lodged by the U.S. solar-cell manufacturers, that the government of China is funneling loan guarantees, grants and subsidies to its solar-cell companies.

Apparently, the Commerce Department is shocked, shocked to learn that a government would subsidize the solar industry.

A few days later, the New York Times described a “gold rush” under way in the U.S. as builders of wind and solar farms cash in on grants and loan guarantees offered by both the federal government and various states. These incentives effectively allow players at every level of the renewable-energy industry to lock in profits of 10 percent to 30 percent a year for the 20- to 30-year life of their plants -- not bad considering 10-year Treasury bonds are paying only 2 percent.

Both of these developments are symptoms of a larger problem with the world’s current approach to renewable energy. The range of prospects being tried now is dizzying -- from high-tech windmills to biofuels, from corn to algae, from silicon photovoltaic cells to boilers heated by thousands of reflected sunbeams. But they all share one thing that makes them appealing to investors: taxpayer dollars. One of the ugly secrets of the renewable-energy industry is that its products make no economic sense unless they are highly subsidized.

‘Levelized’ Energy Cost
To get a sense of just how deep these subsidies run, I looked up projections from the U.S. Energy Information Administration of the “levelized cost” of energy from various power sources. Let’s say you decide to build a new electricity plant that will come online five years from now. Before getting a loan, you’ll want to estimate how much money you will have to lay out for construction, operations and maintenance, fuel, interest payments, insurance and so forth over the 30-year lifetime of your plant. Divide that total investment by the amount of electricity the plant is likely to sell, and you get a break-even price per kilowatt-hour. That’s the levelized energy cost....MORE 
...Some people fret that China will reap the green jobs of the future, but no economically viable green-energy product exists. It makes no sense for the U.S. to try to dominate a money-losing industry, especially by guaranteeing profits to inefficient power plants for 30 years.... 

*December 2009 
Trina, Belle of the Solar Ball (TSL; LDK)
...Trina Solar Prices $120 Million of Convertible Senior Notes and Up to 4,073,194 American Depositary Shares 
TSL is a favorite of the Chinese government who helped arrange this hunk o'loot, September:
September 2010 
China Development Bank to Supply LDK Solar $8.9 Billion Credit Facility (LDK)
April 14, 2010 
"UPDATE 1-Suntech,Trina Solar sign $11.7 Billion loan deals" (STP; TSL)

April 14, 2010 
Credit Where Credit is Due: Forbes Had the Suntech, Trina Loan Story First (STP; TSL)