China moves in on Western solar power industries

China is emerging as the dominant force in the manufacture of solar panels in a world desperate for renewable sources of energy, as collapsing prices and disillusion over government subsidies has hobbled US efforts to take a lead in the development of the new industry.

Prices of solar panels have fallen by more than 40 per cent in the past year, as a result of increased manufacturing capacity and disappointing demand, and the US was reeling yesterday from news that taxpayers may have lost more than half-a-billion dollars on one solar energy firm that shut its doors this week.

Solyndra, whose plant was visited and praised by President Barack Obama last year, said it would file for bankruptcy protection in the next few days, making it the third US solar firm to go under in the past month. Solyndra had been the beneficiary of a Department of Energy loan guarantee programme funded by the Obama administration's economic stimulus in 2009, and loans from the Treasury department. In all, $527m (£326m) in taxpayer funding had been advanced to the company, along with about $1bn in private sector investment. More than 1,100 employees were told this week that they would be losing their jobs.

"This was an unexpected outcome and is most unfortunate," Solyndra's chief executive Brian Harrison said. "Regulatory and policy uncertainties" made it impossible to raise capital to quickly rescue the operation."

Also last month, Evergreen Solar, a Massachusetts firm which had once been a stock market darling, and SpectraWatt, a private firm spun out of Intel, said they were filing for Chapter 11 bankruptcy protection.

Congressman Henry Waxman of the House Committee on Energy and Commerce said the bankruptcies "are unfortunate warnings that the United States is in danger of losing its leadership position in the clean energy economy of the future. We should be doing everything possible to ensure the US does not cede the renewable energy market to China and other countries."

China manufactured about 40 per cent of the solar panels produced in the world last year, from a standing start five years earlier, and the largest single producer is a Chinese firm called Suntech Power Holdings.

Some in the US solar industry have criticised the Chinese for heavily subsidising their own firms, via grants of land for manufacturing plants and cheap loans. The United Steelworkers union filed a lawsuit last year asking the federal government to investigate China's clean energy subsidies and other policies and to pursue the matter through the World Trade Organisation.

But the shake-out in the US also reflects the collapsing prices for solar panels which has resulted from new production capacity in China, Malaysia and the Philippines, and from disappointing demand in Continental Europe, whose governments are most enthusiastically pushing solar power. Uncertainty over regulation of prices in Italy led to a sudden drop-off of demand there, and adoption was also slower than expected in Germany this year.

Shayle Kann, the managing director of GTM Research, said the US still has significant solar panel manufacturing players, such as First Solar, which is building a new plant in Arizona, but faces structural challenges that will inevitably lead to its losing market share to China, regardless of subsidies.

"There are significant low-cost and no-cost loans being granted to some manufacturers from the central government in China, but that is not true of all of them. It is one advantage among many," Mr Kann said. "Take away that government support and you would still have a similar trend, if not the magnitude. China has low labour costs, low utility costs, and a supply chain with the same benefits. In other words, the same benefits that low-cost manufacturing countries have anywhere."

Republican lawmakers criticised the Department of Energy programme of subsidies for solar companies and for the practice of the federal government trying to pick winners in new industries. The Obama administration defended the programme, which has disbursed $18bn in loans or loan guarantees, and its record to date.