XinHua News
Chinese PV pioneer helps build Israel's biggest solar power station
2008-12-09 06:27:49
KATSRIN, Israel, Dec. 8 (Xinhua) -- Israel's biggest solar power station was inaugurated on Monday in this Israeli northern town, setting up a landmark in the Chinese-Israeli cooperation in the field of clean energy.
The 50 KW rooftop project, estimated to generate 85,000 KWH a year, was co-built by China's Suntech Power Holdings Co., Ltd., a world-leading solar energy company, mainly specialized in photovoltaic (PV) power generation technologies, and Solarit Doral, a major local player in Israel's renewable energy market.
Dubbed the biggest and most efficient of its kind so far in Israel, the solar power station is integrated into Israel's national grid, as the Jewish state has been carrying out incentive measures to prod the development of alternative energy, including purchasing cleanly generated electricity at a relatively higher price.
Highlighting the urgent need to find alternative resources to power the world and protect the environment, Zhao Jun, Chinese ambassador to Israel, said at the ceremony that China has been investing heavily in alternative energy, and shares great cooperation potentials with Israel in relevant respects.
"It is very appropriate and natural for Chinese and Israeli companies to work together on this," he told Israeli National Infrastructures Minister Binyamin Ben-Eliezer and local officials.
Ben-Eliezer, whose ministry has unveiled an ambitious plan to produce 20 percent of its electricity through renewable resources by 2020, stressed that Israeli government pays high attention to the development of clean energy, and noted that Israel and China should deepen cooperation in commonly-interested fields, particularly water resources and renewable energy.
Meanwhile, representatives from Suntech, a listed company in New York Stock Exchange, said that the company is planning with its Israeli counterpart to construct a larger solar power plant in southern Israel.
Editor: Sun
Showing posts with label Photovoltaic. Show all posts
Showing posts with label Photovoltaic. Show all posts
Tuesday, December 9, 2008
Wednesday, November 19, 2008
Polysilicon prices have dropped by 50%. Industry calls for adjustments in energy structure.
Information from a source on Monday from the PV industry says that since October, China's polysilicon price has shown a big adjustment. In the recent 2 weeks, the price per kilogram is only about 1000 RMB to 1500 RMB (about 147 USD to 220 USD). Comparing to the peak price of 400 USD to 500 USD per kilogram, the price has fallen by more then half.
The source provided the information while attending the First China-US Green Technology Forum. He points out that because of the outbreak of the financial crisis and the big drop in crude oil price, quite some PV related projects are affected by the banks credit tightening and low liquidity and delayed. The result is that in the short term, there are no more shortage of raw materials in the market and thus the price of polysilicon took a great fall.
As more polysilicon projects goes into production globally this year, the supply source enlarges which speeds up the balancing of demand and supply says the source.
Canadian Solar Inc. (CSI) chairman, president & chief executive officer 瞿晓铧 who was also present at the forum confirms that polysilicon price has seen a retrace. He said that in June-July period, polysilicon price reached the peak of 400 USD to 500 USD per kilogram. At that time, CSI completely stopped all purchasing from the spot market and took measures to extract upgraded metallurgical grade (UMG) silicon and through long term partnership and other methods to get raw materials.
But Dow Corning greater China president Thomas H. Cook (柯同德) said that altough some polysilicon spot contract prices have started to fall, overall the polysilicon market still has not shown excess production capacity.
On the effects of the financial crisis and the fall in crude oil price, 瞿晓铧 thinks that the effects are only temporary. He thinks that in the short term there may be psychological effects on the PV industry but in the long term the development trend will not change.
瞿晓铧 thinks that a mature policy maker should take the current opportunity of low oil price to adjust the country's energy structure. It should include 2 things. One is to increase the energy in dependency and energy safety. The next is to adjust the ratio between crude oil energy and new energy. Under the condition of high oil price, such adjustments will be hard to push because of high costs. But currently it provides a good opportunity and can better achieve a more stabilized adjustment.
LDK chairman and chief executive officer 彭小峰 said recently that the financial crsisi has brought great opportunities for the company's development. The reason being that the financial crisis has caused raw materials prices to drop. The raw materials cost for the company can be expected to drop 40% to 50%. 彭小峰 said that at such situations, the costs for PV electricity generation and traditional electricity generation can catch up. On the condition that electricity prices to keep on increasing and costs for PV to keep dropping, it will speed up the penetration of PV products. There is the possibility that the previous estimated price of $1 per Watt in 2012 can be brought forward by 2 years.
