Trade | Green World Investor

China India Trade Deficit rises to Sinister Heights of $27 Billion Officially and Much more Unofficially

3 Feb, 2012

China India Trade has been rising at very high growth rates over the last few years driven by the booming GDP growth in the fastest growing economies of the world. However India like other countries faces the mounting problem of a huge trade deficit with China which is growing all the time. Like Brazil ,USA this has become a major problem . Beside the official reported figures , there is a large clandestine trade takes place outside the normal channels. Massive imports from China go unreported to avoid excise duties and custom taxes. Both countries have corrupt officials and businessmen which facilitate trade without paying of taxes and duties. Unofficial Trade Deficit with China may be double the $27 billion reported in 2011.

Rising China and India Tensions

India and China are the Two Rising Global Behemoths with Relations between these most populated countries always being tense.Both countries share a similar history of colonization by Western Powers in the 17-20th Centuries and Independence being attained in the middle of the 20th Century.China and India also shared the same economic trajectory until 1979 when Market Reforms put China on track to become the 2nd largest economy in 2010.India also embarked on Reforms in 1991 and has started showing fast economic growth in recent times.The relations between these 2 countries are tense since the Border War fought between them in 1962.They have one of the longest borders in the world which is disputed.China recently upped the ante on claiming territorial rights over India’s North Eastern State of Arunachal Pradesh.

China’s Recent Provocations

Chinese provocations against India have been rising in recent times as the Chinese leadership wants to keep India off tilt.Here is a list of recent provocations against India

1) Stapling of separate visas for India’s citizens from the state of Jammu and Kashmir which is disputed with Pakistan

2) Trying to stall an ADB Loan to India’s state of Arunachal Pradesh

3) Support in Building Nuclear Reactors in Pakistan which regards India as an existential threat.It has also supplying Pakistan with missiles and fighter aircraft.

4) Denial of visa to India’s top ranking military official on flimsy grounds leading to suspension of military contacts between the 2 countries

5) Stationing of 11,000 troops in Gilghit Pakistan Occupied Kashmir (POK) which India regards as a part of its own territory and over which India and Pakistan have fought 3 wars

Many of India’s top companies like BHEL,L&T are being hollowed out by Chinese competition of low cost goods and super cheap financing. Power, Telecom equipment form a major chunk of imports while India is primarily exports resource like iron ore. So what is happening is that India is become a resource vassal economy of China (though it may sound simplistic) . China puts up big trade barriers for India’s value added exports like pharma and Information Technology while putting no hurdles for import of resources.With the rapid growth rate of imports , India is in danger of becoming dependent on China for a number of goods as its industries shut down in the face of competion.

China captures almost Half of the Power Equipment Market in India raising Concerns

India’s private players like Tata Power,Reliance Power and others are in the process of setting up massive mega coal plants using supercritical boiler technology.While L&T and BHEL,the two Largest Capital Equipment Companies have won a lot of orders,the sheer scale of Demand requires Huge Imports as well.Low cost Chinese equipment providers like Shanghai Electric and Dongfang Electric have won almost half of the power equipment orders raising concerns amongst the Indian administrators.

Solar Panels are a good example of one such good where Indian industries can’t compete in the face of Chinese subsidies to its own companies.

The Indian government is not going to impose any new duties on imports of Chinese solar cells. This is despite the petition by the Indian solar panel manufacturers to give a level playing field. Note Chinese solar panels have virtually destroyed the solar manufacturing industry in the West with big companies falling under the relentless price pressure where solar panel prices have gone down by 60% in one year. Only the Koreans seem to be standing up to the Chinese government backed top tier solar companies from China. The rest have mostly folded up and are facing survival questions including those from Taiwan. Indian solar companies were never that big and cost competitive anyway given the headstart and support of the Chinese backed companies. The price crash in 2011 has seen most of them close their factories as they can’t even cover their costs at the Gross Margin Level.

India China relations have never been that great on a geopolitical level with the 1962 War and unresolved border dispute in the north. Recently the imports of Chinese telecom equipment from Huawei and ZTE raised a massive ruckus with Indian telecom companies supporting the Chinese because of low cost equipment while security concerns were raised.

China has recently been in the news over Internet Espionage on defense and sensitive installations in India and USA. This has led to the high profile exit of Google from China.Recently a Canadian research organization revealed/alleged how Chinese govt backed hackers had broken into Indian embassy and government computers.This has made the Indian government wary of allowing Chinese equipment suppliers into India’s communication sector.Though both ZTE and Huawei’s equipment is much cheaper compared to Nokia Siemens,Alcatel and Ericsson , these companies face an uphill battler in India right now.

