Sun rises slowly on China’s solar energy sector

Guardian (UK), via Reuters: Solar power equipment makers will have to wait another half-decade or so before China, one of the world’s fastest-growing but most polluted economies, becomes a major market for them alongside Europe. But many are already preparing.

A bevy of U.S.-listed Chinese firms such as SunTech Power and foreign players such as Applied Materials Inc are starting to expand capacity in China, ploughing billions of dollars into factories across the country to capitalise on Beijing’s intention to generate a tenth of its power from renewables by 2010.
Executives and analysts warn Beijing first needs to get its act together and come up with an over-arching blueprint for subsidies, tax incentives and other schemes — as European governments have done — to drive the sector. Expansion itself is fraught with risk: this early in its development, some analysts say the sector is getting overcrowded and predict a shake-out benefiting big companies with access to the expensive raw material, polysilicon, and weeding out minor players.
“China is facing the same situation as Spain and Germany faced two years ago,” said Bryan Li, chief financial officer of solar cell manufacturer Yingli Green Energy. “The Chinese government is deciding whether to give money to the solar sector. And investors will start to pop up only when the government sets up a clear incentive scheme,” added Li.

Executives attending an industry conference in the southern city of Shenzhen this week said grandiose official targets on renewable energy must be backed up by clear-cut incentive schemes, which helped foster booming solar markets in western Europe, particularly Spain and Germany….
Chinese solar firms such as U.S.-listed SunTech Power, JA Solar Holdings and Trina Solar generate almost all their revenues overseas, with only a tiny proportion coming from the local market. But they predict a boom before too long. “We feel that in five years, the demand will be enormous,” said Steven Chan, chief strategy officer at SunTech.
China wants renewable energy to make up a tenth of its total energy consumption by 2010. This is an ambitious target in a country where coal — one of the dirtiest but most profitable types of power generation — is king.

“Government authorities are facing an enormous amount of pressure to address the currently low returns from renewables projects. Even domestic companies complain the returns are too low and hope there will be some improvements with a new tariff system,” Merrill Lynch said in a report. Most companies seem in little doubt of the government’s intentions to prop up the market and make it an attractive investment target.

There are signs that more and more domestic and foreign investors are keen to pour money into Chinese renewable energy, despite lower returns compared with western markets at present.
Shares in China’s biggest maker of windpower generating gear, Xinjiang Goldwind Science & Technology, soared 264 percent from their initial public offering price last year.
Solar stocks also posted massive gains in 2007 as concerns about climate change and soaring prices of fossil fuels boosted investor interest in renewable energy sources…

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