The Skunk at the Solar Lawn Party

Bloomberg New Energy Finance held a workshop presentation of its Q2:2012 outlook for photovoltaic panels that has attracted a lot of attention.  The story of about the story at this presentation became itself a story in Forbes when the workshop slides were leaked to Forbes by BNEF who then complained when Forbes used them.  DUH!

Not only did BNEF hold the workshop in China but it had the temerity to tell the audience that it would take until at least 2014 to work off the supply glut of PV panels around the world.  Think about that for a moment.

The use of feed-in-tariff subsidies, treasury tax grants, production tax credits, investment tax credits and other subsidies used to manipulate the market for solar energy in the US and EU seduced China into expanding its production capacity to build global market share and suction up all that EU and US subsidy money so much that today there is a two year glut of supply and a risk of continued falling prices in an effort to get rid of it.

The consequence of this market manipulation is a real prospect of cratering the entire global solar photovoltaic industry driving all the major players into bankruptcy unless they can go without sales or revenue for two years until the market catches up.

If this were just foolish business people doing irrationally foolish things with their money we’d say to them “FOOL!  What were you thinking?”  But this is worse!  This manipulation is caused by politicians spending other people’s money trying to pander to one group while paying off a second until the entire scheme collapses.

Give BNEF credit for at least going to the Great Wall to deliver the bad news in person.  But this was no surprise to China and they make no apologies for taking advantage of the game the EU and US politicians cooked up.  Having succeeded in building global market share China now is positioned to use that production capacity for the next two years to satisfy local demand and pick up the pieces of bankrupt global companies to restart its PV exports two years from now when the market clears.  The subsidies were used to buy the rope that the Spanish, German  and other global PV players were hung with as they ran out of time and were unable to compete.

At the Shanghai PV Conference, BNEF presented both conservative and optimistic scenarios of its Global PV Demand Forecast for 2012 to 2014.

It estimated the 2012 Global PV Demand would range from a conservative 26.3 gigaWatt (GW) to 34.7 GW on the optimistic end with the expected market demand estimate at about 31 GW.  That is still a lot of solar capacity added except that combined crystalline silicon and thin film module production across technologies is expected to be about 35 GW in 2012,  40 GW in 2013, and 45 GW in 2014.   This supply excess is forecast even though feed-in tariff reductions in the EU and production tax credits in the US are expected to decline or end undermining demand.

The result is that solar PV panel prices will continue falling.

The US now responds by issuing countervailing anti-dumping duties on China seeking to cover the behinds of politicians and reduce the screaming of domestic manufacturers left stranded to fend for themselves. The government is a terrible business partner and an even worse venture capitalist.  But that never seems to stop the pigs from lining up at the trough.

So what?

The best thing the US could do right now is to declare victory on the state renewable portfolio standards to avoid locking ratepayers into above market prices in a falling price market.  End the Federal and state subsidies for solar PV panel systems and thus stop sending taxpayer money to China.  If the Chinese want to keep selling under-priced solar PV panels into the US markets after the US subsidies end—we should let them!

At grid parity prices solar PV panel systems become an attractive alternative for utility customers who want to insure against utility rate spikes looming in our future resulting from the sum of foolish government industrial policies, regulations and political correctness by becoming ‘net zero’ energy self-sufficient and selling any excess back to the grid at set avoided cost tariff prices.