Chinese Solar Industry Getting Rational?
Earlier this year, the ’55th Chinese Solar IPO’ barely made it out the door. Five years of ‘free water, free electricity, free disposal, and free capital’ had finally wrought havoc with the business models of Chinese assemblers. As Chinese Powers that Be struggled to meet five year energy efficiency commitments, the days of free infrastructures may be near an end. Stranded polysilicon capital, much of it so high cost that it won’t run in a tight market (today!), along with a dormant public equity market, drove several producers to reassess their financial situation. Anecdotally, we notice the first rational steps toward a sustainable solar module industry – several companies have figured out what they do well, or at least better than the next competitor, and are following a natural course. Trina (TSL) has slowed its vertical integration, and is buying incremental wafers from an ‘on-site, on purpose’ plant operated by ‘competitor’ GCL (the only really successful polysilicon producer in country). GCL is replicating this role with Canadian Solar and Suntech. Solar Fun is providing private label modules to (well known) marketers who add their own brand and market it as their own. Ying Li manufactures models sold under the Schuco (German manufacturer) brand name – it was cheaper for Schuco to hire Ying Li than expand their own facilities. And Sunpower (SPWRA), once a proud designer, manufacturer, assembler, installer, has taken on a 50-50 partner to help it address its weakest function – costs. Companies are starting to talk about returns instead of gross margins. It’s not enough, but it’s a start.
Thirty three US states now have a renewable portfolio standards – up from 25 a year ago. The highest target renewable mix, 33% in California, faces a contentious (reversal) referendum earlier this month, which would suspend the standard until unemployment falls to 5.5% (now 9.5%). Ahead of the vote, the states Energy Boards has finalized approval of a gigawatt of utility-scale projects, by First Solar and Sunpower, plus ‘solar thermal’ projects which offer a storage feature for power generated during sunlight hours.
With the IPO of Amyris (AMRS), the number of venture backed companies working on the next generation of biofuels continues. Codexis (CDXS) went public in the spring. The two are at the front end of a lengthening pipeline of companies whose technology, the re-engineering of starches and yeasts, is a critical component in the development of more efficient biofuels. Both companies have ventures with Brazilian sugar/ethanol refiners. Sugar is the cheapest first generation biofuel extant (less than half the cost of corn-based ethanol).