Solar Shaky as US Policy Fails and China Backs Futures

Although global demand for solar power is still growing — about 8% more solar panels will be installed this year compared with 2010 — bankruptcies, plummeting stock prices and crushing debt loads are calling into question the viability of the solar energy industry that since the 1970s has been counted on to advance the world into a new energy age.

Only a handful of manufacturers are now profitable in the face of too much capacity, which has contributed to a plunge in prices as government subsidies have been curbed. Prices for solar panels started 2011 near $1.60 per watt, but a buildup of inventory forced manufacturers into a fire sale toward the end of the second quarter that has pushed prices to near $1 per watt now.

'The prices that we're seeing today are likely not covering manufacturing costs in many cases,' says Ralph Romero.

With at least seven solar-panel manufacturers filing for bankruptcy or insolvency in the last several months and six of the ten largest publicly traded companies making solar components reporting losses in the third quarter, public-market investors are punishing the solar sector, sending shares down nearly 57% this year.

Winners are expected to emerge eventually, the question is how much more carnage there will be before that happens. 'The fact of the matter is, nobody really knows which solar companies will be pushed out of business or be forced to merge,' writes industry analyst Rodolfo Avalos. ' Nobody knows how long it will take for the solar industry to improve even when the foretasted solar global demand for the next 5-10 years is quite promising.'"

German company Solar Millennium on Wednesday filed for insolvency, putting in doubt the future of its 2,250-megawatt pipeline of power plants in the United States. The bankruptcy filing is the just the latest in a series of solar company failures. Besides the controversial collapse of Silicon Valley solar panel maker Solyndra, Stirling Energy Systems went belly up in September along with SpectraWatt and Evergreen. This week, BP pulled the plug on its four-decade-old solar division.

But all is not doom and gloom. Warren Buffett last week bought a $2 billion photovoltaic power plant in California being built by First Solar and on Monday Google and leveraged buyout giant KKR agreed to acquire four solar power plants under construction by Recurrent Energy.