Archive for February 2012

Suntech Weathers Turmoil in Solar Industry

by Aaron Back
Wall Street Journal

China-based Suntech, the world’s largest producer of solar panels, hasn’t been immune to turmoil in the industry world-wide, but the company’s founder and chief executive, Shi Zhengrong, believes increasing consolidation in the sector will buoy large players.

Dr. Shi is a foreign-educated solar scientist. He earned a Ph.D. in electrical engineering from the University of New South Wales in Australia in 1992, and gained Australian citizenship. From 1995 to 2001 he was research director and executive director of Pacific Solar Pty. Ltd., an Australia-based maker of solar components.

Associated PressShi Zhengrong, founder and chief executive of Suntech Power Co. Ltd.

The solar industry globally has fallen on hard times, beset by falling subsidies in Europe, a key market, and global overcapacity for solar panels and their components. In a recent high-profile case, the German government has been in talks with the solar industry to begin monthly reductions in feed-in tariffs, the fixed price at which solar energy is purchased. U.S. trade authorities are also investigating complaints of alleged dumping of solar panels on the U.S. market by Chinese producers, including Suntech.

Dr. Shi has said he sees consolidation of the sector ahead, which could benefit large players like Suntech. Still, the company has been vulnerable to forces buffeting the industry. Suntech posted a $116 million loss in the third quarter, compared with a year-earlier profit of $33.3 million, hurt by a foreign-exchange loss due to volatility in the euro and dollar exchange rates. The company said it expects to post revenue of between $3 billion and $3.1 billion for 2011, up from $2.9 billion in 2010.

Dr. Shi talked with Aaron Back in Davos, Switzerland. The following interview has been edited.

WSJ: You earned a Ph.D. in Australia and took an Australian citizenship. How did this experience shape your management philosophy?

Mr. Shi: I spent 14 years living in Sydney, Australia. When I first went to Australia I was 23 years old. I was a young man. I did my Ph.D. with professor Martin Green, and to be honest, before that I never thought I could be a good scientist.

After [finishing my Ph.D. in] 2.5 years, record time at the University of New South Wales, and afterwards working in the laboratory for about 2-3 years, based on my patents together with the professor, we were able to raise about $50 million to start a spinoff company called Pacific Solar, and I was appointed as deputy research director. So that was actually very important for my career in a way. Before, my background and research specialty was on laser physics, and that really changed my specialty to solar.

WSJ: So was it something of a coincidence that you became involved with solar technology?

Dr. Shi: It was a coincidence for me to come to know professor Martin Green. I knocked on his door at 5 p.m. to ask him for a job. So then I said “I don’t want a full-time job, I just want something like part-time research assistance or something.” So then he said, “OK, come in.” So we started chatting, and he knew my background, he knew I had masters degree, I think based on the credentials of other Chinese students he guessed I was at least above average. That’s how I got into solar.

WSJ: Has your dual role as a Chinese entrepreneur and an Australian citizen been key to your success?

Dr. Shi: I think it’s extremely important for Suntech. If you look at our culture and DNA, a lot of things have to do with my experience in Australia. I got to know Western culture a lot, their way of thinking, their way of doing things. Of course I also kept the essence of Chinese culture, if you look at the style of management in the company, we’re really multinational with a global management team. For our regional sales and operations, we really depend on local culture, local faces and local language to really represent Suntech. And also, because as we know, Australia has leading technology in crystalline silicon solar cell technology, so that also gives us a leading position in research and development and innovation.

WSJ: You’ve said recently that the solar sector will face consolidation. How do you see this playing out?

Dr. Shi: If you look at China there are probably more than 1,000 companies in this sector, but at this moment, 50% at least have either shut down production or partially ended production. Whether they are going to shut down permanently or whether there will be some M&A I think all depends. You know, Chinese companies have very strong survivability. So it all depends on how long this situation will last. But the market consolidation is already happening. If you look at 2011 Q2 and Q3 figures, the top six manufacturers (globally) had 55% to 60% of market share. But in 2010, it was only about 25%. So it’s already happening because customers care more about brand, R&D, sustainability, service and so on.

WSJ: But are you yourself going to go out and buying any struggling rivals? Is that something you would consider?

Dr. Shi: Not really, but we are open-minded to seize any opportunity that fits with our strategy…Anything is possible.

WSJ: Germany has recently cut its solar feed-in tariffs, and it seems around the world in this era there is less money for solar subsidies. So what does that mean for you?

