Solarworld in Renewable Energy ‘War’ With China, Closing Factory

Solarworld AG, Germany’s largest module maker, plans to close a factory to cut costs and compete against Chinese manufacturers that its chief executive officer says are subsidized by the state.

Solarworld will shutter a California manufacturing plant and some production lines in Germany, the Bonn-based company said yesterday in a statement. The move was needed to increase efficiency and reduce costs as Chinese rivals have helped drive down the price of solar cells by 42 percent this year, CEO Frank Asbeck said.

Competing against Chinese producers that receive financial assistance from the government isn’t “fair,” Asbeck said, such as two loan facilities worth $713 million that GCL-Poly Energy Holdings Ltd. received yesterday from state-run China Development Bank Corp. The GCL-Poly financing and Solarworld’s retrenching plan demonstrate the trends that are pushing Chinese companies to the top of the solar industry.

“It’s not about a free market or good products anymore, it’s about who gets the most political protection,” Asbeck said in an interview. “That’s not even industrial politics anymore. That’s war.”

Loans such as the one GCL received are “direct subsidies” from the Chinese government, Asbeck said. “These guys get money practically for free.”

GCL-Poly, China’s largest polysilicon maker, did not disclose the terms of the loans. The company did not reply to e-mailed questions yesterday. Chinese lenders have offered $34.4 billion to support the country’s solar companies, according to data compiled by Bloomberg New Energy Finance. Polysilicon is the main raw material of solar cells.

Three Failures

Three U.S. solar companies have failed in the past month while Solarworld and its German peers including Q-Cells SE and Solon SE are struggling. Slumping prices and slowing demand are driving a wave of consolidation within the industry as weaker companies fail or get acquired, said Aaron Chew, an analyst at Maxim Group LLC in New York.

“It’s not like this hasn’t been developing for a while,” Chew said. Many companies that manufacture solar products in the U.S. and Europe are finding it difficult to compete on price with China. “Everyone could see the writing on the wall.”

Some Chinese companies are also lagging, Chew said. “Let’s not forget, Suntech isn’t competitive either because their inefficient plant was built in 2008.” Suntech Power Holdings Co. of Jiangsu, China, has lost 42 percent of its value this year.

“I’m all for competition, but it has to be fair,” Asbeck said.

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