The source provided the information while attending the First China-US Green Technology Forum. He points out that because of the outbreak of the financial crisis and the big drop in crude oil price, quite some PV related projects are affected by the banks credit tightening and low liquidity and delayed. The result is that in the short term, there are no more shortage of raw materials in the market and thus the price of polysilicon took a great fall.
As more polysilicon projects goes into production globally this year, the supply source enlarges which speeds up the balancing of demand and supply says the source.
Canadian Solar Inc. (CSI) chairman, president & chief executive officer 瞿晓铧 who was also present at the forum confirms that polysilicon price has seen a retrace. He said that in June-July period, polysilicon price reached the peak of 400 USD to 500 USD per kilogram. At that time, CSI completely stopped all purchasing from the spot market and took measures to extract upgraded metallurgical grade (UMG) silicon and through long term partnership and other methods to get raw materials.
But Dow Corning greater China president Thomas H. Cook (柯同德) said that altough some polysilicon spot contract prices have started to fall, overall the polysilicon market still has not shown excess production capacity.
On the effects of the financial crisis and the fall in crude oil price, 瞿晓铧 thinks that the effects are only temporary. He thinks that in the short term there may be psychological effects on the PV industry but in the long term the development trend will not change.
瞿晓铧 thinks that a mature policy maker should take the current opportunity of low oil price to adjust the country's energy structure. It should include 2 things. One is to increase the energy in dependency and energy safety. The next is to adjust the ratio between crude oil energy and new energy. Under the condition of high oil price, such adjustments will be hard to push because of high costs. But currently it provides a good opportunity and can better achieve a more stabilized adjustment.
LDK chairman and chief executive officer 彭小峰 said recently that the financial crsisi has brought great opportunities for the company's development. The reason being that the financial crisis has caused raw materials prices to drop. The raw materials cost for the company can be expected to drop 40% to 50%. 彭小峰 said that at such situations, the costs for PV electricity generation and traditional electricity generation can catch up. On the condition that electricity prices to keep on increasing and costs for PV to keep dropping, it will speed up the penetration of PV products. There is the possibility that the previous estimated price of $1 per Watt in 2012 can be brought forward by 2 years.
Sunday, November 9, 2008
China PV Enterprise Tough Choice
On 15 October 2008, LDK Director, President and Chief Operating Officer Tong XingXue said that 80% of the China PV industry are facing a shortage of funds. Some are cutting production to preserve cash and some have stopped work.
On 30 October 2008, on the the Forbes list of China richest, at the top and bottom of the industrial chain LDK Chairman and Chief Executive Officer Peng XiaoFeng and Suntech Chairman of the Board and Chief Executive Officer Shi ZhengRong position on the list are in close fight but their value halved at about 9.59 billion yuan and 10.2 billion yuan.
At the effect of the financial crisis, once considered the 'sunrise' industry, the PV industry is now not spared from the financial crisis. China's PV industry now faces 2 great risks. 1) Forex losses. 2) Market demand slowing down. Another thing is the tightening of the banks loans. All the various factors have caused the 'money burning' PV industry to feel the early arrival of winter. Some analysts even think that the next movements of the PV industry will be known by the end of the year.
Forex Risks
As the largest solar module producer on the globe, Shi ZhengRong may be the first to know of the marktet movements in the PV industry.
About 98% of China's PV industry's market are overseas with most their products selling to Europe, US, Spain, Japan, etc. In the second half of this year, the Euro depreciation against the RenMinBi (RMB) has overtaken the USD. In the recent 3 months, the exchange rate between Euro and USD has dropped more than 21%.
Sources says that Suntech which is listed on the New York Stock Exchange with its products mostly selling to Germany, because its production scale is the largest and most of the contracts are conducted in Euro, its losses will be the greatest in this round of Euro decline in the forex market. Also, its producte being in the lower end of the industrial chain, it will face directly the end market demand challenges.
Sources said that for example, after exchanging, for every 1 million Euro earned there will be up to 210,000 Euro loss. Sources said that from beginnging of 2006, in order to reduce the risk of the exchange rate between RMB and USD, a lot of export industries have changed to use Euro as the trading currency rather than the USD and now the rapid depreciation of the Euro is becoming the hot potato in those industry's hands.