Dr. Shi: Well, I think its natural and it’s the way it should be. If you look at the [German Renewable Energy Act] initiated by the German government in 2004, that was just trying to help the industry to create a market. So once you have a market, industry will innovate and try to reduce costs. So in the last few years, costs have come down so dramatically…The law was designed to reduce feed-in tariffs annually, say once a year maybe around 10%, but in the last two years, apart from this annual reduction, there were additional 15% feed-in tariff cuts. So that gives you an idea—there’s an accelerated reduction of feed-in tariffs, due to accelerated reduction of solar panel costs.

WSJ: Late last year, some U.S. solar-panel manufacturers asked for anti-dumping investigations against Chinese rivals, including Suntech. Where do you think this is headed?

Dr. Shi: Unfortunately it’s a lose-lose situation. Nobody wins: The U.S. government, U.S. consumers, and the solar industry are all losers in this game. We believe the accusation is not true.

If there’s a tariff or trade war, it would really be a big setback for the industry…Because of [a possible tariff] many projects that were realistic due to reduced prices become impractical because the economics doesn’t work anymore. What does that mean? It means, you will lose jobs. I think in the U.S. currently there are about 150,000 people employed in the solar industry. Globally around 800,000, with 300,000 in Europe. For every 10 jobs we create in factories, there will be 15 jobs created downstream, in installation, financing, project development, distribution.

Write to Aaron Back at aaron.back@dowjones.com

Résumé

Education: Ph.D. in electrical engineering from the University of New South Wales (1992)

Career: Pacific Solar Pty. Ltd. research director and executive director (1995-2001)

On antidumping investigations: “If there’s a tariff or trade war, it would really be a big setback for the industry…Because of [a possible tariff] many projects that were realistic due to reduced prices become impractical because the economics doesn’t work anymore.”

Feed-in Tariff support for solar: a timeline

William Frazer

The saga over the future of Feed-in Tarriff support for solar pv looks set to rumble on. DECC announced at the end of last month they will appeal against a ruling of the High Court that proposed plans to cut the FiT retrospectively were illegal. On 9  February, new Energy Secratary, Ed Davey, announced wide ranging reforms to Feed-in Tariff scheme.

Here we map out the saga so far and show how solar installations have effectively been stopped in their tracks.

The graph below shows how the tariff levels for solar PV have changed since the start of the Feed-in Tariff scheme in April 2010 and the proposed Option A scenario of support between July 2012 and April 2015, as set out in the consultation.

 

 

 

The graph below shows the number of solar PV systems installed over the past 12 months and how the government’s plans to cut support brought the market to a standstill.

 

Timeline of events

1 April 2010 – Feed-in Tariffs launched

7 Feb 2011 – DECC said it planned to carry out a “fast-track” review of support for large-scale solar, due to fears about the number of solar farms being built putting pressure on FiTs budget

18 March 2011 – Fast-track review consultation published – consultation was open until 6 May

9 June 2011 – Government confirmed it would go ahead with the proposed cuts to large-scale solar

1 August 2011 – Lower rates for large-scale solar came into effect. Industry rushed to get projects completed on time

31 October 2011 – DECC launched a consultation into dramatic cuts in support for smaller-scale solar, due to ongoing budgetary concerns. Cuts were due to come into effect from 12 December 2011, 11 days before the consultation closed on 23 December

12 December 2011 – Solar arrays installed after this date would receive the proposed lower FiT rate (roughly half the original tariff)

16 December 2011 – Campaigners won a judicial review of DECC’s handling of the latest Feed-in Tariffs consultation in the High Court

21 December 2011 – DECC said it would appeal the High Court decision

13 January 2012 – Court of Appeal was due to decide whether to hold a full hearing into DECC’s handling of FiTs consultation, but no decision was reached.

18 January – Chris Huhne issues statement online confirming FIT cuts will not fall below 21p/kwh for all systems completed between 12 December 2011 and 31 March this year

19 January – DECC lays before Parliament draft license modifications which regardless of appeal outcome will introduce the lower rate of FIT for all solar PV systems installed after 3 March

25 January – DECC loses its appeal against a High Court ruling which judged the retrospective cuts made to the FiT for solar PV at the end of last year illegal. DECC announce that they will take the appeal to the Supreme Court creating further uncertainty for the solar industry

03 February – Ed Davey is confirmed as the new secretary of state for energy and climate change, following the departure of Chris Huhne, over criminal charges.

 

09 February – DECC announce wide ranging reforms to the Feed-in Tariff support scheme for renewable energy, including more cuts in support to solar from 1 July 2012, the inclusion of a new multi-installation tariff, a requirement for all buildings with roof mounted solar panels to have a Category D Energy Performance Certificate, a proposed option to review tariffs every two months, and a proposed cut in support from 25 to 20 years.

