Solar Energy | Green World Investor

Indian solar companies win a Pyrrhic Victory

23 May, 2010

Indian companies Fear Foreign Competition

Indian companies raised a massive hue and cry against the Indian government’s draft to allow foreign made modules to be used in construction of solar power plants. India has a target of building 1000 MW by 2013 under JNNSM which impiles almost 9000 crores or $1.8 billion in potential business for solar module makers.But the government’s proposal for allowing import of modules would have destroyed the billion dollar hopes of Indian producers like Moser Baer,XL as they would have found tough to compete with imports.So we heard some very funny arguments from these companies against imports.

Making Modules Requires Little Value Addition and has Low Entry Barriers

However according to this news item from the Hindu,the government will mandate local content provisions for modules but will allow import of cells.Note local content requirements have been implemented by Ontario this year and by China for wind earlier.For people who don’t understand the solar industry in detail – Solar Modules are made by assembling solar cells which are in turn made from silicon wafers.The Module part of the supply chain is where the least value addition occurs.It is cheap to set up a module making plant and requires little expertise and capex.

Pyrrhic victory for Indian companies

I think if this proposal becomes law , then it will be a pyrhicc victory for Indian companies since it will be more profitable to import cells (forms almost 70% of the total cost of modules) and do the assembly in India.Indian solar companies in my opinion won’t be able to compete in price or quality with imported cells .China has already raised its marketshare to 50% of the world solar market from 5% in 2006.Expect the Chinese,Taiwanese and to some extent US and European cells to dominate the Indian market

Summary

I think the Indian government needs to discuss and examine the local content requirements in more detail.While “local content” benefits the growth of industry,promotes research,creates jobs and might lead to creation of “national champions” like Sinovel, the flip side is that it raises the cost of power plants leading to higher burden on consumers.A balance between the two needs to be achieved.China implemented the law for local content of as high as 70% for wind equipment in 2004 and once their companies were big enough they reduced it to 5% in 2010. Something along those lines should be thought by the Indian government also.

Local content to shine in solar photo-voltaic projects – Hindu Business Line

The Ministries of New and Renewable Energy (MNRE) and Power plan to make it mandatory for solar power developers to source crystalline silicon-based modules from domestic manufacturers.However, they can import solar cells for manufacturing these modules for the photovoltaic (PV) projects.This provision will be in the soon-to-be notified guidelines by the Ministries for implementation of the solar power projects under the Jawaharlal Nehru National Solar Mission (JNNSM).

The players argue that there is enough cell capacity in India at present to cater to the requirement under Phase-I of the Mission.Tata BP, Moser Baer, Indo Solar, XL Telecom & Energy and Solar Semiconductor have been traditionally manufacturing and exporting solar cells and modules to Europe, Japan and the US. The players are slated to have a total capacity of 750 MW by the year end.

Reality Check for US Commerce Secretary – USA is already far behind China in Clean Energy

22 May, 2010

China,Goldwind,Sinovel,Solar Energy,USA,Wind Energy

The United States could fall behind China and other countries in clean energy technology unless Congress passes energy legislation, U.S. Commerce Secretary Gary Locke said on Saturday- Reuters

While the Commerce Secretary is “only thinking” that the US could fall far behind ,The Reality is that US is already far behind in the Solar and Wind and is at risk of falling behind in the other newer sectors of the Green Industry as well.

USA is far behind China in Solar

USA has fallen far behind China in solar manufacturing despite Silicon Valley being the hotbed for technology innovation in solar . If it was not for First Solar, no US company would figure in the top 10 rankings by 2011 as the Chinese and Taiwanese use their low cost and processing skills to tighten their grip on the world market. Numerous startups like Miasole,Nanosolar,eSolar are in the process of moving from pilot to commercial production but the support from the government does not measure up . Evergreen Solar has given up on the US and shifted its manufacturing base to China while other technology innovators like Energy Conversion Devices are on their “deathbed”.Sunpower and First Solar the other major companies are trying to compete by expanding their facilities in Asia, retaining only a token presence in the US (less than 10% of their future capacity will be located in the US). Technology giant Applied Materials has shifted its manufacturing and R&D base to China as well. While all this is going on, US continues its petty politicking over the climate bill which ironically has support for “offshore drilling”

In Wind US is in a more pathetic condition

Except for GE , US does not have a single company in the top 10 turbine makers for wind. There does not exist a single large pure play wind turbine maker in the US. Despite US being the world’s largest wind market in 2009 , US hardly manufactures even 10% of the world’s wind turbines.In contrast Chinese wind makers like Sinovel,Goldwind ,APower are planning big foreign expansions making the dominant European companies like Vestas go into the red.

Energy Efficiency,Storage and other forms of Renewable Energy a Saving Grace

In the still nascent markets of Energy Efficiency ,Energy Storage and other forms of renewable energy like geothermal ,tidal ,biomass and nuclear energy the US still leads along with Europe, but the Chinese government has been proactively seeking investment in these areas as well. Its a matter of time that once these technologies cross the early adopter curve, companies in Asia will actively look to attain leadership here as well.Innovative companies like Ormat, Comverge,EnerNoc , Johnson Controls,A123 systems still give the leadership to the US in these areas.But unless they are given more government support and subsidies , you can see them moving off to Asia like the solar and semi companies like Evergreen,Applied Materials.

