Solar panel makers in China face huge market hurdles as global sales slump and a price war heats up. The major solar panel manufacturers have accumulated $17.5B US in debt, creating a likely need for rescue funds from the Chinese Government. To make it worse, 25 European panel makers are trying to invoke anti-dumping measures against the Chinese solar industry.

How did the market get so skewed? How did the manufacturers, in China, Europe and the US, get so far in over their wallets?

A look at the true economies clarifies. I was working on a solar panel project last year to place solar arrays in parking lots at an apartment complex for one of our customers. It was about a $10M project that produced about 2MW of power. That was a respectable rate of $4.80/watt.

Without all the government programs, though, the cost for power was extremely high. Using a low 4% cost of money, the kw hr cost came in at $0.22/kwhr. Which is more than 5 times the wholesale cost of electricity. We never built the project.

Can you imagine the government saying, “Hey, we should all switch to X fuel for our cars, don’t worry that it costs $17/gallon, we’re sure the price will drop at some point…and it’s just the right thing to do.”

Be wary when the numbers just don’t make sense. If you want to bet on the next big winner in energy, I think it may be spelled F-R-A-C-K-I-N-G.