The start of another bubble in solar?

The world’s top energy consumer, China, announced that it will up its installed solar power capacity this year to 10 gigawatts (GW) from the original planned 7 GW. China is facing a real problem of having extended billions of dollars in credit and subsidies to its solar panel manufacturing industry and that industry now can’t find buyers for all those panels as solar subsidies in North America and Europe have been disappearing. Not to mention the tariffs in the U.S. and a major pending trade case with the EU. Panel prices fell by 30 percent last year.
So the Chinese government’s move to force Chinese utilities to absorb some of those panels in the Chinese domestic market makes obvious sense. But what’s more of a question is whether the local Chinese market can make enough of a dent to slow the decline of panel prices. Share of Trina Soalr and Yingli Green Energy rose more than 7 percent in morning trading and if you look at the MAC Solar Index, it’s up almost 40 percent since mid-November.
But is this another bubble? In the Reuters article Morningstar analyst Stephen Simko says that “The solar stock run up is not justified at all based on the reality that all these companies still have no means of making money in 2013.”
Moving the Chinese solar target for 2013 to 10 GW is an effective subsidy for the market but it doesn’t really change the global pricing problem, which has created a market where panels are selling close to or below cost. The Chinese government’s move will prop up some of those Chinese solar manufacturers and may hold off a few bankruptcies but with North America and European solar markets constrained, I’m expecting more rough waters for Chinese manufacturers.