Solar market dims as demand slowsThe nation’s largest solar power production manufacturer, Hyundai Heavy Industries, has shut down one of its three plants as global demand dwindles due to the recession in Europe and massive supply from China pushing down prices.
Hyundai Heavy announced yesterday that it has suspended the operation of its smallest and oldest plant that was completed in 2007. The company had three production plants that were capable of generating 600 megawatts of solar power a year.
“The plant has been shut down since June due to decreasing orders,” Kim Ki-young from the company said. However, Kim added, there is little possibility that the remaining two will be closed as well. “When the solar market was thriving, all three plants operated at 120 percent. In contrast, they are barely managing to run at 50 percent currently,” the official said.
The company also scrapped its plan to build the world’s largest photovoltaic plant in Arizona, in the U.S. last month.
The situation is more severe for smaller domestic solar firms. Two solar cell makers are gone now, and even globally renowned Evergreen Solar and SpectraWatt filed for bankruptcy in the third quarter this year.
The Korean photovoltaic industry has been hit by both the U.S. double-dip recession and the euro zone crisis this year. Global demand for polysilicon, solar cells and modules is on the decrease as European countries are suffering severe financial woes.
At the same time, Chinese solar companies are jumping into the industry with much lower prices, which has led to eroding profitability of the entire industry.
The price of polysilicon, the barometer of the industry, took a nosedive to $34.5 per kilogram as of early November this year. The figure had once hovered above $300 per kg until the first half of 2008, according to Taiwan-based PV Insights.
Korean businesses have been investing in the photovoltaic industry since last year, considering it a promising new growth engine. The government pledged to provide support for business investment starting next year.
However, Korean businesses including conglomerates Hyundai Heavy, Samsung SDI, Hanwha Solar and smaller solar firms are already suffering damage from excess investments and declines in demand.
The photovoltaic business is part of the new renewable energy business that Hyundai considers crucial apart from its main shipbuilding business. Next year, the company plans to establish an integrated production system for polysilicon, solar cells and modules. The shipbuilder aims to generate 2 trillion won ($1.79 billion) worth of sales from the alternative energy sector by 2012. For that year, the company is targeting sales of 700 billion won from its solar energy business. However, that remains to be seen as the photovoltaic industry is forecast to struggle the following year.
According to market researcher Solar & Energy, Korean solar firms on the whole are operating at a mere 20-50 percent capacity currently, and they are seeing a fall in demand. Solar demand mainly comes from Europe, which is plagued with a debt crisis at present. Since 90 percent of demand for the Korean companies derives from European countries like Germany and Italy, the financial crisis is dealing a huge blow to the entire Korean photovoltaic industry. Domestic demand is so small that the solar firms are expected to face more difficulties next year.
In order to boost the new renewable energy industry, the Korean government is set to introduce the Renewable Portfolio Standards (RPS) next year. The system aims to require power-guzzling companies to produce certain amounts of solar or wind energy to generate electricity on their own.
“Although many domestic solar firms want the new system to start soon, that would raise demand by a mere 10 percent,” Jun Woo-suk from Solar & Energy said. “With the solar market outlook not bright, two solar cell firms have gone belly up already.”
However, some say that a long-term perspective is needed for the photovoltaic market.
“We continue building a 10,000 ton polysilicon plant in Yeosu, because the photovoltaic market is forecast to begin thriving from 2015,” Kwon Young-sam from Hanwha SolarOne said. “It had been predicted two years ago that the solar industry would go through difficulties for the next two or three years.”
The financial sector is also positive about the photovoltaic business.
“Solar stocks have already begun a survival game,” Kim Dong-jun, analyst from Shinhan Investment said. “The key is the timing. We know that the photovoltaic market will recover someday, but no one is sure about when that would be exactly. Investors in solar now will have to bear some damage for a while.”
By Song Su-hyun [email@example.com]
More in Industry
Chaebol heads talk shop at closed-door dinner
I've got two words for you: Biodegradable plastic