Summary

US is still the leader in technology innovation and R&D in the green technology area,however it is way behind in the manufacturing area.Its only a matter of time that the Asian countries develop the technology once they move further along the experience curve.Companies in the US like IBM,Applied and others have already shifted a large part of R&D to these countries.Unless US soon implements on a coherent long term policy to mitigate climate change and develop clean energy , it would fall too far behind to matter at all

Why is Solar Thermal (CSP) Industry seeing so many Acquisitions

21 May, 2010

Areva,Concentrated Solar Thermal,Siemens,Solar Photovoltaic Energy

The Solar Thermal Space or CSP (Concentrated Solar Power) is seeing increasing consolidation with numerous acquisitions and partnerships . There are 3 main reasons for this trend

Solar Thermal projects typically are built on a scale of Hundreds of Megawatts requiring large amounts of capital which is typically beyond a startup
These CSP Projects also require engineering and construction capabilities which are again beyond startup capabilities
Large Power Equipment and EPC companies like Bechtel,Areva etc possess the capabilities but lack innovative Technology in this space

The above 3 factors make the the sector fertile for partnerships and acquisitions some of which are listed below

Alstom today announced it is investing up to $55 million in BrightSource Energy Inc., with an equity stake that positions Alstom as one of the main shareholders in the company. This operation takes place as part of a capital increase of $150 million organised by BrightSource. This privately-owned company is a specialist in designing, building and operating tower based solar thermal power plants with operations in the USA, Israel and Australia.

BrightSource has contracts for a total of 2,600 megawatts with PG&E and Southern California Edison – California’s two largest utilities. To meet this demand, the company intends to build 14 solar power plants in the US southwest by 2016. BrightSource’s first U.S. power project, the 392 megawatt Ivanpah Solar Energy Generating System, is currently under development in San Bernardino County, California. On completion, the project will generate enough electricity to power more than 140,000 homes, and reduce carbon dioxide (CO2) emissions by more than 400,000 tons per year. The Ivanpah project has received conditional commitment for more than $1.3 billion in loan guarantees from the US Department of Energy (DOE). The first plant is scheduled to come online in the second half of 2012.

Meanwhile Consolidation in Solar PV has been Seriously Lagging Behind

While the consolidation in the CSP space has been fast and furious it has been seriously lagging behind in the Solar PV segment.This is mainly because most of the companies here lack any differentiation in process and technology.However its only a matter of time before the hundreds of companies are withered down to 10-20 as growing competition and price pressures l weed away the weaker companies .

The only big acquisitions that have been done so far is by automotive parts giant Bosch buying Ersol and Aleo Solar (which I think seriously overpaid for a bunch of very ordinary companies).Considering the rock bottom valuations that some technology rich PV companies like Energy Conversion Devices and Sunpower are trading , this might be the right time for the Big Companies to make an entry .

Jinko Solar Down more than 20% since listing ; I told you so

20 May, 2010

China,Green IPO,Solar Photovoltaic Energy

Jinko Solar is fundamentally a low quality stock.I wrote about Jinko’s IPO a few days ago pointing out the severe shortfalls that the company suffers from– Green IPO Jinko Solar Analysis – Extremely Low Quality Offering Seems to be Done in Desperation

The 23.6% GM is a one off I think and it will be tough for the company to maintain it in the long term.It might benefit temporarily from low spot polysilicon prices but that won’t last long . With small scale,high transportation costs,little experience and no differentiation it is remains a highly risky stock with very little chance of any upside in my opinion.Currently at 2:15 pm EST It has underperformed both the S&P and the sector ETF since it has listed.

US wants a piece of China’s Clean Energy Boom;But China only Wants Technology

16 May, 2010

China,First Solar,Solar Energy,USA,Wind Energy

US wants the booming China clean energy sector to help boost its exports to meet Obama’s mission of doubling exports in the next 5 years.However the implicit trade barriers are too high for the foreign companies to surmount.China has managed to dominate the world’s solar industry and is on its way to doing it in wind also.Foreign competition faces formidable hurdles in competing in China as they have to fight huge subsidies and support both explicit and implicit in China.Foreign share of China’s wind market has come down from 70% in 2005 to 12% as China put high local content requirements and transfer of technology to support local companies.The government only awards contracts to selected foreign companies like First Solar and eSolar which have truly path breaking technology.The policy of the government is very simple – “Give Technology to Get Access” .

US, Europe look to China for clean energy sales – AP

U.S. leaders want China’s clean energy boom to drive technology exports and are sending a sales mission to Beijing this week. But Beijing wants to create its own suppliers of wind, solar and other equipment and is limiting access to its market, setting up a new trade clash with Washington and Europe.

China passed the United States last year as the biggest clean power market, stoking hopes for Western sales of wind turbines, solar cells and other gear. But U.S. and European companies find that while Beijing welcomes foreign technology, it wants manufacturing done here and know-how shared with local partners. In the wind industry, foreign suppliers with factories in China say they are shut out of major projects.