Rising Trade Deficit Concerns

India’s trade deficit with China is estimated to reach $60 billion by 2014-15, up nearly three-fold from $23 billion in 2010-11. Bilateral trade with China was $63 billion in 2010-11, with China accounting for $43 billion worth of imports.

“Participants at the inter-ministerial workshop were especially worried about forecasts that China could account for 75% of India’s manufacturing in the next five years, up from the present 26%,” the official said. The workshop was attended by officials of key ministries and departments, including finance, home and the department of industrial policy and promotion.

“Excessive dependence can be disruptive in case of strained relations,” said Narendra Sisodia, a defence analyst and former additional secretary of NSC Secretariat. In general terms, if a country that is supplying basic components to another stops supplies, it would hurt the importing country because its manufacturing will be adversely affected, he said. “Much also depends on whether a country has alternative sources of supply and how quickly those could be mobilised.”

Another Brutal Year for Solar and Wind Stocks in Offing Despite Growing Demand

1 Feb, 2012

Solar Energy,Wind Energy

Solar and Wind Stocks have been massacred in 2011 mainly due to the following reasons

1) Chinese oversupply which is outcome of its massive industrial overcapacity and investment. This has decimated wind and solar companies in the West while also leading to margins and profits collapsing

China’s rise in solar manufacturing has been nothing short of spectacular.From less than 5% of world marketshare it has gone to more than 50% in the current quarter.Some of its companies like Trina and Yingli are the lowest cost producers of solar modules in the world today.The Europeans like Solarworld and Q-Cells which were dominant until 2 years ago have been swept aside with Q-Cells bleeding red ink . Even in wind energy , China’s growth over the last 2-3 years has been awesome with more than 100% CAGR . It has helped in growing wind turbine manufacturers through domestic content requirements.Now that these companies have sufficient technology and are able to leverage their low cost advantages , China has removed the restrictions in Jan 2010 to attack other markets. Vestas the leading European turbine manufacturer like the solar makers has fallen into the red. The only way for these companies to survive is to move their manufacturing to Asia . Ultimately the technology will also follow ( Applied Materials has also move its R&D to Shanghai). Just like the semi and electronics industry,Europe will start looking like a marginal player in the global alternative energy industry. Despite strong domestic demand and policy support , the European industry has been outsmarted and outplayed by the Chinese

2) Commoditazation of Technology and Erosion of Entry Barriers

3) Massive and Irrational Subsidies by Asian countries to support Green Industry

Despite both Wind and Solar capacity growing strongly in 2011 the stocks have been punished.

2012 has a good chance to be another bad year for these stocks because

a) Wind Power in China has reached a plateau installing almost 50% of the global wind turbine installations

China Wind Power Market has become the biggest in the world with more than 18 GW of capacity installed in one single year, Note China has managed to double its capacity each year since 2005 and at the end of 2010 Wind Capacity totalled 44 GW which makes China the biggest Wind Power country in the world overtaking the USA.China has now got 7 of the Top 15 Global Wind Turbine Manufacturers and 2 of the Top 3 WTG Companies.China’s Massive Demand for Energy has made power plants mushroom in the country where more than 70% of the electricity is met by Coal.Wind Energy still forms only a small part of the power mix at less than 7% of the total power capacity and serves only a fraction of the Kwh of electricity given the lower load factor of Wind Power.Note Wind Power has grown in China as its Advantages as a Clean Source of Energy far outweigh its Cons.However the rapid demand growth has made a top inevitable as a country can only install that many megawatts in a year.

The 2 Biggest Signs of Trouble for the Chinese Wind Power Industry have been seen in the last couple of days.

1) Sinovel has canceled shipments of Electrical Control Systems (ECS) for its Wind Turbines from American Superconductor due to high inventory levels and refused past payments as well.With the biggest Manufacturer of Wind Turbines reporting inventory problems,the situation of the rest can’t be that good

2) The Chinese National Energy Bureau was considering tighter procedures that would include requiring local governments to get the written approval before going ahead with wind projects with installed capacity of less than 50 MW.Earlier it used to be more than 50 MW

3) Hundreds of Wind Turbines have not been connected to the Power Grid due to lack of capacity or transmission lines.China emphasises on investment without factoring in returns is one cause of these orphan wind turbines.

b) Solar Energy Growth may slowdown as well after a blistering 35% growth in 2011 as European countries slow / kill subsidies under the Debt Crisis.

c) Industries have too many players many of which are small and uncompetitive. Though a lot of solar companies have become bankrupt, there still exist too many.

