The main subsidiary of Suntech Power, one of the world’s largest makers of solar panels, collapsed into bankruptcy in a remarkable reversal for what had been part of a huge Chinese government effort to dominate renewable energy industries.
The bankruptcy is a sign of the worldwide consolidation of the solar industry, which has been crippled by a glut of products on world markets and Western tariffs on Chinese products. It also signals China’s unwillingness to continue to subsidize struggling manufacturers in the industry, which is contributing to the steep decline of its green energy pursuits.
More than any other country, China had leaned heavily on renewable energy to solve its problems of severe air pollution and dependence on energy imports from politically unstable countries in the Middle East and Africa.
The rapid expansion of natural gas production in the United States and a curtailment of subsidies in the European Union also hurt prices, as did the United States’s imposition of import tariffs totaling about 40 percent after an antidumping and antisubsidy investigation last year.
The European Union is completing its own trade investigation of Chinese solar panel shipments that could lead to steep tariffs there as well.
The bankruptcy comes after a dozen solar panel manufacturers in the United States and a dozen in Europe have either failed or cut back production after finding that they were unable to cover their costs at the current low prices for solar panels.
The industry’s problem is that most of the cost of a solar panel lies in building the factory, not in operating the equipment. So when the industry has severe overcapacity, as it does now, each company continues running its factories to cover its tiny operating costs, and at least a small part of the interest on the loans it took out to buy the costly factory equipment.