China: Let the golden solar energy shine in

Global production of solar photovoltaic (PV) cells has been racing ahead by leaps and bounds in recent years.

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As the chinese makers ramp up production, they will be facing market-share pressure both at home and overseas. This could cause the larger makers to cut margins dramatically in the battle for market share.

By Jeff Bairstow

Global production of solar photovoltaic (PV) cells has been racing ahead by leaps and bounds in recent years. According to recent market-research reports by the Worldwatch Institute (Washington, D.C.; www.worldwatch.org) and the Prometheus Institute (Cambridge, MA; www.prometheus.org), China has now passed the United States in the production of traditional PV cells, trailing behind only Germany and Japan. And even that ranking may soon change, say the researchers. Take just one booming example: China’s leading PV manufacturer, Suntech Power (Wuxi, China; www.suntech-power.com), became the world’s fourth largest maker of PV cells in 2006, after a healthy $455 million IPO in 2005. Offered initially at $15 per share, Suntech’s NYSE-listed stock was trading earlier this year at almost $35 per share, giving the company a market value of a whopping $5.5 billion, according to a glowing report in The Wall Street Journal.

And there’s more to come, claims one of the report’s principal authors. “To say that Chinese PV producers plan to expand production rapidly in the year ahead would be an understatement,” says Travis Bradford, president of the Prometheus Institute. “They have raised billions of dollars from international IPOs to build capacity and increase scale with the goal of driving down costs.”

Four Chinese solar energy IPOs are predicted to come to market this summer alone. Among the solar IPOs expected are LDK Solar (Jiangxi, China; www.ldksolar.com) and Yingli Green Energy (Baoding, China). LDK was looking to sell about 17% of the company or some 7.4 million shares priced at about $16 each. The IPO could raise as much as $470 million, a level that would exceed Suntech’s offering. Yingli’s IPO was expected to raise about $350 million with shares priced at around $12.

Business is looking up for the Chinese PV makers as the giant country prepares for the 2008 Beijing Summer Olympics. “Solar energy is the world’s most plentiful energy resource, and the challenge has been tapping it cost-effectively and efficiently,” says Janet Sawin, a senior researcher at the Worldwatch Institute. “We are now seeing two major trends that will accelerate the growth of PV: the development of advanced technologies and the emergence of China as a low-cost producer.”

But the more significant problem for all PV makers is a desperate worldwide shortage of purified polysilicon, long the basic raw material for conventional PV cells. The shortage has led manufacturers to look for novel ways of using polysilicon more efficiently and has accelerated the introduction of new technologies that do not rely on purified silicon and are inherently less expensive to produce.

In the U.S., several companies (including recent startups Miasolé of SantaClara, CA, and Nanosolar of Palo Alto, CA, and let’s not forget the veteran maverick ECD Ovonics of Rochester Hills, MI) are developing PV cells based on amorphous silicon and have been very successful in raising significant amounts of venture capital. The current emphasis among U.S. makers is the scaling up of the mass production of low-cost thin-film PV materials that can be made like rolls of plastic.

The shortage of polysilicon is less acute for Chinese manufacturers such as Suntech and LDK, which are more vertically integrated than their U.S. competition. Not only that, but LDK uses recycled polysilicon, which is much cheaper. But, as the Chinese makers ramp up production, they will be facing market-share pressure both at home and overseas. This could cause the larger makers to cut margins dramatically in the battle for market share, say some observers.

One thing is certain: as the Chinese have become more comfortable in an already thriving domestic market, they will inevitably become the low-cost, high-volume suppliers of choice worldwide for conventional solar cells. The Chinese clearly have the energy to do just that. And, of course, they will be able to buy or lease more advanced technologies from U.S. companies.

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Jeffrey Bairstow
Contributing Editor
In-My-View@comcast.net

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