2013-07-03
With Europe tipped to levy punitive duties on China’s PV industry, the once lucrative sector may be tottering towards grim challenges. Chairman Liu Hanyuan accepted interview from China Economic Times, and shared his views on China’s PV industry development.
The PV Industry development is at a low ebb
【Once the EU commission decided on levy anti-dumping duties, China’s PV industry will pay heavy price: 1. An estimated output value loss of over RMB ￥100 billion would be caused; 2. Chinese PV companies will lose international competitiveness and have to leave major markets, which in turn could cause bankruptcy of affiliated enterprises, bank credit loss, non-performing loans, and unemployment; 3. As the nation’s strategic industry for fostering economic transition model and new economic growth point, China’s PV industry would lose the most important support and be forced to stick to the old path.】
Q: What is your view on the current status of China’s PV industry, facing a sluggish domestic market and anti-dumping duties?
A: As you have said, currently China’s PV industry is at a low ebb, facing troubles from both domestic and international markets. Though after almost 10-year’s development, China’s PV industry has become a priority industry with international competitiveness, since 2010 the industry had been severely affected by anti-dumping duties from Europe and the U.S., causing production and factories closedown. The whole PV industry from silicon production, solar cell and module manufacturing, to PV system installation is in dire need of effective measures for protection and support from the State.
As for the actual operation of PV companies, the world’s largest PV module producer Wuxi Suntech declared bankruptcy this March. Meanwhile, the world’s leading PV company Jiangxi LDK Solar had a net loss of USD$1.016 billion with its asset reliability rate reaching 102.7%; From 2010 to 2012, the annual proceeds of the leading companies Trina’s declined from USD$ 311 million to USD$-267 million, and Yingli from USD$262 million to USD$– 513 million. So far this year, Trina lost USD$64 million in Q1, and Yingli lost USD$ 103 million. The deterioration of the situation will accelerate China’s PV sector’s overall decline, and cause serious harm to the entire value chain.
Once the EU commission decided to levy anti-dumping duties, China’s PV industry will pay heavy price: 1. An estimated output value loss of over RMB ￥100 billion would be caused; 2. Chinese PV companies will lose international competitiveness and have to leave major markets, which in turn could cause bankruptcy of affiliated enterprises, bank credit loss, non-performing loans, and unemployment; 3. As the nation’s strategic industry for fostering economic transition model and new economic growth point, China’s PV industry would lose the most important support and be forced to stick to the old path.
EU’s probe into Chinese solar products is the largest anti-dumping case of its kind with the widest influence. Whether China and Europe could reach a consensus on a solution in 1 month or within 6 months before the final verdict, depends on mediation by Chinese government and competent authorities. It is necessary to protect Chinese PV companies’ fair trade and legitimate rights in the international arena, and firmly oppose anti-dumping duties.
‘High pollution and high consumption’ is misconceived for the PV sector
【The industry-wide adoption of advanced all-closed circulating production technique enables major domestic producers to achieve just about zero emission. This is the basic concept of modern enterprise and emerging industry.】
【The input of 1 Kwh electricity for polysilicon and solar module production can bring a return of 25-30 Kwh electricity, an utmost return of 30-50 Kwh within the module’s effective life cycle of 25-30 years, bringing unparalleled energy utilization in human history.】
【Developing PV industry can not only help solve China’s sustainable energy supply and economic development, but more importantly, can serve as the fundamental measure to fulfill the Central Government’s plan of energy saving emission reduction as well as economic growth and development transition.】
【Energy production and consumption transition is the essence of economic growth model transition. 】
【As the major forms of clean energy, wind power, hydropower, and biomass energy is in nature some sort of conversion and utilization form of solar power. Solar PV generation is one of the most direct, clean, environment-friendly, sustainable ideal energy with the greatest potential, whether in terms of conversion cycle, conversion rate, development condition, environment influence, or of its mid- or long- term economical efficiency, stability and pro-environment aspects】
【The PV industry can generate huge economic benefits, which is of great significance to the harmony and stability in Mid- and West- China, policy implementation for minorities, environment protection, water and soil conservation, wealth increase for common people, as well as the upgrade and transition for China’s economic development and economic growth model】
Q: What is your view on the criticism of the industry’s high pollution and high consumption?
