Did Overly Optimistic Outlook Lead to Hanergy's Troubles?
Amit Sharma, GlobalData's Analyst covering Power, says:
"The recent troubles affecting Chinese solar Photovoltaic (PV) manufacturer Hanergy are largely the product of an overly optimistic approach regarding its thin-film modules. As a consequence, the firm has recently been subject to a number of volatile events, including a 47 percent drop in its share price within hours on 20 May 2015 and the loss of a $585 million intra-group order on 15 June 2015.
"China's solar PV industry has been severely affected by huge production capacity additions since 2010 and the subsequent overcapacity has had a much bigger impact on the thin-film industry than on the crystalline silicon (c-Si) industry. Thin-film contributes around 10 percent of solar PV installation in China as of 2015 and the technology, in comparison to C-Si, has not achieved its economies of scale. However, Hanergy has been aggressively promoting and increasing its manufacturing capacity for thin-film, based on optimism for the technology, rather than aligning it to upcoming project pipelines. While c-Si manufacturers, such as Yingli Green Energy and Trinity Solar, have the flexibility to outsource production and meet demand when required, thin-film manufacturers lack this ability.
"Despite this, Hanergy's share price downfall is not expected to make a difference to the fast and steadily growing solar PV industry in China and the rest of the world. China's solar industry is set to expand rapidly due to the government's renewable plans and encouraging initiatives. Presently, the country offers a feed-in tariff for both utility-scale and distributed generation installations. The National Energy Administration has increased the solar power installation goal by 20 percent and is aggressively working to increase solar capacity beyond 100 Gigawatts (GW) by 2020, a more than threefold increase from 30 GW in 2014.
"However, recent events raise questions over the future market shares of thin-film and c-Si. The solar PV industry still has no definite road-map to follow, which means the market will be shaped by whatever route its leaders decide to take. As a result, it is perhaps more important for players to have project pipelines, whether in-house or third party, to produce against. Companies must hit customer-required metrics on cost, price, and efficiency, as well as have a business model that makes long-term sense."