
Party is over for dirt-cheap solar panels, says China executive - howard941
https://www.reuters.com/article/us-davos-meeting-solar-gcl-idUSKCN1PI2OQ
======
ChuckMcM
Always over until it starts again. Note that the party is over (in this case)
because it is threatening smaller businesses, not because there is a lack of
capacity or that the "big guys" couldn't still make money at the reduced rate.
In every industry where I have been aware of this this situation coming up
(voluntary reduction in production in order to shore up prices), it works for
a while and then people "cheat" and ramp up their production to make a bit
more money with their now dormant capacity. And then more people cheat, and
the party is back on again. The Chinese are notoriously fierce in their desire
to make a buck and so I give this one about a 5% chance of lasting through the
end of 2019.

~~~
stcredzero
Often, one sees industries making changes because market forces have made the
transaction cost of manufacturing too onerous. Some industries in that case
will consolidate and vertically integrate. If the pain from uncertain prices
and supply gets too great, could the solar industry start with mergers and
vertical integration? Or is it far too early for that?

~~~
philipkglass
Yes, mergers have been common in solar for a while.

This is one of the top manufacturers today:

[https://www.hanwha-qcells.com/](https://www.hanwha-qcells.com/)

A Chinese cell and module manufacturer acquired a Chinese ingot manufacturer.
Korea's Hanwha Group subsequently acquired this merged Chinese entity as well
as the German solar manufacturer Q-Cells. The merged Hanwha Q-Cells is
vertically integrated from cells to modules.

A handful of manufacturers like GCL have vertically integrated even further:

\- Refined silicon production

\- Ingot production from purified silicon

\- Wafers from ingots

\- Cells from wafers

\- Modules from cells

I don't know if that depth of integration makes sense long-term or not. Some
companies have been burned in the past as they integrated with producers that
weren't close enough to the leading edge. All of these steps are evolving
rapidly in small increments; a vertically integrated producer has to keep
pretty close to the leading edge at every stage if they don't want to see
their integration advantages reverse.

~~~
Gibbon1
I suspect vertical integration works when your key intermediate manufacturing
inputs aren't commodities. And you have enough scale to overcome production
granularity issues.

~~~
stcredzero
_I suspect vertical integration works when your key intermediate manufacturing
inputs aren 't commodities._

What if your manufacturing outputs are also getting to be commodities? The
example I was thinking of was refrigerated cargo containers. The inputs are
obviously commodities. The outputs are also getting to the point where the
cost of financing to build stock for sale or lease is getting to be onerous
for smaller players.

------
dak1
Translation: Foreign competition has now been driven out of business by
subsidies, time to raise prices.

~~~
chillacy
The article says Chinese solar is 30% of the world production, not sure if
that’s enough to jack prices.

~~~
danmaz74
30% referred to total installed capacity, not production.

------
baking
Eli Yablonovitch has spoken extensively about this. Here is one talk
([https://www.youtube.com/watch?v=u_K1URyarE0](https://www.youtube.com/watch?v=u_K1URyarE0))
but I think he makes the point elsewhere that the central government in China
told their regional governments that they would need to close down their
smaller scale PV production with the result that they all added capacity to
meet the minimum causing an even greater production glut.

Edit: I found the source (cued up for 37:25)
[https://youtu.be/lDxJsa8miNQ?t=2245](https://youtu.be/lDxJsa8miNQ?t=2245)

------
est31
Perhaps more worrying than this change is the recent focus on expanding
China's coal plants [1]. China already now is responsible for 45% of the
global coal electricity. Just look at this diagram [0]. And with their one-
belt-one-road initiative, they are building coal plants around the world.

[0]: [https://www.carbonbrief.org/mapped-worlds-coal-power-
plants](https://www.carbonbrief.org/mapped-worlds-coal-power-plants) [1]:
[https://www.forbes.com/sites/judeclemente/2019/01/23/coal-
is...](https://www.forbes.com/sites/judeclemente/2019/01/23/coal-is-not-dead-
china-proves-it)

~~~
reitzensteinm
China is still only a moderate emitter per capita, though it's caught up to
Europe in recent years. Considering the wealth disparity it's a little hard to
criticize.

