(Bloomberg) – In many ways, the solar power industry has never looked better, as the race to slow global warming drives demand for panels to an all-time high.
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Try telling that to investors in the world’s largest solar equipment manufacturers.
Shares have fallen as falling prices squeeze margins and factory expansions raise fears of overcapacity, while investors are drawn to new sectors like artificial intelligence. The combined market capitalization of the four largest panel producers, all based in China, has fallen more than 40% since August.
“It’s an industry where it should be fantastic, but instead a growing number of companies are increasingly struggling,” said Cosimo Ries, an analyst at consultancy Trivium China.
The fall follows a meteoric rise that saw Longi Green Energy Technology Co., the world’s largest maker of solar equipment, increase its share price more than fivefold between the start of 2020 and the end of 2021.
Panel demand has increased, driven by government climate targets and energy security concerns, while supply chain improvements have accelerated installations. The world is on track to have a total of 5,300 gigawatts of capacity by 2030, about the amount of solar power needed in scenarios in which global net zero goals are met, BloombergNEF said the month. last.
But that hasn’t been enough to keep the momentum of solar companies going. Longi Green is down 53% from end-July 2022. Trina Solar Co. is down 48% over the same period, while JA Solar Technology Co. and Jinko Solar Co. are down at least 22%.
Things started to turn in the second half of last year. New factories have come online to remove a bottleneck in the production of polysilicon, the key material from which panels are made, triggering lower prices throughout the supply chain. Citigroup Inc. recently downgraded Longi to “sell” over concerns that its margins could be squeezed as supply grew faster than demand.
Fund flows are also having an impact, with investors looking to shift some of the money from the clean energy space into areas like artificial intelligence, according to Daiwa Capital Markets analyst Dennis Ip.
Manufacturers are building their capacity to produce solar equipment along the value chain. There are currently enough factories to produce 657 gigawatts of solar modules per year, with an additional 336 gigawatts announced or under construction, according to BNEF data. The total number of installations this year is expected to reach 344 gigawatts.
Longi recently sounded the alarm over excess capacity, saying more than half of China’s solar makers could be forced out over the next two to three years if the current aggressive manufacturing capacity expansion continues.
“There’s no way the industry can keep up with this kind of capacity expansion,” Ries of Trivium said. “An event that we might not be able to predict could turn everything upside down and trigger a new wave of consolidation.”
Not all sunglasses manufacturers are languishing. First Solar Inc., a U.S.-based company that produces far less than its Chinese rivals but stands to benefit from the Biden administration’s Cut Inflation Act, has seen its shares more than double in the past year. the last year.
But the industry has already seen downtime. Suntech Power Holdings and Yingli Green Energy Holding Co. were the world’s largest panel makers in 2010 and 2012, respectively, according to BNEF. Suntech then filed for bankruptcy while Yingli had to enter into a legal restructuring.
–With help from April Ma.
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