China is a country of big numbers. And it seems the growth virus has infected the Chinese PV industry as well. Growth over the past few years has been impressive and shows even more ambition. In the 30 major companies involved at present, total available production capacity for cell and module production already exceeds 20% of the world’s total. 5 years ago, it was less than 1%. China is now the world’s third country in terms of solar cell production capacity, and this industry is still growing at more than 50% per annum. Based on the ambitions of the 20 cell manufacturers already active in this market, production capacity is expected to grow to 820 MW per annum in 2006. Several new cell and module manufacturers have started production over the past 4 years and are now growing towards the top-ten ranking of the world’s largest manufacturers. Currently, over 90% of all PV products produced (cells, modules) are being exported to Western countries, such as Germany, as well as to Japan and the rest of the world.
The growth in production capacity seems unstoppable; however, actual production is limited by the availability of solar grade silicon (SGS) and wafers on the world market. Since things move and grow fast in China, these international shortages have inspired several new Chinese companies and have resulted in new initiatives for silicon and wafer production. One of them is LDK Solar (located in Xinyu City, Jiangxi Province). The company has set itself the goal of as much as a 13,000-ton production capacity for 2010 - a figure not far removed from current world production, which is over 16,000 tons. In 2006, the company will be making an investment of € 58 million to get started with a production capacity of 75 MW for multi-crystalline wafer production. Typically, the manufacturing equipment will come from a company outside of China: the American company GT Equipment Technologies.
Despite these new silicon manufacturers and a production capacity covering about 20% of the world’s production of solar ingots and wafers, China’s PV industry is still heavily dependent on the import of solar feedstock. And yet, as a result of worldwide shortages and attractive market prices, part of China’s current production of silicon and cells is being exported. Taking into consideration the ambitions of the companies known at present to be involved in the production of solar grade silicon (SGS), wafers, cells and modules, it is anticipated that even by 2010 China will still need to import feedstock to maximise its production of cells and modules.
Opportunities for Western-Asian joint ventures
With everything growing at high speed in China, there is room for collaboration with western companies. Most Chinese PV companies use production processes based on manufacturing equipment and technology purchased from the West. More and more joint ventures and partnerships are being started with Western PV companies, such as the recent joint ventures of Spanish Isofoton with the Himin Group and BP Solar with SunOasis. Other Western companies, such as Sharp and SolarWorld, have (part of) their modules produced in China by OEM manufacturers. Chinese manufacturers are doing good business and have applied for product certificates to sell their modules in the European and American markets. Increasing numbers of them are starting to brand and sell their own products in Western markets. Venture and investment capital no longer set a limit on further growth. China’s market leader Suntech Power recently collected over $ 396 million on the occasion of the firm’s debut last December on the New York Stock Exchange - a record for the global solar industry. Market capitalisation increased the company’s value by more than € 2.5 billion, and all this for a company established less than 5 years ago… Its stock exchange listing made its founder and present CEO, Zhengrong Shi, the first solar PV billionaire…
On the basis of the ambitions presented by several new Chinese players, it is anticipated that in 5 years’ time Chinese PV manufacturers will be dominating the world market with their products. To fulfil their ambitions, cell and module manufacturers will have to grow by 400% in 5 years.
Rural PV application in the Chinese PV market
25 kW rural PV project in Tibet; Photo courtesy by Trina Solar
China’s domestic PV market is still in its relative infancy, but it is growing and has the potential and ambition to become one of the world’s most important PV markets. The market is controlled by central government, and incentives and (international) support still require Beijing’s approval. China offers solar radiation conditions for PV applications that range from good to excellent, and it has an infinite availability of space. The main market segment in China is rural electrification (some 7 million people have no access to electricity, mainly in the North and West). Central government has initiated the Village Electrification Programme (“Song Dian Dao Cun”), which aims to electrify a further 20,000 villages with PV power in China’s off-grid western region between 2005 and 2010.
Government target: 450 MW of PV power installed by 2010
The overall goal of the Chinese government is to have 450 MW of cumulative PV power installed in China by 2010. This is in comparison to the estimated 75 MW which was current in 2005. Average sales growth of 40% per annum until 2010 is needed to achieve this. For the next decade, a target has even been set for 8,000 MW by 2020, when PV might already be cost competitive. For the coming years, rural electrification will remain the dominant segment.
Grid-connected market: youthful and with potential
The new Renewable Energy Law (REL), which comes into force in January 2006 and includes a feed-in tariff, could boost growth further in the market segment of grid-connected systems. This “market” is still fragmented, small and dependent on individual initiatives. The related sales level is 2-3 MW per annum (2005) and is likely to grow by more than 75% per annum. Initiatives such as the Shanghai 100,000 PV roof programme will get underway in the near future and could result in the cumulative installation of grid-connected PV at 70 MW by 2010. Any additional major growth of this segment will depend on the details of the proposed feed-in tariff as part of the new REL, which provides guidelines for grid connection and local initiatives. In the past, China and Chinese companies have been shown to be highly effective in executing the goals and targets they set. If, in the next decade, PV application becomes financially competitive compared to other energy sources, China will not only offer a gigantic market, but will also have the industrial infrastructure and power to supply it.
International PV trade mission to China
SolarPlaza, the global PV marketplace, recently published a report entitled “The Chinese PV market and industry”, which provides additional market information, forecasts and listings of the major PV companies. Following this report and the success of the trade mission to Spain, SolarPlaza will be organising the “PV Business Tour of China” in April 2006. The programme will include visits to major manufacturers, a brokerage event and a symposium for meeting with other major Chinese PV companies. The central goal of this international mission is to meet with China’s PV Industry, producers of SGS, solar wafers, cells and modules and to experience opportunities for collaboration.
More information about the report and the international trade mission to China can be found on www.solarplaza.com