Tech, Environmental Issues Cast New Clouds Over Solar Firms
As if things weren’t bad enough for Chinese solar firms, two new developments are casting clouds over this already struggling sector, one overseas and one at home. Overseas, foreign media are reporting that new solar cells with record efficiency developed by First Solar (Nasdaq: FSLR), one of the last US players still in business following a recent round of bankruptcies, could significantly undermine Chinese rivals. (English article) The second development has seen a smaller US-listed Chinese firm, JinkoSolar (NYSE: JKS) apologize for leaking toxic waste into the environment at its China plant, and promise to clean up the mess. (English article) Let’s look at the First Solar development first, as it probably has the biggest implications. First Solar has showcased a new technology that can turn more than 15 percent of the sunlight it captures into electricity, a huge increase over current top rates that now stand at around 11 percent. Presuming it can commercialize the technology quickly, this kind of efficiency should give the company a huge edge over its Chinese rivals like Suntech (NYSE: STP), Trina (NYSE: TSL) and Yingli (NYSE: YGE), which may have to further lower their already anemic prices to attract customers with their less efficient products. Of course the Chinese companies are also working hard to develop their own higher efficiency products, but unless they can bring some to market soon we might even see First Solar tie up with one or two Chinese producers if demand for the new high-efficiency cells is strong enough. As to JinkoSolar, this story highlights China’s growing concerns about its environment and crackdowns on companies that carelessly dispose of their wastes. I suspect that the larger solar makers are more responsible in their waste disposal, but wouldn’t be surprised to see unexplained rising costs on some of their balance sheets in the next year or two as they install more equipment to dispose of their toxic wastes in more environmentally friendly ways.
Bottom line: New high efficiency solar cells from a US firm will further pressure already weak prices at Chinese players, whose costs for treating their toxic wastes are also likely to rise.
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