Summary
China is becoming the world leader in photovoltaic manufacturing, but has lagged considerably in the consumer, installing less than 100 megawatts (MW) a year. This stands to change as this and other announcements portends China's domestic market to reach over 1,000 MW a year sooner, rather than later. This can benefit companies like Suntech, JA Solar, LDK and others.
Analysis
This announcement is one of a growing number of statements of Chinese intention to become a major consumer as well as producer of solar electric (photovoltaic) panels and systems. Suntech has become one of the prime beneficiaries of government energy policy that can subsidize up to $2.60 per watt of a photovoltaic installation. There has been some official ambivalence as the electricity is relatively costly, especially compared to coal.
But other factors are working into the equation. The Chinese photovoltaic manufacturing industry is approaching 10,000 megawatts of annual production at the cell/module end, and the global market will not be able to absorb that amount against other worldwide production in the immediate future even with a near term economic recovery. The government will be intent on keeping this manufacturing resource and its employment intact, especially among the major producers like Suntech, JA Solar and LDK.
China also realizes it can't keep throwing up coal fired power plants for ever. Indeed, its torrid pace of power plant construction is slowing down and more of the technology includes more expensive combined cycle and carbon reduction. On the positive side, declining costs of photovoltaic technologies puts large-scale systems within striking distance of daytime peak power costs as well as relieving strained local grids. The main market segments will be megawatt-scale roof installations on factories and warehouses, plus two digit megawatt installations in the western provinces that have less access to high voltage transmission.
China and the US stand to be the next markets that could sustainably achieve over 1,000 MW a year installations. The question is whether it will happen in 2010 or 2011.
Mark Burger consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