As such, Suntech's investor relationship department mentioned that the depreciation of the Euro has at a certain level affected the company's performance and says that in the current financial crsis, not one can escape unhurt.
Other than the forex risk, currently the price for solar panels have fallen about 6%-8%. US market research company FBR mentions that the gross margin for the PV industry is going to decline and expects that product prices will decline even more in the November period and will decline about 10% in the fourth quarter of this year till next year's first quarter.
Suntech has shown rather good performance in this year's 2nd quarter with revenue at about 480.2 million USD, a 51.3% increase in income growth and a gross margin of about 24.1%. Following that, the company have risen the target and mentioned that revenue for 2008 to increase from 1.9 billion to 2.1 billion, the production output to incrase from the previous 530MW to 550MW.
Analysts are taking a wait-and-see attitude towards such claims of Suntech because 2nd quarter's growth for Suntech is under the fact that other factories are in shortage of raw materials which causes Suntech to receive large orders giving it a certain level of advantage. However, under the current financial situations, end-market demand has its limitations.
Goldman Sachs in its report says the prices for parts to be used at lower end of the PV industry will face price falling pressure and with the current international credit crunch environment makes the global outlook for solar energy policies subsidies to be more prudent. The report says that during such times, a strong financial position for companies is the most important.
Suntech says that they will use financial tools to hedge a certain amount of the Euro contracts in order to reduce the risks of forex to the minimum. Suntech hoped to use financial means to reduce the effect of the depreciating Euro. But regarding the results, Suntech says that it will provide information on the 20 November 2008 3rd quarter report.
LDK, also on the the Forbes list of China richest, with silicon materials as its products, Peng XiaoFeng says that LDK have no worries in forex. In order to avoid possible forex risks, LDK focused on the adjustments for different currencies deployment. He said that most of LDK's contracts are based on the RMB and USD. For the Europe market products, mostly are also based on the USD. About 30% are RMB based orders, 60% USD and only 10% for Euro.
Peng XiaoFeng says that it can be adjusted. For the 10% orders in Euro, they will be used on equipment purchases. Before this, Peng XiaoFeng has 15 years experience in export trading.
Peng XiaoFeng says that from LDK's order list, most of the contracts are in the 5-10 years period. The orders have now been arranged until 2018 and can guarentee about 10% of deposits which amounts to about 700 million USD. Peng XiaoFeng says that on the eve of the financial crisis on 19 August 2008, LDK successfully sold 4.8 million ADS, raising about 200 million USD worth of funds.
As for whether he will select some financial tools to hedge against forex risks, Peng XiaoFeng says that LDK will not go into something that it is not familiar with.
Market Demand Slowing
The credit crunch will cause a contraction in the end market investments and competition for funds is already white hot. Normally big solar projects can go immediately with the need for a few billions USD support. Some are not even profitable and what they can do is sell their government's tax credit eligibility in exchange for funds.
One manager from GE Energy Financial Services says that there are a lot of solar projects government's tax credit eligibility on the market. A 1,000MW solar project can create about up to 1.5 billion USD worth of government's tax credit eligibility. But at this time, there are few who have the potential to buy up those government's tax credit eligibility. Everybody is looking for money everywhere.
The industry is worrying about the end market as the economic slowdown will weaken the demand for China's PV products which will cause an increase in over-capacity.
As the largest solar module producer on the globe, LDK's coming order list situation becomes the largest indicator for the whole PV industry.
Suntech expressed that the credit crisis is only a short term challenge. It will not change the overall situation and it will not change the inevitable trend on the rapid development of new energy. Suntech hopes to restore confidence in investors.
What can be seen currently is that, Germany which takes about half the world's PV market, has plans to reduce 7% of the subsidies from beginning of next year. Spain's subsidy plan ended in September. The new US president choice will also affect the support for the PV industry. From the PV industry's stock price movements we can see that there is a weakening in investors confidence.
