A few days ago I caught up with Oliver Hartley, Managing Director of the Australian operations for Hanwha-Q-Cells – one of the world’s largest producers of solar PV cells and modules.
The story of Q-Cells is in many respects a mirror of the plight for the wider renewable energy equipment manufacturing sector.
Q-Cells was the number one solar cell producer in the world in 2008 and 2009, and a long-term stalwart of the solar industry with a reputation for quality. But earlier this year it filed for voluntary administration due to difficulties in rolling over some of its debts.
Things are now looking much better for Q-Cells with its acquisition by the Korean conglomerate Hanwha, whose diverse revenue streams in chemicals, insurance, hotels, and defence equipment mean it has the balance sheet to handle the tough times currently plaguing the solar sector.
A range of other leading names in solar PV’s past, including Schott and BP Solar, have not been so lucky, and their parent companies have chosen to pull out completely from the sector.
The wind industry, as covered in the Climate Spectator interview with Vestas’ Morten Albaek, has also been suffering incredibly tough times.
This disastrous crash from buoyant times is neatly illustrated in the chart below of the RENIXX – which is an index the tracks the stock market value performance of the world´s 30 largest companies in the renewable energy industry. In 2008, times were very good but then the Global Financial Crisis hit. Unlike the wider stock markets, there has been no recovery in the fortunes of these renewable energy businesses and, in fact, the RENIXX has continued to decline through to today.
Source: RENIXX® by IWR.de GmbH - Powered by: www.bsb-software.de
This failure to recover from the GFC, unlike the broader market, is largely a product of two things: a rush to scale and battle for market share in what looked to be a boom industry; and China Inc.
China’s state-sponsored investment and loans have continued to drive considerable additions of new production capacity in both wind and solar PV even after it became clear the markets couldn’t support it.
Customers have been major beneficiaries with wind turbine and solar module prices plummeting.
But with firms bleeding red ink everywhere, a restructuring process is now unfolding to bring supply closer into alignment with demand.
This then poses the question of most relevance to Australia as a buyer of these technologies – could this be the end of a honeymoon period of declining prices?
Both Hartley in solar and Albaek in wind think so. They aren’t suggesting prices will rise but they struggle to see how prices can keep on falling, when manufacturers can’t cope with prices at present levels.
In 2012 customers clearly held the bargaining power. Over 2013 we might start to see a rebalancing partly back towards producers, as rationalisation takes place in earnest. In addition the recent news, as covered by Daniel Palmer today, that China will target 40GW of solar for 2015 may also act to put a floor on price declines.