Suntech’s bankruptcy is part of a bursting bubble

Bubbles cause plenty of pain, but they mean buying opportunities when they burst.   

This morning, the AP reports from Beijing that “Suntech, one of the world’s biggest solar panel manufacturers, was forced into bankruptcy court Wednesday, becoming the latest casualty of a painful slump in the global solar industry.”

The problem, according to the AP, was, “Solar panel makers have suffered huge losses over the past year after rapidly growing production capacity outstripped demand and prices plunged.”

And Suntech “has also been hurt by a revelation in July that a business partner faked $680 million in collateral for a loan Suntech had guaranteed.”

This bankruptcy – like Germany’s Q-Cells – is mostly about a bubble bursting. It’s the nature of hot markets, from the U.S. housing market in 2008 to the dot.coms in 2000, right back to the Dutch tulip market in 1637.

The glut in solar panels was brought on by the Chinese government’s efforts to promote the renewable. The industry was powering forward successfully … until it wasn’t.

In the near term, the oversupply and low prices for solar panels are a boon to consumers. Prices on solar panels have dropped by a third in the past year, and buyers are taking advantage.

Before too long, manufacturers will restart. Prices will moderate. And the renewable industry will continue to move forward.

The boom and bust cycle is a natural stage for a growing industry. But it would have been better if Suntech’s partner hadn’t faked the $680 million in collateral.