What do you see when you turn around a toy in a toy store? Now, how far away will this "Made in China" dominance be in the solar industry?

By: Edwin Koot; Director of SolarPlaza.com

19 December 2006

What do you see when you turn around a toy in a toy store? Now, how far away will this "Made in China" dominance be in the solar industry? The recent second PV business tour China, organized by SolarPlaza.com, showed that this mark will appear more and more on products in the global solar energy market. The international trade mission visited 5 manufacturers and heard presentations from some 10 other new or 'long-term' existing producers. Their ambitions are all very clear, and mostly not less than to double capacity and production within one or a few years. The conclusion: the Chinese PV industry is growing at tremendous speed. With a small domestic market, not surprisingly, the export strategies of Chinese players are focused on Germany, Spain and Italy as favorite countries.
Another conclusion is that the Chinese manufacturers are convinced the silicon shortage problem will be solved within 2 years, resulting in a serious price decrease for solar modules.

China is already a major solar manufacturer
Although project developers are sometimes still a little anxious to buy Chinese modules, the reality is that the largest manufacturers in the world all have their stakes or supply agreements with Chinese producers. There is a good chance that the major part of the modules currently sold in Spain are already made in China, either under their own brand or as OEM manufactured. Nowadays a trend is visible that these Chinese modules are sold more often under their own name. Marketing has become an integral part of the Chinese solar business, with western-oriented people, speaking fluent English, onboard. Chinese companies completely unknown a year ago, are nowadays commonly-heard names in the German and Spanish market. But not only the sales opportunity makes the Chinese manufacturers oriented towards Western countries.

The Australian link
There is an interesting link between the sunny Australian continent and China. Like the CEO of Suntech Power, Dr. Shi, the CEO of CEEG Nanjing PV-Tech, Dr. Zhao has roots in the Australian University of New South Wales. Both have considerable experience in solar cell research and hold cell efficiency records. Suntech can already be considered as one of the major solar cell and module manufacturers in the world. CEEG PV-Tech is aiming to become one of the world's leading pure cell manufacturers. Production started in 2005 and the capacity will reach 200 MW in 2006. The goal for 2008 is 600 MW capacity or even more. With its track record, CEEG PV-Tech sees its R&D experience and knowledge as its main competitive advantage. A visit to the companies and their production sites is convincing that the capacity ambitions not only look impressive on paper. These companies are examples of how fast the Chinese industry can grow.

Trina Solar
Visit the manufacturing site of Trina Solar in Changzhou and you will see building activities are going on continuously. You will sense that this company is growing at high speed.
A privately-owned company, Trina Solar is very internationally oriented and has Good Energies as one of their shareholders. Among the management are experienced USA and Spanish seniors. Given the track record of investor Good Energies, it is no wonder that Trina Solar has listed for an IPO in New York last week. This investment company was very successfully involved in IPO's of Q-Cells and REC previously. Trina Solar is expanding activities in solar silicon, wafer, cell and module production to become another example of a vertically-integrated manufacturer. They expect the new cell production lines to be ready early next year. The overall capacity should reach 300 MW by 2009.

Competitive advantages
Most Chinese cell producers have imported and installed production lines from well-established equipment manufacturers in Western countries like Germany and Italy. By using Chinese equipment, some cell manufacturers see this as a strategy to achieve further serious cost price reduction. Furthermore, like all the others, cell and module manufacturer Shanghai Topsola does have a close relationship with a University for further cell research activities. To achieve competitiveness, most Chinese manufacturers are aiming at vertically-integrated production. Some are still looking for an appropriate (Western) partner, others like Shanghai Chaori, have already started a joint venture for their own silicon production. This company started with 1 MW module capacity in 2003 and is now heading for 225 MW in 2010. The company is involved in one of the largest new PV project initiatives in Spain.

More impressive figures
Overall, in 2005 the solar cell production of 12 manufacturers in China was around 150 MW. In 2006 the production capacity may reach 1,450 MW with more than 30 Chinese manufacturers. The figures for solar modules are of a similar magnitude. The production in 2005 was 284 MW at a capacity of 857 MW. This capacity will almost double to 1,500 MW in 2006. The number of manufacturers is not known. It could well be over 50, but will already be more at the time of writing this line …;-)
In their presentations to the international participants in the SolarPlaza trade mission, some major existing and new manufacturers stated their strong belief that the current market stage is only the beginning of a new era. China's largest glass manufacturer presented their entrance in the solar industry with an ambition of 450 MW capacity, from silicon to modules, to be achieved in 2010. Other cell and module manufacturers presented impressive growth figures of more than 100% per year as well. And more than one is said to have plans for an IPO. Now cynics of course can say these production capacities have yet to be proved and fully used. But, if half of this capacity is actually being used (and why otherwise build this capacity?), the production output is enormous. And, as experienced during the site visits, they are not just saying it but really doing it. It seems the Chinese have adapted the credo of the all American company Nike: "just do it".

Local roadmap for domestic industry and market
Not only the Chinese solar industry itself is confident about a future domestic market. The local government is supporting this with new initiatives to create domestic market growth. One of the speakers during the SolarPlaza trade mission was Prof. Wei Qidong, secretary general of the Energy Research Association of the Jiangsu Province. He explained that the Association has developed a roadmap for PV development. The PV industry revenues in 2006 will reach around 1 billion euro but are likely to be 10 billion within 5 years in this region. The Jiangsu government is working on the first steps of a domestic market development with a 10,000 roofs program. And it has started discussions with energy utilities for a feed-in tariff incentive for PV applications. Prof. Wei Qidong sees a bright future for the PV industry in Jiangsu Province, with R&D plans focused on cell efficiency improvement, concentrator PV systems and thin film technologies.

What happens in the Chinese PV market?
In China about 10 MW were installed in 2004. Surprisingly, this figure decreased in 2005 to around 5 MW. A surprisingly small number for such a large country. The reason is that the application in rural projects depends on government programs. One of these major programs ended in 2005. Now, a new program is being prepared to electrify the 3 million households that still have no access to electricity. Several initiatives are now focused on improvements of quality standards within the solar industry, supported by the World Bank.
Although the Renewable Energy Law was published in January 2006, this has not yet resulted in any concrete PV incentives. According to the Chinese people involved, no concrete steps for a stimulating feed-in tariff are to be expected in the short term. Still, all the Chinese companies visited are confident that in the mid term the government will further stimulate the domestic market. Recently, first steps were made with the announcement of a 100 MW project, to be developed in the poor but sunny northwestern province of Gansu. This sounds hopeful and of course, the potential for PV application in China is incredibly large. So, in the mean time Suntech Power started to brand their company in China. Besides the free publicity following their successful IPO and with Dr. Shi as one of China's richest men, the company has hired billboards in the Shanghai area to promote the company.
It made SolarPlaza conclude that a new visit to China seems necessary within six months in order to keep on track with this rapidly growing solar industry and nation.

About SolarPlaza
www.SolarPlaza.com is the global PV marketplace, offering (free) information and matchmaking services to empower solar businesses. It has successfully organised four PV business tours to Spain and China before. The next business tour will visit Italy and Greece in one week. Other new tours to Korea, USA, China and other countries are being planned. The personal matchmaking service is a (free) tool for companies with a business request. By making use of its 14 years of experience and international network of relations and (+10,000) contacts in the solar industry, SolarPlaza can provide the contacts offering the best business deals.
Furthermore the company recently published the market survey report entitled "The Italian PV Market". In January SolarPlaza will publish a report explaining all details of the Greek feed-in tariff and subsidy system.