The biggest impact of China’s industrial curbs has been in wind. Beijing has declared it a strategic industry and wants to build local turbine producers such as Goldwind Science & Technology Ltd. and Sinovel Wind Co. into global players. Chinese companies also get grants and tax breaks to develop solar, biomass, fuel cell and other technology.

The foreign share of China’s wind turbine market plunged from 70 percent in 2005 to 12 percent last year, according to the European Union Chamber of Commerce’s Renewable Energy Working Group. The chamber complains that Chinese authorities help local companies by basing purchases on upfront prices and ignoring a project’s lifetime cost, where more durable foreign equipment wins.

Do Indian Solar Manufacturers Fear Foreign Competition?

16 May, 2010

Energy,Solar Energy,Suntech,Trina Solar

The Indian Government under the Jawaharlal Nehru Solar Mission has proposed ambitious plans for the development of solar energy with a 20 GW target by 2022. This implies almost 1 GW of solar energy to be installed per year in the country.At the current prices that is an impressive $4 billion in investment per year.Naturally this has got the Indian solar industry all excited,however the government’s decision to allow the import of foreign cells and modules has put a dampener in their multi billion dollar hopes.

I have discussed how China has massively increased its marketshare to almost 50% of the current world market from around 5% in 2006. . Indian manufacturing possesses neither the Technological advantages of the US and Germans nor the Manufacturing prowess of the Chinese.So if the Indian government allows the import (which they should both for economic reasons and also not to violate the agreement under the WTO),I can see the Indian manufacturers becoming marginal players players in their home market

Perhaps seeing this potential disastrous future I can foresee,the Indian Manufacturers are making arguments that don’t seem to have a lot of logic. Here are the arguments

“The national solar mission, which will be implemented using Indian taxpayers money, is somehow becoming the reason for many countries to dump their untested, sub-standard solar products in the country,” said Ajay Prakash Shrivastava, president, Maharishi Solar Technology.

I don’t know to which products/companies, Maharishi is alluding to but companies with Years of Experience,Gigawatt scale of manufacturing and hundreds of Installations like Suntech,First Solar ,Trina Solar and Sharp can hardly be accused of making “untested substandard” products

“India has ample capacities to fulfil the objectives of the mission with best quality products and therefore, there is no need to allow the import of solar PV products from outside,” Mr Srivastava saids.olar power projects will have 25-year power purchase agreements requiring quality equipment and legal recourse in case of poor or non performance. “This will be difficult to ensure in case non-Indian products are used,” said Tata BP Solar CEO K Subramanya.

I have no doubt that India has ample capacities ,but I also think a lot of this capacity would be idle because Indian solar manufacturing is not cost competitive compared to foreign solar producers.There are a number of reasons,for example one of the bigger Indian companies Tata BP Solar has British Petroleum as the main technology provider , this is the same company that has shut down its solar manufacturing plants in Spain and US as it could not compete.Nowadays it outsources a lot of the cell manufacturing to Chinese companies

The second part of the argument is also specious.Chinese/Japanese/US modules are installed around the world with 25 year power purchase agreements and they have no issues.I hardly think the Indian quality requirements would be more stringent than those required in Europe ,USA and other developed markets.Note installations in these countries require rigorous testing under standard independent bodies like UL before they are allowed .Every big manufacturer always gets their products certified and provide warranties on their own / in partnership with insurance companies

Chinese manufacturing benefits a lot from the massive subsidies and support that they get from their government not to mention the protectionism like local content requirements,local standards etc.This gives the Chinese makers huge advantages in competing both at home and abroad.US,Japanese and European producers also benefit from their strong Technological bases. For the Indian manufacturers to compete, they would need some sort of support/subsidy by the Government to offset these advantages.However making specious arguments like the above may not help their case.A Discussion between the Industry and the Government on how to support the industry without hurting the Indian consumers is needed.

Cos jittery as govt plans import of solar power tools – Economic Times

The government’s decision to import solar power equipment for its flagship clean energy programme has run into strong opposition from domestic equipment makers, who have argued that it will open up the floodgates for import of cheaper and sub-standard equipment from China.

The government is contemplating import of cells (photo voltaic) and modules from other countries for the its Jawaharlal Nehru National Solar Mission.“The national solar mission, which will be implemented using Indian taxpayers money, is somehow becoming the reason for many countries to dump their untested, sub-standard solar products in the country,” said Ajay Prakash Shrivastava, president, Maharishi Solar Technology.

“India has ample capacities to fulfil the objectives of the mission with best quality products and therefore, there is no need to allow the import of solar PV products from outside,” Mr Srivastava said. Solar power projects will have 25-year power purchase agreements requiring quality equipment and legal recourse in case of poor or non performance. “This will be difficult to ensure in case non-Indian products are used,” said Tata BP Solar CEO K Subramanya.

Many countries impose domestic content clauses on importers. Canada mandates minimum domestic content level of 50%; China has given a $586-billion stimulus package to those projects that purchase local products.

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