China’s Spending on Green Energy Is Causing a Global Glut
Kanebridge News
Share Button

China’s Spending on Green Energy Is Causing a Global Glut

The country’s massive funding of renewables has drawn odd newcomers and led to an oversupply of solar components

By Sha Hua
Mon, Nov 13, 2023 4:25pmGrey Clock 4 min

China’s newest solar-energy manufacturers include a dairy farmer and a toy maker.

The new entrants are examples of a green-energy spending binge in China that is fueling the country’s rapid build-out of renewable energy while also creating a glut of solar components that is rippling through the industry and stymying attempts to build such manufacturing elsewhere, particularly in Europe.

Since the start of the year, prices for Chinese polysilicon, the building block of solar panels, are down 50% and panels down 40%, according to data tracker OPIS, which is owned by Dow Jones.

Inside China, some companies fear a green bubble is about to pop.

China’s state-guided economy spent nearly $80 billion on clean-energy manufacturing last year, around 90% of all such investment worldwide, BloombergNEF estimates. The country’s annual spending on green energy overall has increased by more than $180 billion a year since 2019, the International Energy Agency says.

The rush of funding hasattracted an unusual array of companies to the bustling business.

Last summer, Chinese dairy giant Royal Group unveiled plans for three new projects. There was a farm with 10,000 milk cows, a dairy processing plant and a $1.5 billion factory to make solar cells and panels.

“The solar industry is improving over the long term, and the market potential is huge,” Royal Group wrote in a document outlining the project last year. More recently, Royal Group said it wants to create synergies between its core agricultural business and photovoltaics, “and promote solar technology to empower dairy owners to reduce costs and increase efficiency,” the company said in a response to The Wall Street Journal.

The milk manufacturer wasn’t alone in jumping on China’s solar bandwagon in the past two years. Other newbies include a jewelry chain, a producer of pollution-control equipment and a pharmaceutical company.

The newcomers are helping an ambitious wind and solar push in China—this year alone the country is set to install roughly as much solar as the U.S. has in total, Rystad Energy estimates.

Meanwhile, Chinese exports of everything from batteries and electric vehicles to solar panels and wind turbines have surged, raising hackles in places such as Europe and the U.S., which are trying to grow their own domestic clean-energy manufacturing.

In solar, the investment is an important reason for the huge oversupply of components, and falling prices that are pummeling profits at manufacturers around the world. Many established Chinese solar companies are warning that the fallout could be grim, with losses or bankruptcies looming.

“The entire industry is about to enter a knockout round,” said Longi Green Energy Technology, one of China’s biggest solar-manufacturing companies, in its half-year financial report in August.

At least 13 companies, including Chinese industry leaders such as Jinko Solar, Trina Solar and Canadian Solar, have put capacity expansion plans on hold, according to TrendForce, a Taiwan-based market intelligence firm.

Many Chinese manufacturers have been trying to unload inventory at bargain prices in Europe, one of the few big solar markets without tariffs or other barriers to panel imports. While European solar developers are delighted, the region’s already hard-pressed manufacturers are crying foul.

Some European producers were already struggling with homegrown challenges such as slow permitting, a lack of skilled labor and high energy costs, making it difficult to compete with Chinese counterparts.

The oversupply was exacerbated by barriers to imports in India and the U.S., which threw off Chinese manufacturers’ forecasts and left their panels languishing in ports and warehouses. The U.S. proved particularly unpredictable with the threatened imposition of antidumping duties and the implementation of the Uyghur Forced Labor Prevention Act, which ended up preventing panels made with Chinese polysilicon from entering the country.

The Chinese solar-manufacturing industry has gone through booms and busts before and had its share of odd new entrants. Tongwei Solar began as a fish-feed supplier that acquired a solar-panel maker during the downturn of 2013 to complement its aquaculture business with solar parks. Tongwei is now the largest polysilicon maker in the world.

This time, more than 70 listed companies—ranging from fashion, chemicals and real estate to electrical appliances—have entered the solar sector in 2022, according to data intelligence company InfoLink.

In February, Zhejiang Ming Jewelry, which runs 1,000 gold jewelry stores in China, announced plans to invest $1.5 billion to build a solar-cell factory. Last August, toy maker Mubang High-Tech announced a joint venture with the local government for a $660 million solar-cell production base.

Supply-chain disruptions from the pandemic squeezed inventories and pushed up prices in previous years. European solar buyers ordered large amounts of panels as they became available, while many Chinese manufacturers overestimated demand, said Matthias Taft, chief executive of BayWa r.e., Europe’s biggest solar distributor.

