Business / Green China

China's solar industry rebounds

(Agencies) Updated: 2014-01-24 11:34

China's solar industry rebounds

A worker inspects solar panels at a solar farm in Dunhuang, 950km (590 miles) northwest of Lanzhou, Gansu province Sept 16, 2013. [Photo/Reuters] 

China's solar panel industry is showing signs of booming again after a prolonged downturn - raising fears of another bust when the splurge of public money that is driving a spike in demand dries up.

Lured by generous power tariffs and financing support to promote renewable energy, Chinese firms are racing to develop multi-billion dollar solar generating projects in the Gobi desert and barren hills of China's vast north and northwest.

The sweeteners have not only lured traditional energy investors like China Power Investment Corp, but also a host of solar panel makers and even companies such as toll road operator Huabei Express and Jiangsu Kuangda Auto Textile Group.

Some solar panel manufacturers, encouraged by a recovery in sales in the last two quarters - largely on surging demand from China and Japan - are expanding production capacity, even though the overall sector remains mired in a severe glut.

But industry officials worry fast-growing generation capacity will increase fiscal pressures on China and Japan and force them to cut subsidies which will then hit demand, just as happened with previous big solar users Germany, Spain and Italy.

"The key is whether the Chinese government is determined enough to boost solar generation," Sun Haiyan, senior executive at Trina Solar, said when asked if the current solar expansion in China was sustainable.

China already boasts solar manufacturing capacity of about 45 gigawatts (GW), enough to meet global demand this year.

Trina Solar, JinkoSolar, Yingli Green Energy and Canadian Solar - among the world's largest solar manufacturers that also include Japan's Sharp Corp and US SunPower Corp - are adding 3 GW of capacity, according to industry specialists and Chinese media.

Beijing is trying to consolidate the sector and force out the legion of small "zombie plants" currently sitting idle, but analysts say it faces stiff resistance from indebted regional and city governments that have backed local solar champions.

Michael Barker, analyst at global solar research firm Solarbuzz, said a risk now faced by the solar panel industry was manufacturers may react to improved demand "with somewhat irrational exuberance".

"This could upset the stabilization process that has occurred during the past year, once again creating an overcapacity situation," he wrote in a note this week.

Subsidy burden

Beijing's decision in July to more than quadruple solar generating capacity to 35 GW by 2015, and Japan's push to find alternatives to lost nuclear power following the 2011 Fukushima disaster, have revitalized the moribund Chinese panel industry.

China installed 8 GWs last year, turning it into the world's largest solar market. That included 6 GW of solar farms - utility-scale, ground-mounted facilities - and 2 GWs of distributed solar energy such as rooftop installations. This year, it is talking about adding 14 GWs.

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