Now a new wave of bankruptcies are on the way with Q-Cells likely facing a credit event as it needs to roll over convertibles which come due in February. Note Q-Cells has fallen a long way from being the biggest solar cell company in 2008. Miasole and Nanosolar were Private Equity backed CIGs darlings that were supposed to become the biggest thing following Firsst Solar . Now Nanosolar faceds executive exits while Miasole has fired large number of its workforce failing to find a big parent to support it. Note the smaller companies like Ascent Solar have found backers in Asia . Solar Technologies are seeing Darwin Survival of the Fittest with crystalline silicon solar panel technology beating out thin film solar and solar thermal technologies

APPENDIX

Wind Energy Stocks

1) Vestas – Vestas the largest Wind Turbine Company in the World has been facing one setback after another.The Danish Company which used to be a Green Investor Favorite till a couple of years can’t seem to find a buyer these days.Stiff competition from China,Slowdown in Wind Energy Farms in the West and now Wind Blade Problems have formed a perfect storm for this company.

2) General Electric (USA) - General Electric is looking to Invest Heavily in the new Age Green Industry like other Industrial Giants like Siemens,ABB etc.General Electric or GE as it is popularly known is one of the biggest players in the Green Industry globally.It generated $18 billion in Ecomagination revenues in 2009 with $1.5 Billion in Investment.General Electric like other industrial conglomerates like Siemens,Areva and others are in fact low risk plays in the Green Investing sector.GE is strong across most of the Green Sectors today particularly in the area of Smart Grid and Energy Efficiency.GE has a 40-50% marketshare of the US market which is the 2nd largest in the world.Due to its vertical integration,it has one of the highest margins in the industry and remains a formidable player with its acquisition Enron’s Wind Turbine arm proving to be a masterstroke.

3) Gamesa (Spain) - Gamesa the Spanish Wind Turbine Producer and Wind Farm Operator has faced the worst year of its history in 2010.Like Vestas and Suzlon,2010 has been a cruel year for the Wind Industry in the Western Markets and the WTG Players dependent on those markets.Gamesa is one of the worst performing Wind Energy Stocks in 2010.Gamesa is looking to restructure its operations and concentrating on the offshore wind market by focusing on higher megawatt turbines.Gamesa is leading a massive Spanish Research Effort to develop a colossal 15 MW Turbine meant for the fast growing offshore wind sector.But this is a long term plan with 2020 set as the target for the complete development of this new Turbine.Meanwhile Gamesa has become the target of takeover speculation by one of the bigger Chinese Wind Turbine players like Sinovel,Goldwind etc.Gamesa has seen its revenue fall by 28% and profits by 71% with Operating Margins of 4-5%.Things don’t look too good for 2011 either though Orders have started ticking up

4) Suzlon Energy is the biggest Indian Wind Energy Company by far with 4-5 Gigawatts of WTG Capacity per year.However Suzlon has languished in red ink since the beginning of the Global Financial Crisis in 2008.The company started by Tulsi Tanti in 1995 was a shining example of Asian CleanTech with a 10% global marketshare and ranking amongst the top 5 Wind Turbine Makers .Suzlon buoyed by its success had bought controlling equity stakes in Turbine Gears producer Hansen Transmission and European Wind Turbine producer Repower.Suzlon seems to be recovering with increase in orders particularly at its German subsidiary RePower,however a huge debt burden poses problems.

5) Siemens – The largest Green Company in the world,Siemens has a strong presence in the Wind Turbine Segment.The company is strong in Europe and is now expanding to emerging markets like Asia.Given its huge technological strengths in electrical equipment,power transmission and large project construction,Siemens is looking for a dominant role in the growing offshore wind market as well.

6) Goldwind - The Wind Energy Market in China has witnessed the growth of almost 90 companies with little differentiation competing fiercely on prices.This has led to low to zero margins for most of these companies.Goldwind has managed to rise above the competition by becoming the single largest Chinese player and looks to takeover the No.1 position in the world in the next few years.By taking bold risks and with the support of the government,Goldwind has become a threat to the established Wind Turbine Order

7) Sinovel – The 2nd largest Chinese Wind Power Company managed to do a successful IPO in Hong Kong last year despite long delays.The company is looking to expand in the foreign markets particularly the US market and has gotten a local management to help it penetrate the newer market.