~~~
adventured
The earth doesn't care, so to speak, about whether it's per capita or not, it
only cares about the total global output.

The consequence of having 1.4 billion people in your society, is that you
don't get to pollute at the rate of a nation with one million people that
outputs 10x more pollution per capita.

Is that unfair? No. I don't think per capita equality of pollution is the most
important factor in this. As a society China has to bear the consequences of
their immense population and its impact on the earth. Pre-emptively I'll note
this isn't a defense of any other nation's high per capita pollution output
level.

Globally we have to take the China output _very_ seriously, and we can afford
to not be nearly so concerned about the 10x output of the one million person
nation because it's not a dire threat to the planet (which isn't the same
thing as not caring about their output, it's a difference of one threatening
human existence and the other not; I'm far more concerned about North Korea's
nukes & missiles than the localized authoritarian militia activity in a tiny
nation - even though they might both be reprehensible governments, one is far
more dangerous).

~~~
tzs
> The consequence of having 1.4 billion people in your society, is that you
> don't get to pollute at the rate of a nation with one million people that
> outputs 10x more pollution per capita.

So if China were to split up into a whole bunch of separate countries, it
would be acceptable for each of those countries to have a higher per capita
pollution rate than is acceptable for current China?

As you noted, the Earth doesn't care. That's why per capita is the correct way
to handle this. Otherwise, whether a given set of people producing a given
level of pollution is acceptable changes depending on how you draw arbitrary
political boundaries among those people.

~~~
sigmaprimus
Good argument, maybe it should be based on the area of land controlled by each
nation? Population density or Tons of CO2 produced per square mile? The
problem with per capita policy is it encourages over population which makes
the problem worse.

~~~
atq2119
On the other hand, focusing on controlled area of land seems like a good way
to encourage wars over territory. I don't think there's an easy answer.

~~~
tw04
Not to be harsh, but that sounds like it will solve two problems with one
stone...

I don't think war is good for anyone but it has a way of reducing both
population and carbon output.

~~~
omnimus
Well now you've solved it. Everyone this guy sloved the eco crisis.

------
jartelt
The price of the PV modules only makes up like 1/3 the cost of a utility scale
solar installation and like 1/5 the cost of residential installations. A
10-15% increase in module cost will not slow solar adoption that much. The
solar train will keep chugging along.

We'll eventually get to a point where we generate 5% of the world's power with
solar and people will still underestimate its impact and will still claim its
too expensive to scale...

~~~
tomasien
This is actually accelerating and there's no real reason it should stop. I
think it's going to happen slowly and then all at once.

~~~
syncsynchalt
We're already there, now that solar+storage is cheaper than coal.

Even my local electricity coop, which sends me climate change denial
newsletters every month[1][2], is buying solar.

[1]
[https://ulfheim.net/files/currentwv.pdf](https://ulfheim.net/files/currentwv.pdf)

[2]
[https://ulfheim.net/files/CurrentWV3.pdf](https://ulfheim.net/files/CurrentWV3.pdf)

------
gumby
If you want to invest in or speculate in (i.e. time your installation on your
house) it looks like the model to follow is the historical DRAM market: a
largely undifferentiated commodity market that depend mainly on cap ex and
scale, thus subject to boom and bust as technologies changed (or failed to).

the fact that they are both silicon technologies I think is tangental

------
apo
_Solar panel prices tumbled around 30 percent last year after China, the
world’s largest producer, cut subsidies to shrink its bloated solar industry,
pushing smaller manufacturers to the brink of collapse._

1\. Cutting subsidies should _raise_ prices. I guess the subsidy cut could
have offset a steeper decline, but the article is full of head-scratchers like
this one.

2\. When has China _ever_ cut a major subsidy?

~~~
Brakenshire
A poster below said these were installation subsidies, which makes sense. So
demand fell, there was a supply glut, and prices fell.

55% of solar capacity installed in 2017 was installed in China, so a fall
there is going to have a big impact on the global market.

------
chrisbrandow
30% price drop last year.

Expected to climb 10-15% over _two years_.

