China's Great Green Overbuild Catching Up With It

China’s strategy is in disarray. Though worldwide demand for solar panels and wind turbines has grown rapidly over the last five years, China’s manufacturing capacity has soared even faster, creating enormous oversupply and a ferocious price war.

The result is a looming financial disaster, not only for manufacturers but for state-owned banks that financed factories with approximately $18 billion in low-rate loans and for municipal and provincial governments that provided loan guarantees and sold manufacturers valuable land at deeply discounted prices. _NYT

China's great green overbuild is not so different from a number of other overbuilt industrial sectors in China. Most of the wind and solar products were meant to be sold overseas -- in Europe or North America -- where the great green dysfunction was hitting its peak. But European governments and the US can no longer afford to waste $billions upon $billions buying devices from China that produce types of energy that do not fit with existing power grids. And they certainly cannot afford to spend $trillions on an entirely new electrical infrastructure, with no guarantee that wind and solar will ever be able to provide more than 20% of demand -- even with brownouts and blackouts.

But banks — which were encouraged by Beijing to make the loans — are not eager to acknowledge that the loans are bad and take large write-offs, preferring to lend more money to allow the repayment of previous loans. Many local and provincial governments also are determined to keep their hometown favorites afloat to avoid job losses and to avoid making payments on loan guarantees, he said.

...The Chinese government also wants to see the country’s more than 20 wind turbine manufacturers, many of which are losing money, consolidate to five or six. “Wind does not need so many manufacturers,” said Mr. Li, who in addition to drafting renewable energy policies is the president of the Chinese Renewable Energy Industries Association.

...The modest cutbacks in production barely put a dent in China’s overcapacity problem. GTM Research, a renewable energy consulting firm in Boston, estimates that Chinese companies have the ability to manufacture 50 gigawatts of solar panels this year, while the Chinese domestic market is on track to absorb only 4 to 5 gigawatts. Exports will take another 18 or 19 gigawatts.

The enormously expensive equipment in solar panel factories needs to be run around the clock, seven days a week, to cover costs.

...The average cost of electricity from solar panels in China works out to 19 cents per kilowatt-hour, said Mr. Li. That is three times the cost of coal-fired power. _NYT

The high cost of generating solar electricity is not even half of the problem with trying to use big solar power. Fitting the intermittent low voltage DC power onto a finely balanced high voltage AC power grid, is not only costly, it is dangerous to the integrity of the overall power supply. Not quite as dangerous as big wind if sited in desert areas with few clouds, perhaps, but dangerous enough to create a significant risk.

More: Patrick Chovanec -- What's Going Wrong With China's Solar Energy?

China's entire economy is based upon massive overbuild -- from steel to high rise construction to highways to railways to automobiles etc. Why should the great green overbuild be any different?

Perhaps it isn't, but every failing industry in China risks becoming the one failure that brought down the rest of the great house of cards. Keep a close watch. Things could happen very fast, and if you were not paying attention you are unlikely to understand what just happened.

Solar Power Industry Is a Bust Worldwide

Everyone wants to blame China for the collapse of the global solar industry, but the fact is: big commercial-scale solar is an incredibly stupid, crap-headed idea. More from Peter Glover:

The global solar power industry is in crisis. The industry blames widespread national subsidy cuts and over productivity; China, in particular, being widely vilified on the second count. However, the real cause of the solar industry’s malaise runs deeper, rooted, as it is, in the inescapable fact that, in terms of current technology, commercial scale solar energy remains a non-viable proposition.

Wherever you look the solar power industry is mired in financial problems, all of which lead back to the (life support) of public subsidy, the impact of market-skewing regulations (creating the appearance of commercial viability) and, ultimately, protectionist trade wars (US and Europe v China). In economic good-times, three natural consequences of government-sponsored global industries that can be obfuscated by a network of feed-in tariffs, levies and other ‘green’ taxes to pay for them. But in leaner economic climes, the real cost of ‘free’ energy becomes all too clear.

...China itself is suffering from precisely the same market problems as all its competitors. While Beijing will attempt to stave off decline through government stimulus, it is only a question of time before the loss of European and US markets for cheap Chinese goods, including solar panels, causes an economic downturn there, too.

...China’s over production only came about because Beijing’s economic stimulus for its solar industry led to explosive growth and, ultimately, unfettered over production. Given enormous government subsidies there was literally no incentive to slow production down. In the game of who could sustain massive public subsidy longest, cash-rich China clearly won. But the fact is that the sun looks to be setting on China’s solar industry, too. Beijing has also become aware it cannot go on subsidizing its solar and renewable industries.

...Taken as a whole, government incentive schemes around the world have created a glut of suppliers that the capitalist free market would never have sanctioned. The eclipse of Europe’s solar industry is in truth down to simple economic realities hitting home as commercial scale solar power is simply too expensive a proposition to attract serious private sector investment and end massive public subsidies.

In January, Spain’s economic crisis forced it to cut its renewable subsidy regime entirely. In April, a near-bankrupt Italian government estimated that its subsidy regime left it facing a $60 billion bill to photovoltaic generators over the next 20 years. In The Great British Solar Scam I wrote about how the UK’s bid to cuts its ludicrously generous solar subsidy regime saw it prevented from making subsidy cuts by a European court after the UK solar industry inevitably claimed widespread bankruptcies would result(1).

What marks out both the entire renewable energy sector for economic decline above all else is the fact that it is effectively an expensive government-sponsored enterprise, not a child of the free and democratic marketplace. Consider again the elements colluding to produce the current crisis: the lifeline of public subsidy, energy levies and taxes and market-skewing regulation dove-tailing with incentivized over-capacity, protectionism and, ultimately, trade wars. All marks of an industry kept afloat by ideological fiat and not free market capitalism geared to meeting actual market need. _Peter Glover

All too true.

In fact, Al Fin energy analysts frequently state that even if photovoltaic were 100% efficient and given away free, PV would still not be viable for large scale grid power. Readers who do not understand how that could be very close to the case probably do not understand how the power industry works.

The attempt to match contemporary high voltage AC power grids with intermittent low voltage DC power that requires vast amounts of landscape for minimal amounts of power, could only be a dystopian fantasy dreamed up by the most impractical of persons. Germany's attempts to base its industry on solar power are particularly laughable.

Fortunately for North America, it has other options which have not yet been completely shut off by the incompetent green buffoons within the various governments. It is up to the more knowledgeable to make sure that such a suicidal energy shutdown in N. America never happens.