First Solar Set to Conquer China's Growing Market

By Ucilia Wang

First Solar (FSLR) is set to conquer the growing Chinese market.

The solar panel maker said Tuesday it has signed a memorandum of understanding with the Chinese government to build a 2-gigawatt solar plant in Ordos City, Inner Mongolia. The project is the first in China for First Solar.

The announcement is significant not only for the size of the power plant: Tempe, Ariz.-based First Solar appears to be the first non-Chinese solar energy equipment maker to have snagged a large-scale project to be built in China.

China has traditionally been an exporter of solar panels and other components for building a power plant. But the government has announced incentives to boost solar energy production domestically (see Chinese Gov't Will Pay to Install 500MW Solar).

The announcements have been seen mainly as a way to help Chinese solar manufacturers that have struggled in a market marred by credit crunch and low demand.

Indeed, since the government talked about the first subsidy for building solar power plants earlier this year, a host of Chinese manufacturers have announced their signing of preliminary agreements with local governments, investors and power companies to build power plants.

Those projects tend to be in the hundreds of megawatts each. Chinese solar companies that have announced projects include Suntech Power (STP), Yingli Green Energy (YGE), LDK Solar (LDK) and ReneSola (SOL).

China currently has less than 100 megawatts of solar energy installations now, many of which are off the grid. The government is looking at setting a goal of installing 10 gigawatts by 2020.

Some analysts are skeptical about whether China's solar market will grow so quickly (see True of False: China Will be a Bigger Solar Market Than the U.S.).

Aside from its plan to subsidize power plant construction, China also intends to subsidize solar electricity generation. The government is expected to announce a feed-in tariff soon that would set a long-term purchase price for solar power that is higher than the price for electricity from coal-fired power plants. Similar policies have made Germany and Spain the top solar energy markets in the world.

First Solar's project would be eligible for the feed-in tariff, the company said.

The company is one of the largest solar panel makers in the world, and it uses a compound of cadmium-telluride for its products, unlike most of its competitors in China and elsewhere. First Solar also claims to be able to make panels cheaper.

The company historically has been focused on making and selling panels, and its largest market is Europe. It entered the power plant construction business in earnest over the past year, mostly to create a market for its solar panels in the United States (see Armed for Battle: First Solar v. SunPower v. Suntech).

The MOU, which was signed in the presence of a Chinese delegation from the National People's Congress of China, only outlines roughly what the project would entail. First Solar still needs to negotiate a formal agreement to spell out, among other things, the costs of the project.

Building a 2-gigawatt power plant could cost roughly $5 billion to $6 billion to build in the American southwest, said Alan Bernheimer, a First Solar spokesman.

But the actual cost in China is likely to be different. Labor costs could be less. But other expenses would be higher, particularly in the early stages of the project, because First Solar will need to set up a supply chain in this new market, Bernheimer added.

The MOU requires the solar panel maker to consider building factories in Inner Mongolia for making solar panels or other equipment used for building power plants.

First Solar plans to build the project in three phases. The first phase would be a 30-megawatt installation that would serve as a demonstration project, the company said. Construction for this phase would begin by June 1 next year.

Phase 2 would add 100 megawatts, phase 3 would add 870 megawatts and phase 4 would add 1 gigawatt. First Solar plans to complete phases 2 and 3 in 2014. The last phase would be completed by 2019, the company said.

Comments

[captainccs:]

Why use First Solar if China has a glut of polysilicon?

Sep 09 09:34 AM

[Lptinvestor:]

Yeah I agree. This deal doesn't make a lot of sense with China so overrun with solar companies...........good, quality solar companies over there in China at that.

Sep 09 09:54 AM

[Ming-Wei/Ming:]

China's subside policy states this by limiting efficiency above First solar's efficiency. It is not clear that First solar will go that far without resistant.