Dongfang Electric - Dongfang Electric Corporation,China’s largest power equipment producer is also the 3rd biggest Wind Turbine Producer in China as well .The company has managed to grow impressively like the rest of the Chinese and is looking to expand in foreign markets as well.Recently bagged a 276 MW $203 million WTG supply contract with Abhijeet Group.

9) Ming Yang Power- Ming Yang is the only significant non-state owned Chinese Wind Energy Company with a 2009 marketshare of around 4%.The Company has a very short history installing its first Wind Turbine just 2 years ago and has seen an exponential growth riding on the incredible Wind Industry Growth in China.

10) Mitsubishi Heavy Industries , the massive Japanese Conglomerate is looking to overseas market for growing its Wind Energy Division.Mitsubishi like other Japanese companies are looking towards Green Industry for growth.Japan already possesses solid strengths in this area with its traditional focus on resource efficiency.While companies like Panansonic and Toyota looks towards Electric Vehicles and Batteries,Sharp and Kyocera towards Wind Energy,Mitsubishi is focusing its energy on the Wind Sector.

11) Enercon – Enercon is a privately listed German company which has almost 22 GW of Wind Turbine Installations in the world.Enercon was the first company to build a gearless Wind Turbine which is one of the biggest innovation in the Wind Energy Industry in recent times.

12) Nordex - Nordex is another German company in the Wind Turbine Industry which was the first one to build a 1 MW Turbine.The company has not managed to grow fast as the other German companies like Enercon,RePower and Siemens.

13) United Technologies Corporation (UTC) - This US Giant Technology Conglomerate is still a small player in the World Wind Power Market.However it has increased its footprint by acquiring struggling independent US Wind Power company Clipper.

Solar Energy Stocks

Solar Cells Stocks

JA Solar (JASO) ( The Biggest Solar Cell Producer in the World)

Gintech (3514.TW) ( Biggest Solar Cell Supplier in Taiwan)

Motech (6244.TW) ( Solar Cell Supplier in Taiwan with wafer and poly production as well)

E-Ton (3452.TW) ( Survival is in question)

Q-Cells (QCE.DE) The largest solar producer of cells in 2008 faced a horrendous 2009 running losses of as high as Euro 1 billion)

Neo Solar (3576.TW)(Has been one of the fastest growing solar companies)

Del Solar ( Small Solar Cell Supplier)

IndoSolar ( Small Solar Cell Supplier in India)

Emcore (EMKR) ( Small Specialist suppliers of High Efficiency Multijunction Cells)

Solar Panels Stocks

Suntech (STP) ( The biggest Chinese solar panel producer in the world)

Trina Solar (TSL) ( The most valued Chinese solar panel supplier)

Yingli Green Energy (YGE) ( Top 3 Chinese solar panel supplier)

Jinko Solar (JKS)

Canadian Solar (CSIQ) (Despite Canadian in the name is one of the biggest Chinese solar panel suppliers)

Sunpower Corporation (SPWRA)( Makes the Most Efficiency Solar Panels,bought by French Giant Total)

Hanwha Solar One (HSOL) ( Earlier known as Solarfun,bought by South Korean Conglomerate Hanwha)

Sharp ( Biggest Japanese Solar Compan)

Sanyo Panasonic( Sanyo plans to invest more than 70% of its total investment over the next 3 years in its renewable energy and energy storage segment)

Kyocera(Kyocera is Japan’s second largest solar panel producing company)

Mitsubishi( Mistubishi is another old time Japanese solar company which has a low profile solar module and system business)

LG (It is selling solar modules in the South Korean and European markets and has 240 MW capacity)

Samsung ( The company makes silicon solar cells and panels,will start making poly with MEMC)

Hyundai ( The first South Korean company to move int solar panel production)

Solarworld (SWV.DE)- Solarworld is the Biggest German producer of solar panels,the company is one of the few to still have operations in Europe and USA)

Bosch (Automotive company,made expensive acquisitions,now moving production to Malaysia)

Shanghai Chaori Solar Energy (Listed in China,integrated producer of solar panels)

AUO ( AUO has a JV with SunPower’s to build 1.4 gigawatt third solar cell fabrication facility in Malaysia)

China Sunenergy(CSUN) (A Small China Solar Energy Cell and Panel Supplier)

Arise Technologies (Canadian small suppliers of solar panels)

BP (Outsources production of solar panels,sells under brandname )

GE View

General Electric Co. expects increased competition and a reduction in subsidies by cash-strapped governments to lead to more companies exiting the wind and solar power businesses, but the industrial behemoth still sees growing long-term demand.”There’s going to be a lot of casualties in the wind and solar businesses, there already are in solar,” John Krenicki, who leads GE’s energy division, told Reuters in an interview on Monday.

