Solar panel maker eyes southeast for salvation
Beijing should roll out policies to develop the rooftop solar power market in coastal eastern and southern regions, the head of a leading solar panel maker says.
That would help relieve the loss-making solar panel industry's overcapacity, said Shi Zhengrong, chief executive of Suntech Power, the world's largest producer of panels.
The nascent market segment has the potential to build as much as 100 gigawatts of generating capacity, 20 times the estimated growth in the mainland's solar power capacity this year, Shi told the SNEC International Photovoltaic Power Generation Conference in Shanghai.
But implementing this means a challenge to the monopolistic power of the mainland's two state-owned electricity-distribution firms, State Grid Corporation of China and China Southern Power Grid. They are now the only intermediaries between power generators and end users.
This is because owners of the rooftops of residential and commercial buildings who mounted solar panels would be able to sell the power they generated in excess of their own consumption to the power grids.
'This is not easy, since it involves major reform of our power generation and distribution industry, but the solar industry must keep sending letters to the government year after year to push the reform,' Shi said.
He said he hoped the policies could be rolled out within two years.
The mainland's solar panel industry is mired in widespread losses, its profit margins crimped as prices have fallen faster than production costs amid huge overcapacity.
The industry, which exports about 85 per cent of its output, has built too many plants and has suffered from a slowdown in growth in overseas markets. Its biggest market, Europe, has cut back subsidies amid its sovereign debt problems.
Dr Henning Wicht, principal solar sector analyst at industry research firm iSuppli, projected global prices of solar panels would fall a further 20 per cent this year after declining 38 per cent last year.
He also forecast that the growth rate of solar panel installations worldwide would drop to less than 10 per cent this year and next year, from 55 per cent last year, before recovering to between 20 and 30 per cent between 2014 and 2016.
Although Beijing's implementation of a subsidy programme giving solar power generators a guaranteed minimum power price sent demand soaring more than fivefold last year, power grid bottlenecks are expected to limit development.
'The danger is that the solar industry may suffer from the same problem as the wind farm industry, where over 10 per cent of power output cannot be dispatched to the grid,' Shi said. 'Very soon the hotbeds for solar farms in the remote regions of Qinghai, Xinjiang and Tibet will have this problem.'
He said developing the coastal eastern and southern markets would give the industry a viable alternative, although these regions may be less sunny. This is because power prices there are much higher, which means they have ample capacity to absorb costly but clean solar power.
In the United States, households and businesses can cut tax bills by up to 30 per cent by mounting solar panels. While California has the most panels, less sunshine-endowed New Jersey and Pennsylvania are among the biggest installers thanks to their high incomes and power prices, said Rhone Resch, chief executive of the Solar Energy Industries Association.
In the US, solar projects owned by households and businesses exceed, in terms of generating capacity, those owned by utilities firms.
Draft consultation papers on the subsidisation and development of localised energy generation projects by households and businesses are close to being completed and will soon be submitted to the National Energy Administration in Beijing for approval, the China Securities Journal reported last month.
But the report said the drafts did not include clauses requiring the state-owned power distribution monopolies to buy all of the output generated by such projects and to provide grid connections to them. This raised concerns the monopolies might use the excuse that the projects did not meet technical and safety requirements, to reject their output.
The net loss, in US dollars, New York-listed Suntech reported for last year in March, compared to US$237.9 million profit in 2010