A few years ago, the promise of global renewable energy turned many of us, myself included, into Green advocates.
Companies and governments made strong arguments for outfitting urban rooftops and rural fields with solar panels and plopping down wind turbines along hilltops. It was easy to see, too, the environmental evils in coal burning and atom splitting, the latter brought into sharper focus after last year's earthquake and tsunami triggered a nuclear power plant meltdown in Japan.
But, how quickly things change in the face of economic crisis, pullbacks in government subsidies, and stepped up competition from manufacturers in lower-cost regions. In the end, it's all business, and now the greenest promises are running red with losses.
Last week, bad news from Germany sparked a lot of Internet chatter about the health and future of Europe's green energy industry. Particularly, the insolvency filing of Q-Cells SE, once the world’s largest producer of solar panel photovoltaic cells, showed the fragility of the market -- Q-Cells is the fourth major solar-power company bankruptcy in a handful of months to collapse. As a report in Germany's Der Spiegel indicates, Q-Cells' demise "underscores the degree to which German solar firms are being outpaced by competition from Asia -- despite billions in German government subsidies granted each year to the industry," and its inability to effectively wean itself away from government reliance.
It's not just an isolated incident hitting only a few companies in one country. A Global Post story gives a pretty good rundown of all sorts of problems needling the industry, including these:
France’s market leader, Evasol, was reported close to bankruptcy last week, barely a month since the state power company stepped in to rescue Photowatt, another prominent manufacturer of the photovoltaic cells... Denmark’s Vestas, the world’s largest manufacturer of wind turbines, made a loss last year for the first time since 2005. Its market share has dropped from 28 percent in 2007 to just 12.9 percent last year. Four of the top 10 turbine producers are now Chinese, including second place Goldwind.
So was the greenwashing we came to love, and wave emotional (if not political) flags for, all for naught? I don't think so.
Renewable energy is still a good option. It's the economics behind it -- or at least the business models -- that appear not to work well, at least at this point in time. Converting existing utility infrastructure to modern, sustainable systems costs a lot of money. Since governments and countries have to pitch in to offset the cost of massive capex projects, it's no surprise that innovation and projects of this scale get postponed or axed when local authorities are slashing budgets and trying to get spending under control. The companies themselves should also be faulted; the times of honey and manna in the form of government subsidies were never going to be sustainable forever, and many of them seemed to lose sight of international competitors gaining ground in a maturing market.
The question, now, is whether the industry is resilient enough to withstand the market dip and create lean and efficiently operating and supply chain practices to make it worthwhile for everyone down the road?
@Barbara, yes, those rebates are not as great as they sound. We got even less of a credit for a the energy efficient windows we put in our living room a few years back. When I was getting estimates for replacing our central air conditioning, I was told that the systems that qualify for the rebate cost more than $1500 more. Also the energy savings I was told I would see wouldn't recoup the extra cost for a couple of decades. We opted for units instead and saw our energy bills go down substantially in the summer.
Yes. The issue is that there are many ways to get things done in this world. If the powers that be truly wish to put a lid on the solar innovations, they will. In that case, it will take more pressure and puchback by the masses to get it done. So if WE want things done, WE have to motivate ourselves to get on the path to making small actionable steps towards that goal.
I think in terms of public acceptance, people have short memories. If gas were approaching $5/gallon in the US again, there would be a push toward solar, both for subsidies and tax breaks. Although gas keeps inching up, it's nowhere near the levels that prompted outrage about a year ago.
And I found out the hard way that energy-related tax breaks aren't all they are cracked up to be. We replaced our windows last year and the "up to $1,500 tax credit" turned out to be closer to $200. We'd have to have a lot more windows to come close to qualifying for the credit. as it was, replacement windows gave us a bad case of sticker shock.
Jennifer, you are probably correct, but those who get used to being helped often forget that the assistance will end some day. At least that is the way it works among most, both people and animals. Of course they should have set up a somewhat different business arrangement, but that would have reduced the short term profits, which are usually all that investors can see. So while good and prudent judgement would have dictated doing as you suggest, the current problems indicate that things were done in a different manner. Which is unfortunate.
William K - Good points, but even still all companies--and all their shareholders--knew that government subsidies wouldn't be available indefinitely. There must have been operational practices that could hav been evaluated and implemented that could have helped keep some of these companies afloat for a longer period of time. Or maybe, we have just reached the point of attrition in a mature market...
Don't praise the Chinese wind turbime makers to loudly just yet, because there may be a few quality issues in the future. This assertion is based on the observation of the quality of products from China in the past few years. We don't see commercial aircraft engines manufactured in China, and for a good reason, despite the fact that they would probably be much cheaper.
The problems with being in the renewable power business is that when governmental monitory support dries up the cost to buyers climbs up. That assertion has been made many times by people far closer to the business than I am. Once a product becomes less competitive due to price (cost) increases the sales will usually drop, and many companies have been so very committed to a high production rate that they are unable to adjust and handle the very abrupt drop in sales.
That is sort of understandable because what CEO would be willing to tell the board of directors that they saw a drop in sales or market share, and needed to take steps to prepare for it. They would be out the door. All that the board wants is "sunshine" that they can wave at investors. That is how large business works. It really is not able to work any other way in the present business climate.
@Bolaji Your friend is right, but I wouldn't say 100%. You still need an effective marketing campaign. There are good ideas that just never make it because people don't get to know about them.
"If you can't scale down the cost enough to reach smaller businesses and individuals, it's hard to keep finding new customers."
@Jennifer: I agree. I think without a government subsidy to solar power companies to help them in reducing the costs, they may not be able to compete with mainstream power companies and would not be able to grow and sustain.
Cryptoman - I agree on some of your points. Governments - especially the US - fund all sort of things many taxpayers either don't support or don't care enough to voice an opinion about. Also besides that, let's not underestimate the power of special interest lobby groups, particularly those backed by fossil fuel and oil suppliers.
TaimoorZ - Not sure exactly what's caused these companies to go under. But the high cost certainly is a factor. But I would venture a guess that it has to be tough to sell beyond governments and utilties that would be the only ones who could afford to invest in any large-scale cap-ex projects. If you can't scale down the cost enough to reach smaller businesses and individuals, it's hard to keep finding new customers.
Natural disasters wreak havoc to the tune of $100 billion in annual damages, says a UN report. To cope, companies need improved risk management strategies.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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