Wind Industry Oversupply , Sinovel Profits to Halve in 2012

Sinovel Wind Group Co., China’s biggest wind-turbine maker, expects its 2011 earnings to fall by more than 50 percent as heightened competition at home and abroad dragged down prices.

Rivalry within the market depressed prices, trimming revenue and profit margins, the Beijing-based company said yesterday in a statement. “Cyclical fluctuations” in the world economy also delayed some projects, curbing income, it said.

“It’s difficult for these guys to drive costs down at the same pace as revenue, so margins are getting squeezed,” Aaron Chew, an analyst with Maxim Group LLC in New York, said by telephone. Sinovel may still fare better than European counterparts such as Vestas because of lower labor expenses and more advantageous government subsidies in China, he said.

Lower Support

Vestas has cut sales forecasts twice since October after Asian competitors grabbed market share and U.S. and European governments reined in support for renewable power to curb budget deficits.

A tighter government approval process for projects in China has intensified competition further, spurring domestic companies to study expansion elsewhere. “We do not expect growth in wind installations in China in 2012 to 2014,” so growth abroad would allow the main Chinese players to boost sales, McLoughlin said.

More Western Solar Companies Q-Cells, Miasole ,Nanosolar Teeter on Bankruptcy

27 Jan, 2012

Solar Energy

The Chinese Dominance of the Solar Industry in the last 2 years have seen numerous Western companies go bust . This has accelerated sharply in 2011 with companies like Evergreen Solar,Spectrawatt, Solar Millenium, Solon, Photowatt etc. either gone for good or in various stages of bankruptcy. Other US Solar Panel Manufacturers like First Solar, Sunpower have fired thousands and some are continuing with large losses. European Solar Companies are the worst off given their high cost structure and lack of differentiation. Solland Solar recently killed its solar module line while some like Schott have killed their solar wafer lines.

Solar Jobs have been cut in the tens of thousands this year by a number of European Solar Companies including marquee names such as REC, Q-Cells, Solarworld ,SMA Solar besides many of the smaller names. Some of the solar companies like Solon have completely shut down. 5000 solar companies have downed shutters in 2011 according to German association BSW. This is despite global solar demand in 2011 increasing by around 30-40% compared to 2010. The reason is that massive overcapacity has been created in China and other parts of Asia. Backed by cheap loans and massive subsidies, around 50 GW of solar panel capacity has been created . This has led to a crashing of solar panel prices by 60% which has decimated the higher cost companies in Europe.

In fact some of the biggest solar companies in the world like LDK and Sunpower would have been bankrupt as well but for the support of others. Solar Panel company Solland Solar of Netherlands is shutting down its module operations firing 100 workers. This is after selling its solar cell operations. Expect other remaining European companies to shut down as well though Solarworld is hoping to bring an anti-dumping duty against Chinese solar panels in Europe as well.Note in the past European solar companies have tried various ruses such as shifting solar factories to Asia . However that option is not open to the smaller fry who have no option but to die .

Now a new wave of bankruptcies are on the way with Q-Cells likely facing a credit event as it needs to roll over convertibles which come due in February. Note Q-Cells has fallen a long way from being the biggest solar cell company in 2008. Miasole and Nanosolar were Private Equity backed CIGs darlings that were supposed to become the biggest thing following Firsst Solar . Now Nanosolar faceds executive exits while Miasole has fired large number of its workforce failing to find a big parent to support it. Note the smaller companies like Ascent Solar have found backers in Asia . Solar Technologies are seeing Darwin Survival of the Fittest with crystalline silicon solar panel technology beating out thin film solar and solar thermal technologies

Q-Cells SE (QCE), once the world’s largest maker of solar cells, fell to the lowest on record after a regional court said it can’t defer payment of a 202 million-euro ($263 million) corporate bond due next month.

Q-Cells fell 18 percent to 41 euro cents at the close in Frankfurt, the lowest since it started trading in 2005. The company, based in Thalheim, Germany, said holders of the 2012 bonds will receive partial payments in tranches as it seeks to restructure convertible bonds due in 2014 and 2015 in a debt-to- equity swap. It forecast operating losses through 2013.