Sep 09 10:16 AM

[pgcyf2007:]

Cost of PV Modules with Thin Film technologies as USAD/Watt ( to be comprable) is about 50% face to modules with Silicium Technologies. That means for the same size XXX Mw of plant ( electrical power) the cost is about 50%. There are 2 main problems
1) Need near much more surface between 50% and 100% more . Not critical if surface is desert or equivalent
2) Thin Film Technologies are not tested about long term resistence to environmental factors and aging factors

Chinese PV Industry is quite developed in Silicium technologies ( now 90% of the market) but very little in the very competitive ( now and in the future) Think Film Technologies. So they like FIRST SOLAR to build a new factory in China to produce the 27 millions modules needed for 2000 Mw project in Inner Mongolia.

Sep 09 10:34 AM

[Ming-Wei/Ming:]

LDK Solar Completes First Polysilicon Production Run at 15,000 MT Polysilicon Plant showed light of the tunnel. They will reduced their cost of silicon.

Sep 09 11:00 AM

[HaavBline:]

Author made a ridiculously hyped one-liner at the beginning to catch attention. Then she proceed to write a pretty good, but flat, compilation of information that fail to provide that evidence of her claim that First Solar will CONQUER the Chinese market.

Be realistic. That will NOT happen.

Sep 09 12:39 PM

[wind4me:]

APWR is going to become the next First Solar of Clean , green Chinese power plant builders! Too many Chinese companies into solar to use an American company............sorry, this MOU wont work out long term!

Sep 09 03:05 PM

[trick:]

The Chinese govt has a lot of USD to spend, before it declines much further in value. Expect to see more of this.

Sep 09 05:18 PM

[Sol Rosenberg:]

Do any photons even make it through all of the air pollution in China? People go weeks in China without seeing the sun.

Sep 09 08:37 PM

[RK:]

You think the China based manufacturers would not use their political connections to limit the success of First Solar? First Solar must find powerful allies in the form of JV in China in order to be somewhat successful. This is how GM makes cars in China, how MacDonald and Starbucks operate in China. With the JV partners, First Solar has no chance.

Sep 09 09:24 PM

[RK:]

Should be "without JV partners" below, sorry for the typo.


On Sep 09 09:24 PM RK wrote:

> You think the China based manufacturers would not use their political
> connections to limit the success of First Solar? First Solar must
> find powerful allies in the form of JV in China in order to be somewhat
> successful. This is how GM makes cars in China, how MacDonald and
> Starbucks operate in China. With the JV partners, First Solar has
> no chance.

Sep 09 09:25 PM

[Alphameister:]

Very intriguing development. A way of using up dollars while also setting the stage for a more substantial pentetration of the U.S. market by Chinese solar suppliers? Inscrutable indeed!

Sep 10 09:02 AM

[Jack Yetiv:]

I would not make much of FSLR's "win," for several reasons (yes, I realize the market has disagreed with me so far, but that was also the case last year when FSLR was $300, and I opined its fair value was closer to $100):

1) What was signed was a memorandum of understanding, not a binding contract. Costs and pricing have not been determined yet. The "devil," as they say, "is in the details."

2) Even if this becomes a binding contract, first meaningful revenue to FSLR does not come for another 18 months or so. Further, I will bet FSLR's traditional 50%+ margins will be cut in half on this project--if not less.

3) The bulk of the revenue from this deal is several years away. Lots can happen between now and then--not the least of which is that I believe that total installed costs of poly-based panels will be LESS than the installed cost of FSLR's thin-film panels LONG before the bulk of the revenue is recognized. This sets up a significant possibility that FSLR's margins will either become razor-thin on this project in 2011 or 2012--or it will lose the contract to one or more Chinese poly-based panel makers.

Jack Yetiv

Sep 10 01:49 PM

[Road Runner:]

"First Solar Set to Conquer China's Growing Market". Please stop with the midleading, hype headlines. There is nothing in this that comes even close to your title.

The Chinese may be doing this for good PR to blunt all the western criticism of China restricting all their stimulus to Chinese companies. Or, maybe they want to get a first hand look at FirstSolar's installation technology so they can steal ideas. Or, maybe they just want to size up their products against the competition. Or, maybe they want to see firsthand how this thin-film product degrades over time. Or, maybe they are desperate for electricity in this region. Or, maybe ...

Sep 10 06:30 PM

[wind4me:]

Everyone talking SOLAR but WIND is going to be the monster in China in next 3 years, (APWR) is the ticket for future growth!

Sep 12 08:18 AM