We'll always have South Korea. So goes the constant refrain from PV module manufacturers who've looked in the crystal ball and seen a future of dry markets in the U.S. and Spain. The current thinking is that Congress's failure to renew the solar investment tax credit will significantly dampen demand in the U.S., Spain's inability to make a decision on the direction of their solar policy will cause more than a few solar companies to begin looking elsewhere for new product markets. Even if Spain were to come clean before the September deadline, the government is likely to announce a capacity ceiling of between 500 MW and 1.2 GW, with a €0.10/kWh - €0.15/kWh drop in the country's feed-in tariff - it stands currently at €0.42/kWh. And, really, it's not like anyone's going to diversify into Germany. So what's a solar company to do? South Korea has steadily built its solar industry over the past few years. In 2006, the country was importing 61 percent of its residential solar panels. By July 2007, it had cut that number to 45 percent, while growing its installed capacity from around 3.5 MW of grid-tied in 2005 to slightly more than 100 MW at the end of last year. As if by magic... Actually, as if by a combination of a $0.70/kWh feed-in tariff (that's 0.45 in Travis dollars) and the concentration of metals manufacturers and electronics companies - Hyundai Heavy, DC Chemical, LG, Samsung, etc. Although the country has worked pretty hard to build a domestic supply market, a lot of companies - especially American companies - have looked to South Korea as an enormous growth opportunity. Certainly building out in South Korea would be better than broaching the bureaucracy of the French market or the regulatory 'uncertainty' of the Italian market, or even the slightly strange feta/silicon mix content requirement in Greece. But that window now looks like it's closing, and faster than a lot of producers had expected. South Korea has already reached the 100 MW feed-in tariff ceiling, and that $0.70/kWh rate may have proven a little too rich. The government is now threatening a 30 percent rate cut, instead of the orderly digression it had proposed at the outset. One explanation, again, is the country's desire to grow its domestic industry. Back in college, the South Korean auto industry was the textbook example of import industry substitution in one of my international trade classes - subsidized to the hilt and pushed on the government by steel producers who couldn't compete with the cold rolling Japanese. I'm not saying that's happening here... but maybe it's happening here. Another explanation is that the tariff is running dry, and there's little political will to replenish it. Sound familiar? So let's come down from the guessing and bring some evidence into this situation. Yesterday I was forwarded a press release that I found kind of... stunning. Yingli Green Energy, one of China's largest solar companies and a fairly successful vertically integrated firm, was happy to broadcast the fact that "it has entered into five new sales contracts to supply an aggregate of more than 7 MW of PV modules to five companies in Korea." Right. Back in the market heyday of 2Q 2007, Chinese execs were doing these kinds of deals in their sleep, or with Elon Musk and a bottle of baijo in a Chengdu karaoke parlor. Is Yingli's willingness to do (and announce!) such small deals a sign of leaner times to come? The company's going to produce around 600 MW over the next year, though their 2008 module sales guidance has the company coming in between 255 MW and 265 MW of module shipments - only 100 MW more than they sold in 2007. This isn't a criticism of Yingli, but just some evidence that producers may have already made their bets on a low demand scenario, and that South Korea - the one shining light for 2008 - may not come through after all.