Miasole Firings

According to a report published by greentechsolar, CIGS maker MiaSolé has let 10% of its workforce go, with most of the layoffs taking place in the engineering and equipment design divisions. The report claims that a company spokesperson verified the layoffs, but did not specify on the extent of the reduction in the workforce. The report from greentechsolar further stated that while, at one time, MiaSolé was producing 15,000 modules per week, various sources have specified that its production numbers have dropped significantly.

Solar Jobs Cut by Dutch Company Solland as European Solar Panel Industry Dies

19 Jan, 2012

Europe,Solar Energy

Solar Jobs have been cut in the tens of thousands this year by a number of European Solar Companies including marquee names such as REC, Q-Cells, Solarworld ,SMA Solar besides many of the smaller names. Some of the solar companies like Solon have completely shut down. 5000 solar companies have downed shutters in 2011 according to German association BSW. This is despite global solar demand in 2011 increasing by around 30-40% compared to 2010. The reason is that massive overcapacity has been created in China and other parts of Asia. Backed by cheap loans and massive subsidies, around 50 GW of solar panel capacity has been created . This has led to a crashing of solar panel prices by 60% which has decimated the higher cost companies in Europe.

In fact some of the biggest solar companies in the world like LDK and Sunpower would have been bankrupt as well but for the support of others. Solar Panel company Solland Solar of Netherlands is shutting down its module operations firing 100 workers. This is after selling its solar cell operations. Expect other remaining European companies to shut down as well though Solarworld is hoping to bring an anti-dumping duty against Chinese solar panels in Europe as well.Note in the past European solar companies have tried various ruses such as shifting solar factories to Asia . However that option is not open to the smaller fry who have no option but to die .

Schott Solar fires 290 workers

The number of solar factories closing in Europe has increased tremendously in the 2nd half of 2012 despite a record surge in Germany which would have raised 2011 solar growth to 25%. However the relentless price pressure from Chinese solar panel companies has decimated the solar companies in the West. While there have been a number of famous cases of bankruptcy like Solyndra and Solon, there have been bigger solar factory closedowns. REC has closed down more than 1 GW of wafer capacity while a pure play Spanish solar wafer factory also closed down recently . British solar wafer maker PV Crystalox is also near the verge of failure. Solar Wafer prices have fallen by almost 60% in the last 1 year with the prices much below the cost of production in Europe. It seems unlikely that any solar wafer maker will remain alive in Europe by 2013.

Q-Cells move to Malaysia

Solar Factories in US and Europe have been closing at a rapid clip over the last 2 years as Solar Panel Prices have come crashing down.Earlier the higher cost factories were able to survive due to non-existent Asian players and benign competitions.But with the rise of the Asian Solar Companies,the European and US Companies have faced very tough times.Q-Cells closed most of its German Solar Cell Manufacturing Lines even as it ramps up a factory in Malaysia.While there have been isolated cases of module factories being opening in Germany,Most of the Major Manufacturers like REC and Q-Cells are moving lock,stock and barrel to Asia.REC is already stepping up production at its 1 GW integrated solar plant in Singapore while Q-Cells manufacturing is also migrating to Malaysia.

Note this is not restricted to Europe.Japanese solar factories are being closed and shifted to Asia. USA Solar Jobs are also being moved to Mexico and other places.

Sharp which has managed till now to survive with its high costs in Japan factories too is now facing the pressure.Japanese market is highly protectionist with majority of the demand going to Japanese zaibatsus.The Japanese government is helping Solar Companies with subsidies/diplomacy to sell Japanese solar panels in Asia and Africa.Sharp now is being forced to move off the islands of Japan as the high cost of labor and currency makes it uncompetitive in the fiercely cutthroat solar panel global market.Sharp has a giant thin film silicon factory in Sakai and cell/module operations spread out in Japan.It will now manufacture more of its cells/modules overseas to cut down on the cost which are much higher than the Chinese.Note while Sharp is still a long way in suffering the fate of the likes of Evergreen Solar,there is no doubt that it is under huge pressure.Read my earlier post on Sharp’s position in the solar industry

Indian Imports of Chinese Solar Cells to Continue despite Indian Panel Factory Closures

19 Jan, 2012

Energy,Solar Cells,Solar Energy

The Indian government is not going to impose any new duties on imports of Chinese solar cells. This is despite the petition by the Indian solar panel manufacturers to give a level playing field. Note Chinese solar panels have virtually destroyed the solar manufacturing industry in the West with big companies falling under the relentless price pressure where solar panel prices have gone down by 60% in one year. Only the Koreans seem to be standing up to the Chinese government backed top tier solar companies from China. The rest have mostly folded up and are facing survival questions including those from Taiwan. Indian solar companies were never that big and cost competitive anyway given the headstart and support of the Chinese backed companies. The price crash in 2011 has seen most of them close their factories as they can’t even cover their costs at the Gross Margin Level.

