Beijing officials are deadly serious about investing in solar power capacity at home and eventually becoming a dominant player in this rapidly-emerging, clean energy technology, the Business Week reports.

Consider that some 1,100 solar panels are being installed over the curved roof of Beijing's National Indoor Stadium, ahead of the 2008 Summer Olympics. In October, SunTech Power (STP), based in the old industrial city of Wuxi in Jiangsu Province will begin installing a 130 kilowatt solar energy system in the main venue of the games—Bird's Nest Stadium. Beijing has also been installing solar powered streetlights throughout the Olympic Village as well as in less urbanized areas of the Chinese capital's suburbs.

This is a serious and sustained push to diversify China's energy mix, local officials contend. Beijing has pledged to install three megawatts of solar power for the 2008 Olympics. However, "If you add up all the solar energy investment in the Olympic Village, National Indoor Stadium, Bird's Nest, and rural villages, it is entirely possible that Beijing could have six megawatts by 2008," says Zhu Wei Gang, a vice president with Beijing Corona Science & Technology, the company which is installing the solar panels in the National Indoor Stadium.

Ambitious Goals

China's worsening environment and overly dependence on imported oil have prompted the government to set some ambitious goals for solar power. Last year, China's solar power consumption was less than 10 megawatts, a tiny fraction of the country's total electricity consumption of 2.83 billion megawatts. By 2010, though, China hopes to be generating and consuming about 300 megawatts of solar energy, roughly equivalent to what Japan, the world's second largest consumer of solar energy, used last year.

Getting there, however, will be a stretch. China's domestic solar power industry is a work in progress. There are more than 150 Chinese companies that make photovoltaic cells that convert light into electricity, accounting for a third of the world's solar cell production. Yet the industry is heavily reliant on overseas supplies of polycrystalline silicon, or polysilicon, a key material used in solar cell production. And since demand for alternative energy has been low at home until recently, Chinese solar cell makers export 90 percent of their products to Germany, Japan, the US and other countries.

There are compelling reasons for China to build up its own industrial solar energy capacity. The global market for solar panels and cells has been growing at a 38 percent compound annual growth rate since 2001. Demand is so brisk that there is now a serious shortage of polysilicon. In fact, prices for the material have jumped tenfold, to US$200 to US$300 per kilogram, since 2003.

'Foreigners Have Power'

If China developed a robust domestic market for solar power, it could shift the solar industry's balance of power, from the West and Japan to the Middle Kingdom. Just as the focal point of global TV and personal computer manufacturing has shifted to China, solar panel and cell production could be next, some argue. "If the domestic Chinese PV (photovoltaic cell) market starts to develop that would pretty much be the nail in the coffin for other countries because then not only will the cluster be here, but the [lower] manufacturing cost will be here," figures Timothy Chang, managing director of Citigroup Venture Capital China.

However, the report quotes Meng Xiangan, secretary general of the China Solar Energy Society, as saying China's solar industry now relies on foreign imports for its raw materials and exports most of its finished products overseas. "The foreigners have, in their hands, the power to direct which way our solar industry is heading," Meng said.

The German market, for instance, continues to be the largest market in Europe. Its growth, however, appears to be slowing down over time, said Kevin Wei, chief financial officer of Shanghai-based SolarFun Power Holdings (SOLF).

Polysilicon Monopolists

Another huge obstacle to China's solar power industrial ambitions is the current shortage of polysilicon. Seven companies—including Germany's Wacker Chemie (WKCMF), Mitsubishi Materials (MIMTF), Sumitomo Titanium (SMOEF), and Renewable Energy Corporation ASA—hold a monopoly over the world's polysilicon supply.

Chinese solar cell makers have to pay dearly for the stuff, which has somewhat undercut their huge labor cost advantage. "Access to polysilicon serves as barrier to growth and entry for many Chinese companies," says Sanjeev Chaurasia, vice president with the Credit Suisse's Energy Group. "If they have unfettered access to polysilicon, they'll be able to compete on cost and not necessarily on access to raw materials," she adds.

China is now trying to level the playing field by developing its own polysilicon supply. At least 11 new polysilicon projects are in the pipeline. China hopes to be able to produce 12,660 tons of polysilicon and break its dependence on foreign supplies by 2011, according to THT Research.

(CRIENGLISH.com April 14, 2007)