A local Chinese government is throwing a dying solar panel producer a $150 million lifeline. Suntech was once the world’s top seller of solar panels, largely because it was able to leverage government support to sell panels cheaper than all of its non-Chinese competitors. It won the race to the bottom, flooding the market with cheap, low quality products.But Suntech couldn’t turn a profit, and relied on the local Wuxi government to stay solvent. Things came to a head back in March, when Suntech defaulted on a $541 million bond payment. The Chinese government indicated it would switch to a tough love policy and cease propping up its solar industry. But as the FT reports, the Wuxi government relented this week:
Suntech’s latest announcement that Wuxi Guolian – the government’s investment arm – would invest $150m comes days before the deadline for the company to respond to an attempt by bondholders to force it into involuntary bankruptcy in the US. […]Suntech is the poster child for the excesses of the Chinese solar panel industry, whose subsidy-fuelled expansion collapsed into a severe glut after overseas markets dried up.
You can imagine Wuxi’s discomfort: let Suntech get carved up in bankruptcy and lose whatever value was left, or continue to hold the non-competitive firm afloat. It went with the latter option, doubling down on the subsidies that got it into this mess in the first place.Every aspect of the global solar panel production chain is subsidized by one government or another. Keep that in mind the next time you hear a green breathlessly extolling the virtues of cheap solar energy.[Broken solar panel image courtesy of Getty Images]