For those who look at recent prices of silicon, cells or panels as the arrival of the Age of Aquarius or somesuch I'll refer you to one of Nixon's Econ. Advisers.
"If something cannot go on forever, it will stop,"
-Herb Stein
(Ben's infinitely smarter dad)
From the WSJ's Venture Capital Dispatch:
Unmanageable debt, liquidity concerns and a very poor pricing-and-demand environment–does this remind anyone of Solyndra’s predicament?
In fact, these are descriptions from recent analyst reports pertaining
to Chinese solar companies, many struggling under heavy debt burdens
that two years ago seemed like a godsend.
Even now, as the U.S. reevaluates its federal loan and other subsidy
programs for renewable energy, some lawmakers invoke the strong support
the Chinese government offers to its own renewable energy industry as a
call for the U.S. to match up with its own support.
Indeed, easy access to low-interest loans over the past three years
helped Chinese solar makers build up capacity, and quickly take over
market share from European and U.S. manufacturers. In 2010 alone, the
China Development Bank made $35 billion in low-interest credit available
to Chinese renewable energy companies, according to Bloomberg New
Energy Finance, a figure cited by Energy Secretary Steven Chu in his
testimony to the House Energy and Commerce Committee in mid-November.
But, perhaps an unintended consequence of this easy access to capital
was that the cheap, plentiful production of solar panels resulted in a
cutthroat pricing competition, which, in turn is now starting to
suffocate the very same large, leading Chinese manufacturers.
“We remain concerned about debt levels across the solar manufacturing
complex given the compression of profit margins,” wrote Think Equity
analysts in a recent report. “With increasing net debt and reduced
module prices, it is hard to imagine absolute gross margin dollars
growing enough to offset existing OpEx and interest payments.”...MORE
