[Industry news ]Solar Shakeout Could Soon Reach China

If oil prices fell from their 2008 peak as far as solar component prices have, a barrel of oil would cost about $10 a 93 percent drop. Everyone could afford to fuel his own Formula One racecar.
Instead, more utilities and companies can now afford to install solar power. A kilogram of polysilicon, the basic material in solar panels, dropped from $475 in February 2008 to less than $35 Oct. 31. Not every manufacturer can stay in business with prices so low. The great shakeout has begun in the U.S. and elsewhere -- even as the largest producers continue to ramp up output. But whats going on in China?
The price drops are a stunning turnaround for this alternative to traditional power generation, the economics of which have long prevented its widespread adoption.
Polysilicon manufacturing has been growing at an annual rate usually reserved for another silicon product, computer chips. By the end of 2010, the world produced enough photovoltaic panels theoretically to power about four New York Cities. At about 42 gigawatts, that's 43 percent more solar capacity built than in 2009, which itself was a third higher than 2008.
Solar is already competitive with fossil fuel power in many markets around the world, especially where supply is unreliable and diesel backup generation is uncommon. "People are missing out about how cheap solar power has become, said Ramesh Misra, senior analyst covering solar and technology at Brigantine Advisors in New York. "There is no other energy source that can make that claim."
The falling prices have changed the competitive landscape and knocked smaller manufacturers out of business, including Evergreen Solar, the Marlboro, Massachusetts panel-maker, and Solyndra, the thin-film solar manufacturer whose bankruptcy kicked up a solar storm in Washington, DC, because the Obama administration backed $537 million in loans.
Analysts and investors are studying the effect of this price shakeout on the global solar industry. Leading companies in the U.S., Germany, Korea, Norway and Japan are easier to read than their secretive peers in China. A Chinese analyst, Xie Chen, gave Bloomberg News a glimpse behind the Chinese Wall at the end of last week. About 90 percent of plants in China risk suspensions in production because of the low prices, said Xie, an analyst at the China Nonferrous Metals Industrial Association, something of a cross between a think tank and a government agency. Those factories, most of them quite small, produce about half of Chinas overall polysilicon output.
The closings, though perhaps temporary, will lead China to import more polysilicon from large international competitors, Xie said, such as Hemlock Semiconductor Corp., in Hemlock, Michigan, and Wacher Chemie AG, in Munich.
Aaron Chew, a senior analyst at Maxim Group LLC in New York, attributes the price drop to aggressive sales from larger firms such as GCL-Poly Energy Holdings Ltd., in Hong Kong, and OCI Company Ltd., in Seoul. "I don't think the smaller polysilicon manufacturers are responsible for the current downward pricing pressure, he said. "Even if all of the capacity of these smaller players went offline, there would still be enough to supply the industry."