A: The phenomenon of high pollution and high consumption does exist for some individual companies. This can not, however, be the general perception of the PV industry, especially the upstream polysilicon sector.
’High pollution’ did exist at the stage when many years ago, the Chinese had not yet mastered the recycling technique, and simply discharged silicon tetrachloride and hydrogen chloride into the water. Now, the industry-wide adoption of advanced all-closed circulating production technique enables major domestic producers to achieve just about zero emission. This is the basic concept of modern enterprise and emerging industry.
’High consumption’ is simply concluded from the manufacturing process, during which the production of 1kg polysilicon would consume almost 100 Kwh electricity, in comparison with traditional fossil fuels. The latter, however, is not renewable, being consumed and gone forever, whereas in the PV industry chain, energy is consumed and converted into another substance. From the energy utilization point of view, polysilicon production serves actually as an energy converter through PV generation, with the output largely exceeding its input. By calculation, the input of 1 Kwh electricity for polysilicon and solar module production can bring a return of 25-30 Kwh electricity, an utmost return of 30-50 Kwh within the module’s effective life cycle of 25-30 years, bringing unparalleled energy utilization in human history.
Developing PV industry can not only help solve China’s sustainable energy supply and economic development, but more importantly, can serve as the fundamental measure to fulfill the Central Government’s plan of energy saving emission reduction as well as economic growth and development transition. Energy production and consumption transition is the essence of economic growth model transition.
The twelfth five-year planning has listed the renewable clean energy of PV power, wind power, biomass and geothermal energies as the nation’s strategic emerging industries. As the major forms of clean energy, wind power, hydropower, and biomass energy is in nature some sort of conversion and utilization form of solar power. China’s possession of solar PV generation resources goes far beyond the total volume of other renewable resources. Solar PV generation is one of the most direct, clean, environment-friendly, sustainable ideal energy with the greatest potential, whether in terms of conversion cycle, conversion rate, development condition, environment influence, or of its mid- or long- term economical efficiency, stability and pro-environment aspects.
It is necessary to develop solar PV industry based new energy, and gradually decrease the consumption of fossil fuel stock. As for the environment and resources, the best and most revolutionized sustainable utilization is to satisfy over 70% energy consumption by PV power generation and other renewable energies in 30-50 years. By then, China’s long-term sustainable supply and environment development can be fundamentally addressed.
Additionally, solar PV industry is a sunrise industry with scaled market, wide industry radiation and distinct driving effect. Mid- and West- China enjoys abundant solar energy resources in desert and plain areas. Making this region China’s future clean energy base, is not only the need of economic development for provinces of Sichuan, Qinghai, Gansu, Inner Mongolia and Xinjiang, but also of great significance to regional harmony and stability, policy implementation for minorities, environment protection, water and soil conservation, wealth increase for common people, as well as the upgrade and transition for China’s economic development and economic growth model.
China’s PV industry is well-positioned for vigorous development and wide application.
【With production scale-up and technique improvement, currently the cost of PV power generation system is controlled within the range of 5000-8000 yuan/Kw, and PV power generation cost within 0.6-0.8 yuan/Kwh. All the energy input consumed by solar modules during production can be returned in half a year for regions with rich solar resources, and in 1 year for 3rd or 4th tier regions. The modules can run stably for 25-30 years with almost no maintenance and zero emission.】
Q: Is China’s PV industry well-positioned for vigorous development and wide application?
A: Presently, as the world’s biggest PV module producer and exporter, China has established a complete PV industrial chain. The PV industry has become one of its priority industries with international competitiveness and leading position. China’s PV industry is well-positioned for vigorous development and wide application.
During the industry downturn in 2012, China’s module production was still able to reach 23 GW with a year-on-year growth of 10%, accounting for 60% of the world’s total, with the annual output value reaching RMB￥300 billion yuan. With production scale-up and technique improvement, currently the cost of PV power generation system is controlled within the range of 5000-8000 yuan/Kw, and PV power generation cost within 0.6-0.8 yuan/Kwh. All the energy input consumed by solar modules during production can be returned in half a year for regions with rich solar resources, and in 1 year for 3rd or 4th tier regions. The modules can run stably for 25-30 years with almost no maintenance and zero emission.