 

Policy Questions For Solar Advocate Bill Ritter, Former Colo. Governor

by Jessica Lillian on Thursday 02 February 2012

The state of Colorado has established itself as one of the U.S.’ leading markets for PV installations, ranking No. 7 in a recent report from the Solar Energy Industries Association.

During his 2007-2011 tenure as governor, Bill Ritter helped to encourage Colorado’s solar market through a range of clean energy policy goals. After leaving office, he was named director of the Center for the New Energy Economy at Colorado State University, where his work focuses on state-level clean energy and economic initiatives.

Ritter delivered the keynote speech at the AEE Solar Dealer Convention in Orlando, Fla., earlier this week. After his address, Solar Industry sat down with the former governor to discuss his vision and strategies for deploying solar power in both Colorado and the rest of the U.S.

During your time as governor of Colorado, what were your main solar- and renewables-related goals? What obstacles were you up against?

“The broad goal was to promote a clean energy agenda to diversify our energy resources in order to make full use of domestic clean energy,” Ritter says, stressing that such initiatives also needed to deliver economic benefits.

Both renewable energy and energy efficiency factored heavily into the equation. Among other solar-specific initiatives, Ritter says his administration introduced a 3% solar carve-out in Colorado’s renewable portfolio standard and worked to offer new financing options for residential solar, such as property-assessed clean energy finance and homebuilder-provided PV systems.

Obstacles to pursuing his clean energy goals while in office were “partly political,” Ritter recalls. “There are naysayers out there who say you can’t get to 30 percent renewable energy without it becoming very expensive.”

Colorado, in particular, currently enjoys inexpensive fossil-fuel-generated electricity – one reason that promoting natural gas in concert with renewables makes sense, Ritter adds.

The severe national recession that hit just as Ritter’s term as governor got under way also somewhat hindered progress. “Cleantech was one sector that grew, but it was still constrained in its potential,” he says.

On a national level, what policies do you see as crucial for ensuring the continued development of solar in the U.S.?

The Dec. 31, 2011, expiration of the U.S. Department of Treasury’s Section 1603 cash-grant program continues to receive a great deal of attention from solar power advocates who are eager to see an extension of this project-finance tool. Ritter agrees that this program is important in the short term.

“The fact that the investment tax credit is not going to expire for a while is helpful for the industry,” he adds.

Overall, he believes the most important long-term policy need is putting a price on carbon. “Everyone experiences the consequences that flow from emitting carbon,” he points out. “It is incumbent upon us to find a way to price that fairly.”

In the meantime, Ritter notes, solar is helping its own case with its price-reduction curve. “Solar was the most expensive of any [type of] renewable energy when I became governor – more expensive than wind,” he says. “That’s changed a lot. The price of solar has come down significantly.”

How important is it that we see a national renewable portfolio standard passed in the U.S.?

In his 2011 State of the Union address, President Barack Obama proposed an 80% by 2035 clean energy standard, which would include natural gas, nuclear energy and “clean coal” as acceptable energy sources for meeting the goal.

“That was a concession of sorts to Republicans – he wanted to go across party lines and build a bridge,” Ritter says. He adds that focus has since shifted more toward a low-carbon standard, as Obama and others recognize that many locales and policymakers in the U.S. reject the idea of a traditional renewable portfolio standard.

Solar advocates may view this shift as a weakening of support for solar power, but Ritter says the low-carbon approach has its practical benefits. “If what we care about most is emitting [carbon], then by a low-carbon standard, we will get to the same goal,” he says.

Can the U.S. maintain a global presence in the manufacture of solar products?

The increasing dominance of low-cost Chinese solar cell and module manufacturers has cast doubts on U.S. manufacturers’ abilities to compete, but Ritter believes the U.S. “should absolutely pursue a solar manufacturing market.”

Thin film may be the market segment where domestic manufacturers have the best chance. Ritter cites First Solar, Abound Solar and GE as examples of U.S. firms that are “pushing the price curve down.”

On the crystalline PV side, he is adamant that Chinese manufacturers play by the rules and not sell their product for less that what it cost to both produce and ship.

“One thing we, as Americans, believe in is not just free trade, but fair trade,” he says. “The U.S. still has a role to play [in solar manufacturing], and we should do everything we can to compete on fair terms.”

Photo: Colorado State University Photo Services Department

Don’t miss the latest solar energy news — register to receive Solar Industry’s news headlines.