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?