Solar panel industry savours success but growth relies on government policy

The wild success of the mainland's solar panel manufacturing industry has set a high bar for other renewable sources of energy but the industry is firmly focused on exports and likely to remain so for the future.

The country's solar power story is a reverse image of the wind power industry, as solar panel companies built mainland factories to cut costs while exporting nearly all their products. Wind turbine makers, on the other hand, have flocked to the mainland to build factories to serve the domestic market.

'Making photovoltaic solar power is mostly like electronics manufacturing which can be mass-produced and China is the best place to mass-produce something,' said Bing Zhu, chief financial officer of Canadian Solar. The company is based in Canada and founded by a Canadian-Chinese entrepreneur but has its factory in the mainland. It raised US$115.5 million on the Nasdaq a year ago.

The mainland has set a target of 300 megawatts of solar power by 2010, but focuses on wind power as solar power costs about two to three times as much as wind power.

The local wind turbine industry got a kick-start from government concession projects, while the solar panel sector received help from European government policies. Germany in 2004 removed subsidy caps on solar power projects, instantly boosting demand and making it the biggest market for mainland solar cells.

'Governments dictate solar [power] demand. If China were to introduce subsidies, they'd have solar demand but at the moment there are virtually no subsidies for solar power [in the mainland],' said Cyrus Mewawalla, analyst at Westhall Capital in London. 'China has less than 1 per cent of global solar photovoltaic power demand, but they produce 30 per cent of the world's solar PV cells.'