Solar Power Industry in China

In 2007 Shandong Province established a 2.133 billion Yuan fund to support energy conservation and reduction of emissions. From that fund the provincial government will allocate funds to subsidize hotels, schools and other establishments to build solar hot water supply systems. Shandong Province now has more than 100 companies that are involved with renewable energy and those companies produce more than 3 billion Yuan/annum in revenue. To date a total of 15 million square meters of buildings have a solar hot water heating system.

In remarks made on September 18, 2007 at the “2007 World Solar Energy Conference”, Shi Dinghuan, the Chairman of the China Renewable Energy Institute and a member of the Counselor’s Office of the State Council, said that after 2020 China will experience scale development of solar power. Nearly 1000 individuals from more than sixty countries attended the conference. In his remarks Mr. Shi called on greater cooperation between developed countries and developing countries, especially in the realm of technology transfer of key renewable energy technologies.

Construction began on August 18, 2007 on a 12 billion Yuan, 15,000 MT solar energy grade silicon project in Xinyu city, Jiangxi Province. The first phase of the project, which will total 6000 MT of polycrystalline silicon materials, is expected to be completed and in operation by the end of 2008; the entire project will be open by 2009. The project is being developed by Jiangxi Saiwei LDK Solar Energy High Technology Co., Ltd., which went public on the NYSE on June 1, 2007, raising $469 million U.S.D.

According to Shi Dinghuan, the chairman of the board of the China Renewable Energy Society, solar hot water appliances already cover 90 million square meters of buildings in China and serve 40 million households and 200 million people. China is now the world’s largest producer and user of solar hot water appliances.

On August 8, 2007 the 200 million Yuan, 25MW solar cells project of the Tri-crystalline Silicon Products Manufacturing Co., Ltd. formally set up in Quanzhou, Fujian Province. The project will be manufacturing mono-crystalline solar cells by 2008.

In early August 2007 a group of Chinese solar module manufacturers were having preliminary discussions regarding forming a national photovoltaic industry alliance. The motivation for the discussions included the desire to contain what was referred to as “disorderly, pernicious competition” among companies in the solar energy module industry. The background to these discussions is the rapid growth of the domestic solar industry in China over the past 1-2 years, fueled by a great deal of capital which perceived a new market opportunity. Being near the tail end of the solar industry production chain, the solar module industry doesn’t have a great deal of technology that it contributes, which means that there are fewer barriers to entry than in the solar cells or silicon industries. According to one industry insider by the end of 2006 there were approximately 200 solar module manufacturers in China and because there is a lot of capital that is available and which likes this sector, there will be another increase in the number of solar module manufacturers in China in 2007. Solar module manufacturers are competing to increase the scale of their operations to reduce costs; in this manner they see the way to overcome the price competition which has ensued as a consequence of so many new entrants into the industry. One example is the Wuxi (Jiangsu Province) Guofei Green Energy Co., Ltd. which had 10MW of capacity in 2006, which will increase to 30MW in 2007 and further increase to 40-50MW in 2008; the company is increasing capacity despite the fact that it sold only 6MW of solar modules in 2006. The price of modules has declined over the past two years. In 2005 the price was $35 U.S.D. to $38 U.S.D. per watt; as of the beginning of 2007 the price had dropped to $32 U.S.D. per watt and it is expected that the price will drop again by the end of 2007 to $30 U.S.D. per watt. Consequently, gross profits at most profitable solar module manufacturers are only 10%. The solar cell manufacturers, which are the upstream suppliers of the solar module industry, are also experiencing an increase in production capacity and fairly robust competition. The suppliers of the solar cell manufacturers, which are the polycrystalline silicon manufacturers, are not reducing prices as the supply of silicon is insufficient at present to address the current demand; the U.S. and Japan are the principal suppliers of polycrystalline silicon. One such example of a solar cell manufacturer is the China Power (Nanjing) Photovoltaic Co., Ltd., which went public on NASDAQ in May 2007. Beginning in August 2004 when the company started-up it had five production lines producing solar cells. By the end of 2006 the company had 6 production lines producing a total of 192MW of solar cells; by the end of 2008 the company expects to have expanded further to a total of 12 production lines and be producing 390MW of solar cells. Industry experts believe that the solar module manufacturers will have their toughest time in 2008. By 2009 the price of polycrystalline silicon will have moderated somewhat and by 2010 as China’s output of polycrystalline silicon grows the price will decrease further. By 2010 China’s domestic polycrystalline silicon output capacity will reach 60,000 to 100,000 tpy and international suppliers will provide another 100,000 tpy; in 2010 the demand for polycrystalline silicon will be only 100,000 tpy.

GT Solar Incorporated of Merrimack, New Hampshire entered into a $171 million U.S.D. supply agreement with Glory Silicon Energy Co., Ltd. of Zhenjiang, Jiangsu Province to sell its DSS450 furnaces for the production of multi-crystalline silicon ingots. This order will equip what will be one of the world’s largest silicon wafer factories, having approximately 1500MW per annum of capacity.

More than 90% of regions in China enjoy as much as 4500 mega-joules per square meter of irradiation from the sun. More than 2/3rd of China’s regions have in excess of 2200 hours/year of the sun’s exposure. If only 1% of the sun’s exposure on China were converted into power, all of China’s energy requirements for the year would be satisfied.