Government policy initiatives have had a more powerful effect on the Chinese renewables industry than direct investment in research and development, said the founder of the world’s largest solar photo-voltaics (PV) company.
“The Chinese government has provided really clear and consistent policy to support the manufacturing – not just for solar but to try to attract all sorts of people to do all sorts of things in China,” Dr Zhengrong Shi, CEO of Suntech, told the Ceres conference in Oakland, California last week.
Dr Jiang Lin, senior vice-president and director of China sustainability program at the Energy Foundation, agreed that China’s policies had made a huge impact over the past 5 years.
“Policymakers have given clear signals to the market and in the case of wind in China the market took off very quickly,” he said. “Five years ago there was almost no wind industry in China, there were maybe one or two wind manufacturers and the market size was in hundreds of MW.”
“In 2005 the Chinese government passed a renewable energy promotion law which laid out long term targets for wind incentives for wind developers and manufacturers. China went from zero to number 1 wind manufacturer last year when some 46% of wind turbines were installed in China. So really is the policies driving the market, creating incentives for investors and the aim is to develop that market.”
In 2001, Dr Shi founded Suntech, headquartered in Wuxi, China, where 90% of the company’s operations are based. The company is now the world’s largest manufacturer of solar PV modules, with total PV shipments of 1,572MW and net revenues of $2.9m last year.
Dr Shi said that for his first production line, he had to look overseas to source equipment in Japan and Germany. But for his second production line, the industry in China had moved on so quickly that he had been able to source much more from local supply chains, reducing his set up costs by two-thirds.
Innovation led by government policy was behind this rapid transition in China, he said.
“If you look at the solar industry when Suntech started there were perhaps four small manufacturers in China each of them with 200KW capacity. So we decided to aim for 10MW and that was already the biggest in the world. In the last 10 years the innovation in the industry in China is enormous.
“In the last five years, the Chinese solar industry became the largest in the world and also reduced solar panel costs dramatically by more than three times. Some people think that’s due to cheap labor but I don’t think so.”
Some 200 people are now employed by Suntech in the US, where the company opened a new factory last October in Goodyear, Arizona.
Arizona was attractive to the company because of the state’s tax incentives to encourage renewables manufacturing in the state. Arizona has a Renewable Portfolio Standard of 15% by 2525, but 30% of that must come from distributed generation such as rooftop solar. Suntech is in line to get $2m from state tax breaks, in addition to federal tax incentives, Shi said.
“The Arizona factory is now running three shifts. Six months ago we opened the factory with one shift…We also believe the US will be a giant market because there’s a need for it – most people want solar panels on their roofs,” he said.
Suntech has also won the contract announced this year to supply 800,000 PV panels for Sempra Generation‘s 700MW Mesquite 1 project near Phoenix, Arizona.
Dr Shi said the manufacturing shift to the US made economic sense and would position the
company well for global competition.
“Energy costs in the US are among the lowest in the world – 3 cents to 5 cents per kilowatt hour – much cheaper than in China. I always encourage Chinese manufacturers – move your factory to the US.”
Picture: A Chinese worker walks in the solar modules of a newly installed 100MW photovoltaic on-grid power project on July 21, 2010 in Dunhuang of China’s northwest Gansu Province. The government is tendering for bids to develop 13 solar projects with a combined capacity of 280MW in the western regions. The Chinese government has set a target to install 20GW of solar energy capacity and 100GW of wind power by 2020.