Why Chinese Solar Companies are being able to win massive Solar Farm Projects

Sneha Shah wrote on 14 Jan, 2014

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Chinese solar companies are benefiting hugely from the Chinese government’s decision to install 35 GW of solar power by 2015. China is going to install around 8-10 GW this year, with the 2014 target of 12 GW. The state run utilities as well as large solar companies in China are going on a development spree to benefit from this golden opportunity. Shungfeng plans to install an extremely ambitious 3000 MW of solar power per year in China, while others such as Trina Solar (TSL) plans a more prudent 500 MW each year. A number of companies have already installed large solar capacities in 2013, with Jinko Solar connecting 213 MW of solar plants in different Chinese provinces.

Read on GWI China set to become the “Super Solar Power”

Pure play Chinese solar panel companies which are facing debt issues are forming joint ventures with different government entities, as well as large Chinese companies to build gigawatts of solar farms. Yingli Energy (YGE) which is the largest solar panel supplier in the world has signed a framework agreement with a local government to build 3000 MW of solar farms and also entered an agreement with a big coal producing company. These pacts not only provide a captive buyer for their large solar panel capacities but also give more margins and revenues to the companies. Goldpoly, Hareon Solar, GCL are some of the other big solar players with massive solar development plans in China. The smaller companies are unable to participate as their balance sheet is weak. The bigger companies are also benefiting from the billion yuan credit lines given to them by the Chinese Development Bank (CDB). 80% of the solar project cost is funded by debt and interest cost is a major component. Having good relations with a big financial institution and securing cheap debt for long tenures is a key competitive advantage in the solar development and installation business.

Reasons why Chinese Solar Companies enjoy Monopoly position:

The Chinese solar companies have a virtual monopoly over the solar development business in China because of the following reasons:

1) Low costs

2) Easy financing by China Development Bank

3) Implicit preference for domestic companies and

4) Understanding of the local culture and economy.

Please note that most of the large solar farm projects given by Department of Energy (DOE) were won by the US companies, so it is not unusual for countries to favor their own. However, in China there are absolutely no projects being won by non-Chinese companies despite the massive scale of farms being built. First Solar’s massive Ordos solar farm project that was singed many years ago is gathering dust till date.

The US listed companies that can be used to leverage the massive solar farm building spree in China are:

1) Yingli Green Energy (YGE)

2) Trina Solar (TSL) and

3) Jinko Solar (JKS).

The other companies are also building large projects in China but not as big in scale as these three companies.

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Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in