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Xinhua Insight: Fresh air for China's solar industry

English.news.cn   2012-11-02 20:02:48            

by Xinhua writer Wang Zichen

BEIJING, Nov. 2 (Xinhua) -- China's solar industry has received an injection of fresh air.

Thursday saw the implementation of new measures that facilitate solar power plants' connecting to the national grid, as well as a Ministry of Commerce probe into polysilicon imports from the European Union. This follows previous similar investigations against the United States and Republic of Korea (ROK).

By tackling illegal foreign dumping and subsidies upstream and stimulating domestic demand downstream, analysts and industry insiders say the moves have offered hope to the struggling solar industry in what are its chilliest days.

SANDWICHED

Foreign dumping and subsidies have severely harmed China's polysilicon refiners, while the underdeveloped domestic market left equipment manufacturers prone to trade protectionism overseas.

Chinese enterprises that lobbied for investigations into unfair trade practices allege that nearly a dozen European companies have received subsidies, which go against World Trade Organization rules.

One German company has allegedly received 400 million euros in subsidies and 850 million euros in preferential loans, according to Lu Jinbiao, deputy general manager of China Silicon Corp.

Chinese companies have collected abundant evidence from financial reports, official webpages and investment research, said Lu.

Customs data show that China imported 9,300 tonnes of polysilicon from the EU in the first half of 2012, a year-on-year increase of 30.8 percent.

Of 43 Chinese polysilicon manufacturers, only a handful were operating this year, according to the China Nonferrous Metals Fabrication Industry Association.

So far this year, domestic production of polysilicon has fallen 25 percent while imports have increased by 30 percent, according to estimates by the association's silicon branch.

Although China imported a significant amount of polysilicon to manufacture solar equipment like wafers and panels, most of the finished products were exported.

That is because solar power plants' disconnection from China's national grid has left potential buyers of solar products disenfranchised.

Official statistics suggest that one-quarter of the power-generating capacity of new solar plants in 2011 stood idle.

"There were too many uncertainties associated with buying solar panels and building power plants, because we couldn't be sure of accessing the national grid and sell electricity," said Shu Xianjun, who leads solar-related capital investment in Shanghai.

As Chinese solar equipment became popular around the world, the United States Commerce Department finalized heavy punitive tariffs on Chinese solar panels in October.

Additionally, in the biggest ever trade case Brussels has brought against Beijing, an investigation focusing on made-in-China solar products is being pursued in the European Union.

RELIEF

On Thursday, China began implementation of support measures rolled out by the State Grid Corporation of China (SGCC) to address the inaccessibility to its network.

Aiming at boosting domestic demand and buoying the solar industry, which has relied heavily on overseas markets, the SGCC will help solar power plants with less than 6 megawatts of installed capacity connect to the grade.

"The need to nurture domestic demand for solar panels can not be overstated," said Wang Sicheng, a researcher with the Energy Research Institute of the National Development and Reform Commission.x The SGCC, which serves 88 percent of the national territory, will also provide technological assistance and waive charges associated with connecting to the grid, according to Wang Xiangqin, the SGCC's deputy chief economist.

"With this development, uncertainties are diminishing as to whether the solar power plants could be put to use, and that is a great boost to related investment," said Shu, the investor.

In response to requests filed by four Chinese polysilicon manufacturers, the Ministry of Commerce said Thursday that it would initiate an anti-dumping and countervailing investigation into imports of solar-grade polysilicon, a material used in solar equipment manufacturing, from the EU.

Among the items that will be investigated are policy loans from the European Investment Bank and German subsidies associated with the law on the improvement of the regional economic structure via infrastructure development and investment, according to a ministry statement.

The four enterprises that brought the complaints to the state accounted for over half of China's solar-grade polysilicon production in recent years, including LDK Solar Co., Ltd. and China Silicon Corp.

Thursday's move came after an anti-dumping probe into imports of solar-grade polysilicon from the United States and the ROK was launched on July 20.

Together with the EU, the three economies account for 95 percent of China's solar-grade polysilicon imports.

The statement said the ministry will combine the cases and make an accumulative evaluation. The probe will be finished before Nov. 1, 2013. It may be extended for another six months under special circumstances.

MARATHON

Optimists have pointed out that the solar industry is still in its infancy and has incredible potential in the decades to come.

"Harnessing new energies like solar energy is like running a marathon," founding Chairman and CEO of Canadian Solar Dr. Shawn Xu said on Thursday.

"By 2030, if solar takes up 5 percent of the global power supply, 890gigawatts (GW) would have to be installed in place," said Xu.

By 2015, China plans to boost its solar power generation capacity to 21 GW, seven times its current capacity of 3 GW, according to a government white paper issued last week by the Information Office of the State Council, China's Cabinet.

Despite the wave of good news and fancy projections, analysts and industry insiders agree that structural overcapacity still looms large and the industry needs to take a long view on future development.

By September, China's imports of polysilicon had grown 33 percent year-on-year, exceeding the total imports of 2011, while the average price dipped 61 percent, suggesting overheated competition in polysilicon manufacturing.

"Until we see some notable exits from larger-scale manufacturers that can serve as the circuit breaker for the current oversupply issues affecting the market, we believe pricing trends are likely to get worse before they get better," wrote Barclays analysts Amir Rozwadowski and Shrenil Bhansali in research sent to Xinhua.

There is also an excess of equipment made from polysilicon.

"There is global overcapacity in photovoltaic (PV). The global market stands at 30 GW in newly installed capacity this year, but the manufacturing capacity is 60 GW," according to Dr. Wolfgang Palz, chairman of the World Council for Renewable Energy and a former adviser to the European Union Commission on renewable energy, who was referring to PV panels.

Shanghai- and Shenzhen-listed solar companies have turned out poor performances in the first three quarters of 2012, according to their latest Q3 reports.

There are 99 listed "solar concept" companies, and their combined net profits have so far registered 12.06 billion yuan (1.93 billion U.S. dollars), marking a 37.6 percent decrease from last year.

The immediate priority has been placed on research and development capabilities, interviews with industry heavyweights, including Suntech Power, Yingli Group and LDK Solar, show.

"Suntech has logged a world record 20.3 percent cell efficiency, and we are upgrading to 21 percent," said Dr. Shi Zhengrong, founder and executive chairman of Suntech, in an earlier interview.

"A level playing field in trade permitting, Chinese polysilicon manufacturers could fully tap their potential and vigorously compete with foreign rivals," said Zhu Gongshan, chairman of the China Photovoltaic Industry Alliance.

Editor: Chen Zhi
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