Chinese solar company planning a large increase in solar panel capacity

According to an article posted on chinadaily.com.cn titled Solar cell maker adds 3 new production lines Nantong Qiangsheng Photovoltaic Technology Co Ltd (QS Solar), which currently runs a production line for its thin-film amorphous silicon solar cell panels, is planning to increase its capacity by by a factor of more than 10 by adding three additional lines to its facility, located in Nantong, Jiangsu Province. Each of the new production lines will produce more than twice as many panels each year as the current line. According to the company,

China’s two million sq km of deserts could generate the same amount of electricity as produced by hydro, thermal and nuclear power plants combined if just one percent of it was used to build photovoltaic power plants

On the face of it, this news might sound like the Chinese government is putting its money into a potential solution to its enormous air pollution problem. That interpretation is contradicted by other key facts in the article. For example,

“Capital is not a problem,” Sha said, adding that 10 foreign financial institutions – including Morgan Stanley, Lehman Brothers and Standard Chartered Bank – will back the project.

A bit later in the article “Sales are good,” Sha Yan, general manager of QS Solar, said. The company has signed a contract with a US firm to sell five mW of solar panels, as well as deals for two mW to South Korea and two mW to Spain.

The manufacturer has also signed a deal with Nantong’s Rudong Economy and Technology Development Zone to launch a one-mW photovoltaic solar power plant.

Final piece to the puzzle China produced 3,000 mW of solar cells last year, but its photovoltaic materials relied heavily on imports and 90 percent of photovoltaic cells were exported to Europe, the United States and Japan.

In other words, this new solar plant capacity addition is just one more example of the Chinese understanding that it is more profitable to make products for that are in demand in export markets than to produce products for domestic use. Of course, the Chinese manufacturer has a number of advantages over potential competitors in other countries.

Not only will the factory cost less than half as much to build in China compared to other industrial countries, but the owner will have access to lower cost labor and the period of plant construction will probably be much shorter due to the ease with which such an expansion can be permitted and completed. The factory will also have access to relatively low cost electricity, probably produced in one of those rapidly constructed coal fired power plants that we hear so much about.

Those advantages combined with ready access to capital and a well lubricated market supported by generous product purchase subsidies in the customer countries makes the investment a no brainer, even though the intermittent electrical power that the panels will eventually produce is more than 3 times as costly as other alternatives.

Oh yeah, just in case you are a really careful reader and took some solace in the fact mentioned above that China currently imports most of its photovoltaic materials, you might want to read this article as well Chinese solar wafer manufacturer listed on NYSE. That one is about ReneSola Ltd., a company that is quickly expanding its capacity to produce the same kind of solar cells that QS Solar uses to produce its panels. That is also a typical pattern for Chinese manufacturers; they often look like they are going to be good customers for high tech imported goods, but that only lasts until they have figured out the production process on their own.

(BTW: I am not bitter or jingoistic. I am just sharing a bit of hard earned knowledge. In one of my former lives, I was the general manager for a small manufacturing company that produced plastic products. We constantly had to compete against Chinese manufacturers who were well supported by Americans who taught them how to produce the products and then imported them to compete against us. Some might say that is just business, but the workers in our factory would not agree. It was really disheartening to recognize that the competitor’s product was an almost exact duplicate of the one that they had worked hard to design, refine and establish in the marketplace. The competition found some shortcuts through those steps and used American sourced capital and intellectual capital to take away chunks of our business.)