Crystalline silicon cells cost of generating electricity is about 3.8 USD per Watt. Thin film solar cells cost of generating electricity is about 2.8 USD per Watt, much higher then traditional electricity generation methods. Thus, PV industry's market will still be based on government policies directions. Shanghai Solar Energy Society Chairman 崔容强 says that the rapid development in the PV industry mainly depends on Germany, Spain, US and other government's various subsidy policies for power generation into the power grid to encourage development. Although the prospects are good in the long term, but with the current global financial pressures, various country's government needs funds to resolve thier own domestic financial problems, will there be weakening of the efforts to support the PV industry cannot be judged at the moment.
With the spot price of solar cells down, it has also brought about the loosening of prices of materials in the upper industrial chain. LDK, being at the upper end of the industrial chain, its current list of orders is estimated to last about one winter period with signed supply of up to 15GW with next year's estimated sales to reach 1.6GW. Most of the customers are Q-Cells, SolarTech and other big global companies, these are almost guaranteed demands.
Peng XiaoFeng says that every year they give customers about 10% price reduction in order to safeguard the rights and interests of customers. Next year when their silicon plant goes into operation, they can increase the gross margin from the current 25% to about 40%-50%. With the support of the 16,000 tonnes silicon factory, together with LDK's enclosed recycle system, the price per kilogram of silican wafer can be controlled at about 20-25 USD, down from 100 USD.
From the evolve from 'Silicon Material is King' to 'Technology is King', with the coming of the financial crisis storm to the PV industry, only those companies with core competitiveness can survive said a source from a PE. This may be an opportunity to structure the 'chaos' in PV industry. Because steel, oil and other purchasing material prices have went down, the cost to build and run a factory is much lower then before.
With the semiconductor industry downturn, Applied Materials, Qimonda and others have announced that they will expand into solar business. The big number of people retrenched from the semiconductor industry can also benefit from the growth in solar business.
At the current situation, which could be the worst or the best times, how many in the PV industry can last through this coming 'winter', overcoming the problems of shortage of funds and slowing of market demand and how many can benefit from the current situation, we will have to wait and see.
On 30 October 2008, on the the Forbes list of China richest, at the top and bottom of the industrial chain LDK Chairman and Chief Executive Officer Peng XiaoFeng and Suntech Chairman of the Board and Chief Executive Officer Shi ZhengRong position on the list are in close fight but their value halved at about 9.59 billion yuan and 10.2 billion yuan.
At the effect of the financial crisis, once considered the 'sunrise' industry, the PV industry is now not spared from the financial crisis. China's PV industry now faces 2 great risks. 1) Forex losses. 2) Market demand slowing down. Another thing is the tightening of the banks loans. All the various factors have caused the 'money burning' PV industry to feel the early arrival of winter. Some analysts even think that the next movements of the PV industry will be known by the end of the year.
Forex Risks
As the largest solar module producer on the globe, Shi ZhengRong may be the first to know of the marktet movements in the PV industry.
About 98% of China's PV industry's market are overseas with most their products selling to Europe, US, Spain, Japan, etc. In the second half of this year, the Euro depreciation against the RenMinBi (RMB) has overtaken the USD. In the recent 3 months, the exchange rate between Euro and USD has dropped more than 21%.
Sources says that Suntech which is listed on the New York Stock Exchange with its products mostly selling to Germany, because its production scale is the largest and most of the contracts are conducted in Euro, its losses will be the greatest in this round of Euro decline in the forex market. Also, its producte being in the lower end of the industrial chain, it will face directly the end market demand challenges.
Sources said that for example, after exchanging, for every 1 million Euro earned there will be up to 210,000 Euro loss. Sources said that from beginnging of 2006, in order to reduce the risk of the exchange rate between RMB and USD, a lot of export industries have changed to use Euro as the trading currency rather than the USD and now the rapid depreciation of the Euro is becoming the hot potato in those industry's hands.
As such, Suntech's investor relationship department mentioned that the depreciation of the Euro has at a certain level affected the company's performance and says that in the current financial crsis, not one can escape unhurt.
Other than the forex risk, currently the price for solar panels have fallen about 6%-8%. US market research company FBR mentions that the gross margin for the PV industry is going to decline and expects that product prices will decline even more in the November period and will decline about 10% in the fourth quarter of this year till next year's first quarter.
Suntech has shown rather good performance in this year's 2nd quarter with revenue at about 480.2 million USD, a 51.3% increase in income growth and a gross margin of about 24.1%. Following that, the company have risen the target and mentioned that revenue for 2008 to increase from 1.9 billion to 2.1 billion, the production output to incrase from the previous 530MW to 550MW.