Indian Solar Panel Companies are asking for protection from cheap imports from China and other countries. Note the prices of solar panels have fallen by 60% in 2011 due to a number of reasons such as cheap raw material polysilicon prices,high competition between majormodule manufacturers, dropping processing costs. The biggest reason for the solar panel price crash has been the support of the Chinese and other Asian government to their respective domestic solar industries.

It is a fact that many of the major solar module companies would be bankrupt right now without government support. LDK is the prime example of a zombie company flourishing on the back of Chinese government support. Indian solar panel makers have got some protection with the federal subsidy policy JNNSM mandating that cell and modules be made in India.However thin film solar panel technlogy is exempt which means that they are not fully protected.Besides state government solar polices don’t protect them at all. The consequence has been that most of the solar panel companies are running at 0 to 20% utilization as orders dry up.

The Indian Solar Companies were hoping that like the US government , India too would impose some sort of anti-dumping duty on imports of Chinese solar cells and panels. But the government seems in no mood to oblige. Note the import duties would hurt the powerful Indian utilities and developers who need the cheap solar panels. There is some protection for the solar players in the federal subsidy scheme JNNSM but nothing for the state subsidy programs. It looks likey that most of the Indian solar cell and panel producers will be wiped out given the current state of affairs.

Read our previous stories on Domestic Content Controversies on Indian Solar Panels.

USA Opposes India’s Solar Energy Domestic Content Requirements

USA has opposed India’s Local Content Requirements for the Federal Solar Energy JNNSM program.Note according to the JNNSM rules,solar panels will have to be produced in India for the first year and solar cells will also have to produced from the second year.There is also a proposal that the local content requirements may be extended beyond 2013 and will also include solar inverters.US administration is opposed to these rules as it will lead to export hurdles for its solar companies Sunpower and First Solar.India installers and developers have also opposed the move as it will lead to lesser choice amongst suppliers and probably higher costs.

Why Germany could join USA, India in Anti Dumping Duty on Chinese Solar Panels Imports

Solar Trade Wars are becoming the norm in the globe these days with the major one between USA and China.The instigator is the German solar company Solarworld which helped started the ITC Case in the USA. India too is thinking of putting some kind of import duty to protect its domestic solar panel producers which are dropping like flies. Chinese solar panel producers have swamped the world with super cheap solar modules. though a part of their low prices can be explained by competitive advantage, another part is due to the labor, capital subsidy given by the Chinese government. It would not take a rocket scientist to say that some of the biggest Chinese solar companies are insolvent and would be dead within a month without Chinese state loans.

The government says it has no objections to Imports of low-priced Chinese solar cells as long as they meet prescribed quality standards. This comes as a setback to domestic manufacturers battling cheaper Chinese imports. Last week, the government rejected a plea of domestic players seeking imposition of import duty on finished solar equipment.

“The market will always bend towards the products which are low-priced. But, yes the quality matters,” said Tarun Kapoor, joint secretary, ministry of new and renewable energy. Kapoor, however, said, “We support what is legal, this is a case and we support WTO-accepted norms. It is not country specific, it’s rule specific.”

India’s National Solar Mission gives preference to domestic manufacturers. However, this is only at the central level and states are not obliged to follow this policy. “There’s only one scheme that offers this provision and it’s not a law,” Kapoor said. “We give the projects to developers who in turn are free to choose the products. If the prices are low and quality is good, then obviously, anyone would go for it.”

Indian Wind Energy Developers to focus on Electricity Production than Accounting Gimmicks with Depreciation Removal in new Tax Code

18 Jan, 2012

Energy,Wind Energy

Subsidies of different kinds are given to the Renewable Energy Industry around the world . These incentives or subsidies which they are better known as are in the form of

a) Capital Subsidies

b) Feed in Tariffs

c) Tax Breaks in form of Accelerated Depreciation

d) Renewable Energy Certificates

e) Carbon Credits.