“We and others ordered massively” during the second half of 2022, he said.

The recent drop in solar prices meant Chinese panels are selling for around half of manufacturing cost for members of Europe’s solar-manufacturing industry association, said Johan Lindahl, the group’s secretary-general. Around 40% of the panels manufactured this year by members who responded to the association’s survey were languishing in inventory.

One Norwegian producer of solar wafers, a key panel component, went bankrupt in August. Its sole remaining European rival, NorSun, stopped production in recent weeks because its customers—mostly European solar cell and panel manufacturers—weren’t able to sell their products, said Carsten Rohr, NorSun’s chief commercial officer.

At this rate, Europe’s dependence on Chinese solar is increasing rather than decreasing, said Gunter Erfurt, chief executive of Swiss solar cell and panel manufacturer Meyer Burger. The company has opted to postpone its planned European expansion and instead ship the manufacturing equipment to a new factory in the U.S., which has offered big government subsidies to solar manufacturers.

Market watchers say the oversupply may work itself out faster than expected, because some companies are likely to cancel or postpone expansion plans and others are retiring old factories in favor of new ones.

Still, some Chinese industry executives such as Liu Yiyang, deputy secretary-general of the China Photovoltaic Association, are calling for local governments to tap the brakes on green-tech investment.

In January, the Shenzhen Stock Exchange issued a letter of concern to Suzhou Shijing Technology, known for its pollution-control equipment. The exchange asked Shijing from where it was drawing its investment capital of $1.5 billion to build a solar-cell factory. The company’s total assets are valued at only $450 million.

In its reply, Shijing said 60% of the investment would be provided by the local government, including building the factory infrastructure and dormitories as well as granting equipment and electricity subsidies.

When asked about the progress of the solar project, Shijing referred to its public statements. In the latest quarterly report in October, the company noted it was proceeding in an orderly manner.



MOST POPULAR

Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts

Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Related Stories
Lifestyle
Car Dealers on Why Some Customers Hesitate With EVs
By SEAN MCLAIN 11/12/2023
Lifestyle
Going warm and fuzzy for the 2024 Pantone Colour of the Year
By KANEBRIDGE NEWS 08/12/2023
Lifestyle
3 Reasons You Should Buy a Stick Vacuum—And 3 Reasons They Suck
By KATE MORGAN 08/12/2023
Car Dealers on Why Some Customers Hesitate With EVs

Concern about electric vehicles’ appeal is mounting as some customers show a reluctance to switch

By SEAN MCLAIN
Mon, Dec 11, 2023 4 min

Auto dealers across many parts of the country say electric vehicles are becoming too hard a sell for buyers worried about the range, reliability and price of these models.

When Paul LaRochelle heard Ford Motor was coming out with an electric pickup truck, the dealer was excited about the prospects for his business.

“We thought we could build a million of them and sell them,” said LaRochelle, a vice president at Sheehy Auto Stores, which sells vehicles from a dozen brands in Virginia, Maryland and Washington, D.C.

The reality has been less positive. On Sheehy’s car lots, LaRochelle says there is a six- to 12-month supply of EVs, compared with a month of gasoline-powered vehicles.

With automakers set to release a barrage of new electric models in the coming years, concerns are mounting among auto retailers about whether the technology will have broader appeal given that many customers are still reluctant to make the switch.

Battery-powered models have been piling up on car lotsdealers say, as EV sales growth has slowed in the U.S. this year. Car companies have been offering a combination of discounts and lower interest-rate deals in an effort to juice demand. But it hasn’t been enough, because buyer reticence extends beyond the price tag, dealers say.

“I’m not hearing the consumer confidence in the technology,” said Mary Rice, dealer principal at Toyota of Greensboro in North Carolina. “People aren’t beating down the door to buy these things, and they all have a different excuse why they aren’t buying one.”

Customers cite concerns about vehicles burning through a battery charge faster in cold weather or not being able to travel as far as they expected on a single charge, dealers say. Potential buyers also worry that chargers aren’t as readily accessible as gas stations or might be broken.

Franchise dealerships fear that the push to roll out new models will inundate them with hard-to-sell vehicles. Research firm S&P Global Mobility said there are 56 EV models for sale in the U.S. this year, and the number is expected to nearly double to 100 next year.

“I start to think, you know maybe we should just all pump the brakes a little bit,” Rice said.

A group of dealers expressed their concerns about the government’s role in pushing electric vehicles in a letter last month to President Biden.

