This War is Shuffling Solar Energy Stocks

Germany once dominated the global solar industry; European solar manufacturers have seen product prices fall since the Chinese solar panels flooded the market; and now the European Commission, led by Germany’s SolarWorld AG, said Thursday it will investigate whether Chinese makers of solar equipment illegally push their products into Europe.

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If the Commission discovers that Chinese solar companies have been selling panels below market value, it could impose tariffs on the solar equipment China exports to the European Union. That would be bad news for companies such as Yingli Green Energy (NYSE:YGE), Trina Solar (NYSE:TSL), Suntech Power Holdings (NYSE:STP). But U.S. company First Solar (NASDAQ:FSLR) stands to benefit.

However, imposing tariffs may escalate growing trade tensions. Chinese companies deny the accusations, while Ministry of Commerce spokesman Shen Danyang said in a statement on the ministry’s website, “China expresses deep regret” about the Commission’s decision to investigate.

To reach an informed decision, the Commission will send questionnaires to the Chinese exporters and European producers and importers, and then make a recommendation to EU members.

But many in the industry see the investigation as coming too late to protect the Europe’s solar industry.  Already, many European solar manufacturers have gone out of business and Europe has ceded much of its market share to China.

Helmut Vorndran, who runs a private-equity firm, Vorndran Mannheims Capital, invested tens of millions of euros in the German manufacturer of photovoltaic solar panels, Sovello, in 2010.  At the time, the market was booming, but now, a couple of years later, he believes his Sovello investment will result in a big loss.  Sovello filed for insolvency in May and ceased production in August.

“I think the chances of survival of western solar manufacturers are slim to none,” said Vordran to the Wall Street Journal.

The market has contracted sharply; from January to June of this year, the average selling price of solar panel fell by 40 percent, according to Director of the Berlin-based Center for Solar Research Wolfgang Hummel.  EU ProSun, a joint initiative of EU solar businesses, say panel prices dropped by 75 percent from 2008 to 2011.  In contrast, Chinese companies claim China exported $35.8 billion worth of solar panels in 2011, with the EU receiving more than 60 percent.

Germany itself still has over one million solar facilities, built with the help of generous government subsidies, but now the government is proposing to stop subsidies for solar, which it says have become too costly.

“We are fighting for fair competition. Chinese manufacturers are breaking the rules,” said the chief executive of Germany’s SolarWorld Frank Asbeck, in a letter to shareholders in July. “Something must be done to fight their illegal dumping.”

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