What’s going on with solar power? On the one hand, I read things like this:

• Paul Krugman, Here comes the sun, New York Times, 6 November 2011.

In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, “there’s now frequent talk of a ‘Moore’s law’ in solar energy,” with prices adjusted for inflation falling around 7 percent a year.

This has already led to rapid growth in solar installations, but even more change may be just around the corner. If the downward trend continues–and if anything it seems to be accelerating—we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal.

This would be a big deal! As you may have noticed, attempted political remedies for global warming aren’t working too well yet. Cheap solar power won’t be enough to solve the problem: even if we can build a grid that deals with the intermittency of solar power, the problem is that electric power only accounts for some of the fossil fuel burnt. But it could help.

On the other hand, I read things like this:

• Jackie Chang, Half of China solar firms halt production, says report, Digitimes, 9 December 2011.

About 50% of the firms in China’s solar industry have suspended production, according to the country’s Guangzhou Daily.

The daily cited the solar energy division of CSG Holding as claiming that half of the solar firms have stopped production, 30% have halved their output and 20% are trying to maintain certain levels of production.

Digitimes Research’s findings have indicated that only tier-one solar firms in China had capacity utilization rates over 80% in the first half of 2011 while tier-two and tier-three firms were already facing falling capacity utilization rates.

Guangzhou Daily stated that oversupply and significant price drops are the reasons for the firms to shut down production.

The report also indicated that China firms have been facing increasing production costs following news on September 2011 that one of the large-size solar players had a chemical leak at one of its plants that polluted a nearby river. This means the other solar firms now face increasing costs to prevent such pollution while suffering from sharp price drops and low demand.

And this:

• Yuliya Chernova, Chinese solar industry fueled by unsustainable debt, analysts say, Wall Street Journal, 8 December 2011.

Even now, as the U.S. reevaluates its federal loan and other subsidy programs for renewable energy, some lawmakers invoke the strong support the Chinese government offers to its own renewable energy industry as a call for the U.S. to match up with its own support.

Indeed, easy access to low-interest loans over the past three years helped Chinese solar makers build up capacity, and quickly take over market share from European and U.S. manufacturers. In 2010 alone, the China Development Bank made $35 billion in low-interest credit available to Chinese renewable energy companies, according to Bloomberg New Energy Finance, a figure cited by Energy Secretary Steven Chu in his testimony to the House Energy and Commerce Committee in mid-November.

But, perhaps an unintended consequence of this easy access to capital was that the cheap, plentiful production of solar panels resulted in a cutthroat pricing competition, which, in turn is now starting to suffocate the very same large, leading Chinese manufacturers.

“We remain concerned about debt levels across the solar manufacturing complex given the compression of profit margins,” wrote Think Equity analysts in a recent report. “With increasing net debt and reduced module prices, it is hard to imagine absolute gross margin dollars growing enough to offset existing OpEx and interest payments.”

It’s hard to know who to trust. Of course all three of these news reports could be true! Or none.

Do you know what’s really going on with solar power?