Wind Power in India has been wildly successful and is the 5th biggest in the world because of substantial incentives from the government. One of them has been accelerated depreciation which has made hundreds of companies and rich individuals buy small wind farms. This helps them offset their tax liabilities providing a substantial 2 digit returns. However the big drawback in this from of green subsidy is that it does not incentivize the production of wind energy. Once the wind farm is set up, the incentive to produce lots of electricity is not there unlike the case of Feed in Tariff where your returns are solely based on the electricity generatino.

India is coming up with a new Direct Tax Code in April 2012 which will substantially overhaul the current tax system in the country. In this the accelerated depreciation given to wind power turbines in India will be done away with. This might lead to a dip in the wind power production addition in the country. However in the Long Term its a plus as it would force Indian Wind Energy Developers to focus more on Electricity Production than Accounting Gimmicks

Wind Energy Companies in India that will be Affected

1) Suzlon Energy – Suzlon Energy is the biggest Wind Energy Company by far with 4-5 Gigawatts of WTG Capacity per year.Its subsidiaries Hansen Transmission and RePower are also big players in the Wind Energy in Europe.The Company has seen its revenues and profits take a huge hit in recent times but has been recovering slowly.

2) RRB Energy – The company has a long history and manufactures Wind Turbines at its plants in Tamil Nadu.The Company has a capacity of 300 MW which it is expanding to 700 MW.The Company makes only 2 models with power rating of 600 Kw and 1.8 MW.Merill Lynch has made a small investment in this company.

3) NEPC India – This company was one of the wind energy heavyweights and a stock market darling earlier.However It no longer remains an active player in the Indian market .Heavy Debt and Bad Management drove to this company to the ground despite being a pioneer in the Indian Wind Power Market.

4) Auro Mira Energy – The company is more of a Green Utility rather than a full fledged WEG manufacturer.It has made plans to manufacture Wind Turbines in the future.It has attracted funds from Baring and IFC to push forward its Green Plans.Auro Mira Energy is a Tamil Nadu based Green Utility backed by a clutch of PE investors like IFC etc.It has 2 biomass plants of 7.5 MW and 10 MW and plans to build around 100 MW of hydro and biomass capacity over the next 2-3 years.

5) Regen Powertech - It is a small scale WTG Supplier like RRB Energy which recently set up a small 300 MW manufacturing facility in Tada,Andhra Pradesh recently.The company licenses technology from Vensys to manufacture 1.5 MW gear-less Wind Turbines.The company has managed to supply both big and small wind farms over the last 2 years.The company is supported by the PE arm of Future Group.

6) WinWind – The company is not exactly a domestic company rather one with a Finnish Origin.It is owned by the Abu Dhabi Masdar ,Siva Group and the government of Finland.It has recently established a 1000 MW capacity in Venga,Tamil Nadu and also has a 500 MW plant in Finland as well.The company plans to producer 3 MW Turbines at its Indian plant as well.

7) Pioneer Wincon – The company is a JV between the Pioneer Group and Wincon of Denmark.It makes small 250 KW Turbines and is a bit player with 30 years of operations in India.The Company remains a small static player in the Wind Energy Market of India.

Chiranjeevi Wind Energy – A Small bit player like Pioneer Wincon which engages mostly in the sale of small 250 KW Wind Turbines.Like Pioneer Wincon it has sold a number of these Turbines to small companies mainly in the Southern Part of India.

9) Lietnar Shriram Limited - The company is a 50:50 JV betwen the Shriram Group of India and Lietnar of Italy.The company makes gearless turbines of 1.5 MW capacity and has supplied to small farms in Maharashtra.The company has a major inhouse customer in the form of Orient Green Power which is building a 300 MW farm in Tamil Nadu using Lietnar Shriram Wind Turbines.

10) Kenersys - The company is part of the Baba Kalyani Group which is a major forgings manufacturer in India.It was bought over in 2007,when the Kalyani Group and PE firm First Reserve bought over the German company RSB Consult.The Company mainly makes 2 and 2.5 MW turbines and has production facilities both in India and Germany.It has wind design capabilities between 1-3.6 MW and with a powerful parent, it could become a success in the future.Amongst the newer wind energy companies like Lietnar,RRB Energy,Regen and WinWind,it looks like the one with most potential

Source – http://www.bloomberg.com/news/2012-01-17/india-may-end-tax-break-for-wind-farms-this-year-official-says.html