The global renewable energy market in the recent years has seen such an increase in investments, industries and policies that literally the acuity may lag behind the reality. Rapidly gaining momentum in the global arena is solar power for obvious reasons of being clean, sustainable and natural resource of energy. Renewable energy market trends reflect strong growth and investments in the solar Photo Voltaic (PV), concentrating solar thermal power and solar water heaters.
Solar PV capacity addition in more than 100 countries in 2010 itself convincingly demonstrates the changing geography of the renewable energy deployment. Inactive for years, Concentrated Solar Thermal Power (CSP) rushed back to the market with its 740 MW capacity addition between 2007 and 2010. Solar heating capacity increased by an estimated 25 GWth in 2010 to reach approximately 185 GWth.
Global annual increment in solar PV capacity, Solar PV cell production and solar water heater capacity seen in 2010 on an average ranged between 35-40%. Three major propelling forces can be considered for the brisk increase of the solar energy market. First and the foremost reason for the accelerated development of PV were the supply issues with oil and natural gas and global warming concerns. Secondly, the state-owned multilateral and bilateral developmental agencies supported the investments in renewable energy to a large extent. More public money went to the renewable energy sector through developmental banks than through government stimulus packages during 2010. Thirdly, renewable energy development is considered to have the potential to create new industries and generate new jobs. Globally, there are more than 3.5 million direct jobs in renewable energy industry. These three major factors or objectives have been the pillars of the solar energy development planning and are therefore, subject to constant criticism with every downfall or underachievement.
Given the huge amount of investments, incentives and policies, it would be naïve to assume or predict that the market won't see any shortages, collapses or political dominance. Market experts have predicted that the solar energy market would be a harbinger of alternate-energy boom. Closely threatening such a review of the market was the recent case of Solyandra collapse questioning the over-ambitious plans of US and other countries that have similar investment plans in the solar industry.
US solar industry got a set back with almost three solar companies declaring suspension of their operations and plans. Solyandra Inc., a solar module manufacturer that received a $535 million loan guarantee from the US Energy Department filed for bankruptcy in Sept, 2011 arguing that it couldn't compete with the larger rivals. The hyperbole about the affair has managed to draw attention to the broader energy policy, loan guarantee schemes and effectiveness of due- diligence processes. To an extreme end, Rep. Cliff Stearns, who chairs the oversight subcommittee of the House Energy and Commerce Committee, said that Solyandra’s downfall proves ''that green energy isn't going to be the solution''1.
Initially, during Solyandra's development, the analysts gushed over the cylindrical design, so much more exciting than the dull, flat panels coming out of China. Company executives promised huge revenue, supporting thousands of permanent jobs, while a stream of state and federal politicians toured the Fremont plant, basking in what felt like the glow of the future. Desolately enough, it all collapsed surrendering to numerous conspiracy theories and probing the green energy policies and investments. Additionally, the political discourse of the situation dragged the simple market dynamics into a controversial corner. Obama administration is being blamed for rushing into providing loan guarantee of $527 million to Solyandra, despite firm's low performance. Furthermore, the technical parameters such as incompetent products and functionality of the firm have found lesser attention in the media reportage. Even the classic 'blame-game' has found its way into this controversial Solyandra’s bust.
Criticising China's role in the failure of the US solar companies may come as a natural defence mechanism, but then China can't be completely held responsible for the cause of Solyandra and other companies collapse. According to the United Nation’s Environmental Program's report on Global Trends in Renewable Energy Investment 2011, Renewables investment in China continued to benefit from the $46 billion 'green stimulus' package announced at the height of the financial crisis. By the end of 2010, some 70% of the funds had been spent, although data about the details are sketchy. China’s solar manufacturers benefitted from a series of huge government debt financing deals. Loan guarantees worth $32.5 billion were extended to 10 manufacturers including LDK Solar, Yingli Green Energy and Suntech Power Holdings, creating an intimidating backdrop for foreign competitors (See Table 1). Given such state of financial and market situation, it is imperative that the least competitive companies will disintegrate. The fact that manufacturing and assembly costs associated with a Solyandra module weren’t particularly scalable added to the weak global demand and drove the wave of industry consolidation.
With the downturn of Solyandra and many other solar companies, it would still be incorrect to state that the solar industry is less lucrative as a business option or more risky. Solar industry is a booming industry in the light of raging climate change awareness and fossil fuel price volatility. With the advancement in technology, effective policies and government incentives, a cut-throat competition is indispensable. Still ambitious and determined to lead in the global clean energy race, US should put aside the Solyandra case and move ahead with their renewable energy development plans.
Although, Solyandra's collapse might have paved way for pessimism in the solar industry, but the assurance from Department of Energy for continuing their loan guarantees in the renewable energy ventures should be able to console the lenders and investors to some extent. Still, lenders need to prepare for a more complicated restructuring like Inter-creditor disputes, government and political intransigence and potential tax subsidies, if ever that happens. For perspective, US government needs to adhere to strict oversight in the loan program, if it wants to keep up its place in the global renewables run. Instead of blaming China for the bankruptcy of solar companies in US, it needs to be recognized that going toe-to-toe with China on direct subsidies may be futile. As an alternative, focus should be laid on efforts to bolster innovation in technology.
Other countries that have huge investments in the solar industry might have felt the initial intimidation from the solar company collapse but for India there is hardly any need for a knee-jerk reaction. Primarily, India’s objectives for the solar mission are mainly socio-economic and electricity oriented as compared to manufacturing. Moreover, it is on the receiving end of the Solar PV modules or CSP, thus, providing additional market for both US and China. Nevertheless, disseminating the lesson learnt from this dramatic episode of US solar company collapse, India should implement effective monitoring and evaluation of the loans granted for maintaining its target of Jawaharlal Nehru National Solar Mission (JNNSM).
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