Solar Cos. Bitten Twice By Economic Crisis

It's all about credit.

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Interesting tidbit from Jefferies & Co.'s '09 cleantech outlook. Solar companies are getting squeezed by both the credit crunch in Europe and the stimulus in the Chinese economy (home to a big chunk of low-cost solar panel makers). From the report (bold is mine):

We see the fundamentals for solar as still somewhat unstable. We believe module oversupply is being exacerbated by liberal lending practices among Chinese banks which continue to support many public cell and module plays with ever larger amounts of short-term debt, leading to a disincentive to rationalize industry capacity. Conversely, in Europe, the financial institutions historically responsible for the bulk of project lending in the renewables space remain focused on fixing their own balance sheets and unable to fund significant amounts for traditional project lending time frames, apart from key projects in Germany.

Too much product in China thanks to loose lending by government-sponsored banks meets ailing demand in Europe, where banks are still in fearful hibernation. Just goes to show: The recovery in solar, as in the rest of the market, will always and everywhere be a credit-driven phenomenon.

  • Kirk Shinkle

    Kirk Shinkle is a senior editor for U.S. News Money and manages the Best Funds portal. Follow him on Twitter @KirkS or email him at

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