A Toyota Motor spokesman said the majority of dealers have become “increasingly more confident in their ability to sell Toyota EV products.”

At Ford, the company’s electric-vehicle sales are rising, including for its F-150 Lightning pickup, but demand isn’t evenly spread across the country, according to a spokesman.

Dealers say that after selling an EV, they sometimes hear complaints about charging and the vehicles not always meeting their advertised range. In some cases, customers seek to return them to the dealer shortly after buying them.

“We have a steady number of clients that have attempted to or flat out returned their car,” said Sheehy’s LaRochelle.

While EVs remain a small but rapidly expanding part of the new-car market, the pace of growth has slowed this year. Electric-vehicle sales increased 48% in the first 11 months, compared with a 69% jump during the same period in 2022, according to Motor Intelligence. Sales remain concentrated in a few states, with California accounting for the largest chunk, S&P Global Mobility data found.

The cooling growth has raised broader questions in the industry about whether car companies face a temporary hurdle or a longer-term demand challenge. Automakers have invested billions of dollars to bring more EV models to the market, and many analysts and car executives say they remain optimistic that sales will continue to expand.

“Although the rate of growth has slowed recently, EV demand is clearly moving in the right direction,” said General Motors Chief Executive Mary Barra on a recent conference call with analysts. A combination of more affordable model options and better charging infrastructure would help encourage more people to buy electric vehicles, she said.

There are also varying views within the dealer community about how quickly buyers will adopt the technology.In hot spots for electric-vehicle demand, such as Los Angeles, dealers say their battery-powered models are some of their top sellers. Those popular EV markets also tend to have more mature public charging networks.

Selling an electric car or truck outside of those demand centres is proving more difficult.

Longtime EV owner Carmella Roehrig thought she was ready to go full-electric and sold her backup gasoline vehicle. But after the 62-year-old North Carolina resident found herself stranded last year in a rural area of South Carolina, she changed her mind. Roehrig’s Tesla Model S got a flat tire, but none of the stores in the area carried tires for a Tesla. She ended up paying a worker at a nearby shop to drive her home.

Roehrig still has her Tesla but bought a pickup truck for long road trips.

Tesla didn’t respond to a request for comment.

“I have these conversations with people who say we’ll all be in EVs in 15 years. I say: ‘I’m not so sure. I’ve tried to do it,’” Roehrig said. “I think you need a gas backup.”

Customers who want to ditch their gas vehicle for environmental reasons are sometimes hesitant, said Mickey Anderson, president of Baxter Auto Group, which owns dealerships in Kansas, Nebraska and Colorado.

“We’re in the Colorado Springs market. If this is your sole mode of transportation, and you’re in a market in extremes of elevation and temperature, the actual range is very limited,” Anderson said. “It makes it extremely impractical.”

Dealers representing around 4,000 stores across the U.S. signed the letter in November addressed to Biden, saying the administration’s proposed auto-emissions regulations designed to promote electric-vehicle sales are unrealistic. The signatories ranged from stores owned by family businesses to publicly held giants such as AutoNation and Lithia Motors.

“Some customers are in the market for electric vehicles, and we are thrilled to sell them. But the majority of customers are simply not ready to make the change,” the letter said.

Some carmakers are pushing back EV-rollout plans. GM said in mid-October that it would delay the opening of an electric pickup plant by a year to late 2025. In response to weaker-than-expected consumer demand, Ford said in late October that it would defer $12 billion of planned spending on electric-vehicle investment.

Since September, dealers on average took more than two months to sell an EV, compared with 40 days for all vehicles, according to car-shopping website Edmunds.

While discounts have helped boost sales of some electric vehicles, they also have led to repercussions for some current owners because it reduces the value of their vehicles, dealers say.

“Most people don’t have the confidence to buy an EV and know what it will be worth in 10-15 years,” said Rice from the Toyota dealership.

It may take some time for the industry to adjust because it is still in an early stage of switching to electric vehicles, Sheehy’s LaRochelle said.

“We’re asking for this market to grow organically,” he said.

MOST POPULAR

Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts

Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Related Stories
Money
China Tried Using Economic Ties to Bring Taiwan Closer. It Isn’t Working.
By JOYU WANG and Nathaniel Taplin 28/11/2023
Money
Banks Earn Billions Thanks To Higher Interest Rates
By Bronwyn Allen 16/11/2023
Lifestyle
ASX uranium stocks go gangbusters as the world turns to nuclear energy
By Bronwyn Allen 31/10/2023
0
    Your Cart
    Your cart is emptyReturn to Shop