Doesn’t seem like the party has ended. Just cooled a bit.

------
sneakernets
Until the next cost-reduction tech scales up, and so on, and so on...

------
rrabsolne
The most interesting part of the article is the seemingly perverse economic
response where the government cut subsidies and then the prices _fell_.

Is this an actual known pattern or just a strange side effect of this
situation?

~~~
jbay808
As other commenters have noted, it was an installation subsidy. Installation
is a major cost of solar, other than just the cells themselves. That made it
cheaper to move inventory out of the warehouse and into the field. With the
subsidy gone, the inventory piles up in the warehouse and manufacturers get
desparate to sell. So they drop their prices, but it's still more expensive to
bring those panels online than it was when the subsidy was in force.

It's possible that the price will keep dropping until the panels are cheap
enough to move at their current production capacity. But it's also possible
that the lost profits make this level of production unsustainable, and solar
panel costs climb back up as manufacturers shut down their no longer
profitable lines and supply drops. It depends partly on what their margins are
now, and what cost reduction room they have.

------
tossaccount123
no shit, this is what everybody with a brain has warned about

China's MO is to subsidize Chinese businesses, restrict foreign competition
internally, and steal foreign companies IP until they are bankrupt, while
simultaneously being allowed to export their goods to those same countries
with no penalty. Then they jack up the prices when all the competition is gone

Everybody criticized Trump for the steel and solar tariffs because they don't
think beyond next quarter earnings report. What happens in 20 years when China
has a monopoly on steel, solar, and other key industries and they decide to
jack up prices? The rest of the world won't be able to do anything about it
because they are junkies and China is the supplier

~~~
mateo1
Lots of people profit short-term by trading with China. It's easier to make a
profit as a middleman with China than as a manufacturer in a western country.
I'm definitely left wing, but I applaud Trump for the tariffs. Tariffs are a
must for the western world if we want to maintain our standards of living and
survive long-term.

Germany is also a predatory exporter in Europe, but fewer people seem to care
about that. The US definitely doesn't want to end up having the same relations
with China as Southern European countries ("PIIGS") have with Germany. You
can't win if you have zero leverage left to negotiate.

~~~
rswail
Germany is the prime exporter of the EU. It has the benefit of the Euro in the
internal market for buying power due to its size and it has the benefit of the
Euro in the external market because German bonds denominated in Euros are
cheaper for it than the other EU states.

I'm a democratic socialist, but tariffs are not the way to control trade and
standards of living. That is a mercantilist attitude from the 19th Century.
Tariffs are paid by the consumers in the country that has the tariffs (ie
Tariffs on China by US is paid by people in the US). It primarily hits those
that spend most of their income on consumption, which is those that are
poorer.

What is needed is the power of Labor (ie unions etc) to be applied in the
foreign country, by having restrictions on goods and services that are not
provided by Labor with fair conditions.

That's not the same as pay or money, there are comparitive advantages in
things like the supply and demand on local food production etc.

~~~
brmgb
> Tariffs are paid by the consumers in the country that has the tariffs (ie
> Tariffs on China by US is paid by people in the US). It primarily hits those
> that spend most of their income on consumption, which is those that are
> poorer.

But consumers are already paying for the current situation in Germany. Instead
of tariff, Germany decided to put downward pressure on salaries via the Hartz
reforms. The effects are not far from tariff in that it shifts money from
consumption towards savings/investments. That's why Germany has such a large
trade surplus. And like tariff, it's a losing solution. In the end, your
currency should reevaluate. Germany is just lucky to have the euro.

For a long time, I was really puzzled by why the German European partners
stuck with Germany in the currency union were so tolerant of pretty much being
spoiled. But after Macron, I think it's pretty clear: the richest are far too
happy to be able to present lowering salaries and degrading work conditions as
an inescapable part of modern economic competition. They are after all on the
right side of the rising inequality.

------
viburnum
China should continue to subsidize solar so they eatablish a completely
dominant position, then use their navy to start sinking oil tankers. That's
our best hope for salvaging Earth's climate.

~~~
jonknee
That would also throw throw us into a world war that would devastate the
planet, but hey.