Analysts are taking a wait-and-see attitude towards such claims of Suntech because 2nd quarter's growth for Suntech is under the fact that other factories are in shortage of raw materials which causes Suntech to receive large orders giving it a certain level of advantage. However, under the current financial situations, end-market demand has its limitations.
Goldman Sachs in its report says the prices for parts to be used at lower end of the PV industry will face price falling pressure and with the current international credit crunch environment makes the global outlook for solar energy policies subsidies to be more prudent. The report says that during such times, a strong financial position for companies is the most important.
Suntech says that they will use financial tools to hedge a certain amount of the Euro contracts in order to reduce the risks of forex to the minimum. Suntech hoped to use financial means to reduce the effect of the depreciating Euro. But regarding the results, Suntech says that it will provide information on the 20 November 2008 3rd quarter report.
LDK, also on the the Forbes list of China richest, with silicon materials as its products, Peng XiaoFeng says that LDK have no worries in forex. In order to avoid possible forex risks, LDK focused on the adjustments for different currencies deployment. He said that most of LDK's contracts are based on the RMB and USD. For the Europe market products, mostly are also based on the USD. About 30% are RMB based orders, 60% USD and only 10% for Euro.
Peng XiaoFeng says that it can be adjusted. For the 10% orders in Euro, they will be used on equipment purchases. Before this, Peng XiaoFeng has 15 years experience in export trading.
Peng XiaoFeng says that from LDK's order list, most of the contracts are in the 5-10 years period. The orders have now been arranged until 2018 and can guarentee about 10% of deposits which amounts to about 700 million USD. Peng XiaoFeng says that on the eve of the financial crisis on 19 August 2008, LDK successfully sold 4.8 million ADS, raising about 200 million USD worth of funds.
As for whether he will select some financial tools to hedge against forex risks, Peng XiaoFeng says that LDK will not go into something that it is not familiar with.
Market Demand Slowing
The credit crunch will cause a contraction in the end market investments and competition for funds is already white hot. Normally big solar projects can go immediately with the need for a few billions USD support. Some are not even profitable and what they can do is sell their government's tax credit eligibility in exchange for funds.
One manager from GE Energy Financial Services says that there are a lot of solar projects government's tax credit eligibility on the market. A 1,000MW solar project can create about up to 1.5 billion USD worth of government's tax credit eligibility. But at this time, there are few who have the potential to buy up those government's tax credit eligibility. Everybody is looking for money everywhere.
The industry is worrying about the end market as the economic slowdown will weaken the demand for China's PV products which will cause an increase in over-capacity.
As the largest solar module producer on the globe, LDK's coming order list situation becomes the largest indicator for the whole PV industry.
Suntech expressed that the credit crisis is only a short term challenge. It will not change the overall situation and it will not change the inevitable trend on the rapid development of new energy. Suntech hopes to restore confidence in investors.
What can be seen currently is that, Germany which takes about half the world's PV market, has plans to reduce 7% of the subsidies from beginning of next year. Spain's subsidy plan ended in September. The new US president choice will also affect the support for the PV industry. From the PV industry's stock price movements we can see that there is a weakening in investors confidence.
Crystalline silicon cells cost of generating electricity is about 3.8 USD per Watt. Thin film solar cells cost of generating electricity is about 2.8 USD per Watt, much higher then traditional electricity generation methods. Thus, PV industry's market will still be based on government policies directions. Shanghai Solar Energy Society Chairman 崔容强 says that the rapid development in the PV industry mainly depends on Germany, Spain, US and other government's various subsidy policies for power generation into the power grid to encourage development. Although the prospects are good in the long term, but with the current global financial pressures, various country's government needs funds to resolve thier own domestic financial problems, will there be weakening of the efforts to support the PV industry cannot be judged at the moment.
With the spot price of solar cells down, it has also brought about the loosening of prices of materials in the upper industrial chain. LDK, being at the upper end of the industrial chain, its current list of orders is estimated to last about one winter period with signed supply of up to 15GW with next year's estimated sales to reach 1.6GW. Most of the customers are Q-Cells, SolarTech and other big global companies, these are almost guaranteed demands.
