By Julian Wong Jan.21.2009
In: policy, solar, uncategorized
3 comments

Solar at a Crossroads

Solar is been making the news in China for a mixed bag of reasons.

[Pictured right:  a solar installation on a German football stadium using panels by Yingli Green Energy, a Chinese solar company based in Baoding in Henan province]

The Chinese Academy of Sciences (CAS) announced their Action Plan for Solar to ramp up research, development and deployment of solar photovoltaics (PV) in China.  People’s Daily vaguely describes the Plan’s has three scheduled milestones:

  • distributed utilization of solar energy by 2015,
  • substitution utilization by 2025 and extensive utilization by 2035, and
  • aiming to make solar energy one of China’s important energy sources around 2050.

There are no further explanation of what these milestones mean in the article or in the official CAS announcement (Chinese only).  Nor has GLF been able to get its hands on the Action Plan document itself.  But the People’s Daily article goes on to say that:

CAS will strive to make breakthroughs in the areas of theory, methodology, materials and techniques. At the same time, through the integration of production, study and research, the plan will promote the research and development of core techniques, application models and transfer transformations, and eventually the formation of a scientific and innovative value chain for the utilization of solar energy from basic research and application to marketing.

All these will be done in an effort to turn solar energy into a new source of energy that can soon be utilized on a large scale.

Also grabbing the headlines recently, as we covered in our previous “Green Hops” are two mega-scale projects: a 166 MW plant in Kunmin Shilin of Yunnan province, and a gargantuan 1,000 MW farm in the Qaidam Basin in Qinghai province.  Whether you think solar PV energy is better deployed on a large-scale centralized basis, as is being done in Yunnan and the Qaidam Basin, or as a distributed resource on roof-tops spread throughout an urban environment is a whole debate by itself and something we’ll be covering with a little more depth in a future blog post.  But you get a sense of what Amory Lovins, the energy guru, thinks by clicking here.

So far so good.  What’s the bad news?

Regardless of the merits of “single-large versus many-small,” the timing of these announcements provide a small measure of cathartic relief to a domestic solar manufacturing base that is, simply put, in dire straits.   Here are the hard facts of China’s solar industry–although it has recently emerged as the world’s leading manufacturer of PV panels, it is almost completely export oriented, with 95% of output destined for overseas markets like Germany, Spain, U.S. and Japan.  In her well-received presentation at the Beijing Energy & Environment Roundtable (BEER) on December 10 last month, Julia Wu, a solar industry analyst at New Energy Finance, pointed out that the global financial downturn, coupled with reduced financial incentives for solar energy in certain key markets such as Germany but especially Spain, has dramatically reduced overseas demand and is leading to a stark oversupply situation.  Indeed, it is projected that worldwide revenue from shipment of solar panels will decrease by 20% this year.  Take a look at Julia’s slides for an overview of China’s solar policy, and some food for thought on what lies in store:

View more presentations or upload your own. (tags: china solar)

There are other forces at play.  The price of polysilicon, the crucial raw ingredient for silicon-based PV cells, which account for close to 90% of all PV cells, have come down dramatically in recent months, in part due to the upstream effects of declining overseas demand for PV panels, but also because more and more polysilicon plants are coming online to meet what appeared to be a promising solar boom when these polysilicon plant projects commenced building some two or three years ago.  The combined effect of weakened overseas demand and declining raw material costs GLF at Yingli's production line in Baoding, Dec '08means the price of PV solar panels are set for a significant decline.

As pictured in the right, GLF visited the factories of Yingli Green Energy (NYSE: YGE), one of China’s biggest PV manufacturers based in in Baoding city, Henan province last month.  Yingli representatives told GLF that the selling price of its PV modules would decrease by 15% in Q4’08 compared to US$4.04/watt in Q3, and probably decrease another 15% in 2009.  [Note:  GLF does not have a sorry sense of fashion.  The shower cap" is to prevent stray hairs from contaminating the solar cells, and I swear every other employee was wearing it.]

Similarly, Shi Zhenrong, the CEO of the bellweather Suntech (NYSE: STP) based in Wuxi, Jiangsu province, recently warned that he expects Suntech’s panel prices to be slashed by 20 to 30% in 2009 compared to its Q3 selling prices (h/t Earth2Tech).  And it could get worse:

“The financial crisis has accelerated that situation,” Shi said. The entire sector could halve the cost of solar power before 2012, he added, assuming companies cooperated on cutting prices across the supply chain.

The result is that the PV manufacturing industry is in a world of hurt.  We said in the last “Green Hops“:

On the [PV] manufacturing side, all is not well as the massacre continues, with reports that some 70% of PV makers have been forced out of the market in the face of collapsed overseas demand.  Suntech, the poster-child for China’s PV manufacturing industry, is cutting 10% of its work force and is operating at just 50 to 60% capacity.

The CAS Action Plan is laudable and needed.  This is of course, assuming, that the program is real and supported by proper funding, the details of which GLF could not find.  And of course, such long term R&D does nothing to alleviate the short term world-of-hurt that the solar manufacturer’s are experiencing.  Mega projects like the ones announced in Qinghai and Yunnan create some sort of domestic market, but with tight credit markets, how many more such projects can we expect to see if the government does not step in to create a more favorable policy environment?

With solar panel prices at an all-time low, and which at the looks of it, may decline further, isn’t it a good time to jump start the domestic market and deploy PV panels on a large scale?  This would soak up the panels in oversupply; save jobs in the PV manufacturing space; and create additional jobs in the balance-of-parts (i.e. non-panel components) manufacturing, systems integration (i.e. assembling solar systems from the modules and balance-of-parts, and them installing these systems), and operation and maintenance and monitoring (which might involve high value added spin-offs in the IT sector). And I haven’t even started talking about the environmental and climate virtues of clean solar power!

So the fundamental question now is the one that Ms. Wu highlights in her final slide: “Can [the] financial crisis become a special opportunity for China to start the domestic market?”   The answer, to GLF, is a resounding yes, and GLF still stands by many of the policy prescriptions it laid out back in a GLF post last year entitled “Solar’s Journey to the West.”

Some people may call it nothing more than a bailout to the solar special interests.  GLF calls it “choosing hope over fear, [and] unity of purpose over conflict and discord.”

(Okay, it was really the newly minted U.S. President, Barack Hussein Obama, who said those words in his inauguration speech last night, but the GLF wholly agrees, and really wanted to at least include a SHOUTOUT in this today’s post to President Obama for making history.)

Comments (3)

  1. Soalr Energy Blog Mar.18.2009@8:49 am Reply

    With out a queestion China is going to be the leader in Soalr energy in the short future… you only have to see the roofs there, they ALL have soalr heaters

Trackbacks for this post

  1. The Green Leap Forward 绿跃进 » Solarizing for Security Mar.7.2009@12:00 am Reply

    [...] the general state of China’s solar industry and concludes that despite the tough times (see previous post), a vast market and progressive national renewable energy policies make China the key to a solar [...]

  2. The Green Leap Forward 绿跃进 » Dawn of a New Era: The Gansu Solar Concession and Landmark Solar Roofs Program Mar.27.2009@11:38 am Reply

    [...] on many of the recommendations I put forth in my policy paper.  If solar was at a crossroads two months ago when this blog pondered the question, this policy announcement is definitely the right step forward and should provide a much needed [...]

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