China’s PV product application comparatively fell behind major developed western countries. Take Germany for instance, its land area is just 1/27 of that of China, and most of its PV resources is just equivalent to that from the 3rd or 4th tiered regions in Mid- and East-China. Since the implementation of Renewable Energy Sources Act (EEG) in 2005, Germany’s PV installed capacity has seen rapid growth with an annual increase of 7-8GW for recent 3 years. May, 26, 2012, Germany set a new record. Its solar power plants produced 50% of the nation’s electric energy. Meanwhile, the country has basically achieved grid parity this year, making it possible the shutdown of all nuclear power plants in 2020.
With the same growth ratio and speed of Germany, China’s annual installed capacity increase could have exceeded 50GW. Last year, however, China’s installed capacity increase was only 4 GW, accounting for 7% of the world’s total. The increased installed capacity only accounted for 5% of the country’s total volume of 80 million Kw.
Related support policy details to be made explicitly
【The predicament of the PV industry is essentially caused by misunderstandings, misconceptions, and negative judgments, such as high pollution and high consumption. The formation of social consensus needs guidance from the State. It is important to truly realize that the PV industry is the necessary path for China’s or even the world’s energy solution, and is the inevitable choice of sustainable development and economic development model transition.】
【Support from the State could be given from the following five aspects: 1. The execution period of subsidy shall be 25 years. 2. The current FiT policy of 1 yuan / Kwh shall not be adjusted during the twelfth five year planning. 3. The FiT for distributed power generation should be unified at 0.5 yuan/Kwh. 4. The executive examination and approval procedures of downstream PV generation projects should be streamlined and released.5. The above policies shall be put in place during the twelfth five year planning. With gradual guidance, grid parity could be achieved in about 10 years. 】
-- The execution period of subsidy shall be 25 years. According to PV modules’ current averaged life time of 25 – 30 years, an execution time of 25 years could bring definite expectation and confidence to the market.
-- The current FiT policy of 1 yuan / Kwh shall not be adjusted during the twelfth five year planning period. The implementation of the FiT policy has just started. The domestic PV application market has not been initiated in large scale with just a small volume of plants being completed. It is therefore better to keep with the 1 yuan electricity price policy, enabling the market to be moderately heated. Lowering electricity price too soon will only bind the market with hesitation and straddle, inflicting greater losses to the industry.
-- The FiT for distributed power generation should be unified at 0.5 yuan/Kwh. The subsidy can only activate investment enthusiasm by bringing more proceeds to end users than directly using electricity from the power grid. It is preferred to have more subsidies so as to promote the wide application of distributed power generation. In addition, if classified FiT is implemented, loopholes in laws and regulations could be taken advantage of, making intermediate management harder and giving rise to possible grey zone.
-- The executive examination and approval procedures of downstream PV generation projects should be streamlined and released. Meanwhile, related support policies and measures from banking regulatory commission, banks, revenue and insurance companies shall be made clear and definite. Particularly, PV power plants shall be taken equivalent to hydropower plants with simpler project management and credit financing means. The purpose is to effectively address the pressing issue of relevant financing policy for PV power companies. Especially in recent years, increasing currency issuance may lead to a negative effect of inflation and the financing status of high deposit reserve. Banks shall press on with making explicit support policies, and establishing a sound financing service system for the PV industry. Window for new energy special fund development shall be specially opened. It is also necessary to mobilize, encourage, guide and support capital from all sources into the long-term investment in the PV industry for sufficient capital reserve. Credit rate shall also be regulated, with the standard of zero rate or a low rate of 3%, exempting 17% power rate value-added tax.
-- The above policies shall be implemented stably during the twelfth five year planning period. Domestic PV application market and scientific development need to be effectively promoted with related policies being put in place. Adjustment shall be made in accordance with actual conditions of installed capacity, market environment, and cost variation in future, giving the market an adjustment period of half a year to 1 year. With gradual guidance, grid parity could be achieved in about 10 years.
I believe, if the State’s policies are effectively implemented, solar PV generation grid parity can be achieved in 10 years with the finance support that the State is capable to bear. The nation’s energy supply ability can be promoted to the greatest extent. The situation of being negatively checked and controlled can be altered, and China’s energy supply safety can be thus ensured.