Peng XiaoFeng says that every year they give customers about 10% price reduction in order to safeguard the rights and interests of customers. Next year when their silicon plant goes into operation, they can increase the gross margin from the current 25% to about 40%-50%. With the support of the 16,000 tonnes silicon factory, together with LDK's enclosed recycle system, the price per kilogram of silican wafer can be controlled at about 20-25 USD, down from 100 USD.
From the evolve from 'Silicon Material is King' to 'Technology is King', with the coming of the financial crisis storm to the PV industry, only those companies with core competitiveness can survive said a source from a PE. This may be an opportunity to structure the 'chaos' in PV industry. Because steel, oil and other purchasing material prices have went down, the cost to build and run a factory is much lower then before.
With the semiconductor industry downturn, Applied Materials, Qimonda and others have announced that they will expand into solar business. The big number of people retrenched from the semiconductor industry can also benefit from the growth in solar business.
At the current situation, which could be the worst or the best times, how many in the PV industry can last through this coming 'winter', overcoming the problems of shortage of funds and slowing of market demand and how many can benefit from the current situation, we will have to wait and see.
Wednesday, August 27, 2008
The China PolySilicon balance sheet
CEO of LDK Solar (赛维 LDK) in China says that if it is possible to lower the cost of polysilicon purchase, it will be possible to resolve the high cost of using solar panel to generate electricity. It should be possible to reduce the dollar per watt from 4 to below 1 dollar.
Polysilicon takes up to about 70% of the cost to manufacture a solar panel. In order to keep up with the profit margin, the leading solar panel manufacturers in China are moving upstream into polysilicon material related projects. A lot of other solar panel manufacturers outside of China are also rushing into the same area in order to have a piece of the cake in the most lucrative part in the solar panel industry.
According to data, currently there are about 33 projects in China in building on the solar panel related projects with total investments of about 100 billion yuan. Local governments are most happy to bring in such projects and then get it listed as quick as possible on stock markets outside of China.
Some industry experts are already sounding the alarm bell that polysilicon may face the danger of excess production capacity in the near future. If the 33 polysilicon projects that are currently building are able to fulfill full production capacity , they can manufacture up to 140,000 tonnes. In 2010, the estimated global demand for polysilicon is about 80,000 tonnes.
The Ecomomic Figures
Polysilicon manufacturing costs at more high tech plants outside of China is about 30 US dollar per kilogram. Because of technology barrier, capital limitations and the quick development of the end of the manufacturing chain, there is severe shortage of polysilicon in recent years. In China, ready stocks can sell for about 500 US dollars and about 95% is imported.
Such high profits are being eyed after by the China manufacturers.
As Asia's largest polysilicon manufacturing enterprise, LDK Solar's 70%-80% polysilicon material mostly came from the recycling of polysilicon from semi-conductor plants outside of China, waste materials from semi-conductor plants and also other silicon based side materials. The waste materials are much cheaper compared to the direct material purchase price. Those quantity that cannot be met by recycling are purchased from polysilicon manufacturing plants outside of China. But now, even waste materials from semi-conductor plant are getting scarce.
August 2007, LDK Solar invested 13 billion yuan to kick start the upstream manufacturing project of polysilicon with yearly manufacturing capacity of 16,000 tonnes. It is estimated that by the end of 2008, production capacity is to reach 6,000 tonnes and by 2009 will see the full completion of the project.
About 2 months ago, LDK Solar completed its IPO listing in US, the largest new energy IPO in China. Currently, the 16,000 tonnes silicon project has become the largest polysilicon plant globally.
The reason for the 13 billion yuan big investment was that LDK Solar believes that a more economical way of manufacturing polysilicon is to have large scale manufacturing capacity. During the manufacturing of poly-silicon, there is a side product namely Silicon Tetrachloride, a poisonous gas. If this gas cannot be re-cycled, it can harm and pollute the environment. If the polysilicon manufacturing plant can build an enclosed re-cycling system to convert the Silicon Tetrachloride to Trichlorosilane, not only can it can re-cycle the gas for re-usage, stop environmental pollution and lower production consumption, it can help create economical value and lower costs.
Investment in this area is pretty high and there is a high re-cycling technology barrier. Those small plants with capacity of about a few hundred tonnes and with investment amount of only about 100 to 200 million yuan are unable to get into it.
LDS Solar's will take the industrial grade silicon and do extraction/purification. This step needs high technology support, consumes the most energy and have high pollution and re-cycling index. This step also greatly impacts the profit margin. Currently, China plants costs are at about 100 US dollars.
In the past 20 years, the market value of polysilicon per kilogram is about 60 US dollars. Analysts in the industry think that the 400 to 500 US dollars per kilogram is too lucrative and costly. Once when the price goes back to the norm, it will be the time when the industry faces re-shuffling.
LDK Solar's CEO says that in order to reach a viable ecnonomic model, the manufacturing capacity of polysilicon projects should reach 10,000 tonnes. LDK Solar hopes to maintain the cost per kilogram at 20 to 25 US dollars. With the lowering in price of raw materials, then the profit margin at the next steps for silicon wafer production can be increased.
After reaching 16,000 tonnes production capacity, it will all be used fully for LDK Solar's internal silicon wafer production. Currently a lot of the industry players are facing shortage of materials and thus cutting their manufacturing lines and so the production capacity is not fully utilized.
According to LDK Solar's 2008 2Q results, gross margin is about 112.3 million US dollars, gross profit margin is about 25.4%. If LDK Solar were to meet expected production capacity next year, it can reach about 40%-50%.
Capacity Risks
In 2006, when polysilicon was in high demand, a lot of the PV enterprise players chosed to sign long term supply contracts with the global big silicon suppliers. The secured long term contracts may resolve the supply situation but will also face risks when price drops.
In the same year, Suntech (尚德) in WuXi China signed a 5 to 6 billion US dollar polysilicon 10 year contract with the big global suppier MEMC and also signed a 678 million US dollar contract with HoKu in US.
To lower the production cost of a solar panel, other then the raw silicon wafer cost, the other ways are to increase the efficiency of the electricity conversion process and decrease the silicon wafer thickness. But now, the more established industry players are looking upstream to the manufacturing of the raw silicon material.
Industrial leaders are moving upstream in order to open up the industrial chain. Other then LDK Solar's 16,000 tonnes polysilicon project, Suntech invested Asia Silicon (亚洲硅业) have a 6,000 tonnes polysilicon project in oder to have a more secured supply. TianWei BaoBian (天威保变) invested XinGuang Silicon Technology (新光硅业) is also preparing to built two 3,000 tonnes polysilicon projects in ChengDu (成都) XinJin (新津) and LeShan (乐山) in order to link up with the downstream solar panel manufacturing chain.
The high lucrative has attracted a lot of other industrial players in order to have a piece of the sweet cake in the PV industry. Glass industry leader China Southern Glass (南玻集团) has invested a few billions to build a 5,000 tonnes polysilicon project. A subsidiary of DAQO Group (大全集团), originally named Jiangsu Changjiang electronic group, which is in the electrical industry, has plan for a 10,000 tonnes polysilicon project. From the garment industry there is JiangSu Sunshine (江苏阳光) investing in a 4,500 tonnes polysilicon project and so on.
In the past 3 months, Intel, IBM, HP, GE, Bosch, BP, Samsung, Hyundai, LG and UMC are all going into or expanding their investment in the solar energy industry.
Industry experts see that although there are a lot of polysilicon projects ongoing on or starting up, in the short term, the production capacity cannot be fully realized. In 2007, China's polysilicon yearly production capacity was only about 1,100 tonnes and the demand at the same year was about 12,000 tonnes. In 2008, polysilicon supply shortfall situation still exists. Industry players who have the supply chain advantage will be able to avert the market risk.
Chinese Renewable Energy Society secretary-general says that the support for PV industry development comes from various countries government's energy related policies. Germany, US and Japan's are the most effective. Legislations, energy purchase rebates, rate cuts and investment subsidies have helped with the development of the PV industry. Currently in China there are no such policies yet. China's PV industry have to find its own survival space in this unbalanced demand-supply situation outside of China, which is quite reactive.
LDK CEO thinks that after 5 years time, the industry can supply about 100 GW, 3 times demand. Thus till 2012, supply for polysilicon will go way beyond demand.
However, LDK Solar believes that if the problems of funding, technology and market share are resolved, it is still worth a try because large scale of manufacturing can help lower costs. Only if the upstream polysilicon costs can be lowered to the same level as those manufacturers outside of China, then China PV products can be more competitive.
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