Grim long term view

The outlook for European solar and renewable energy manufacturing are very grim if Chinese underpriced products continue to flood the European and global markets.

Five year plan

China's long term ambitions to become the global leader in PV solar production are clearly stated in the current five-year plan. A Five-Year Plan is a key element in state central planning first implemented in the Soviet Union and other countries. The ‘Plan’ regulates the allocation of resources among different industries and sets rules for redistribution. The People’s Republic of China uses central plans since 1953. People’s Republic of China 12th Five-year-Plan currently in force is valid for 2011 to 2015 and contains a specific sector plan for the photovoltaic industry. It sets ambitious goals:

• Silicon companies will produce 50,000 tons a year and leading cell manufacturers will exceed the five-gigawatt mark. The government expects that the largest PV company will generate revenues of 100 billion Yuan, over € 12.5 billion, by the end of this five-year plan. In addition, there is the requirement that at least 50 percent of the materials used in manufacture must be from China.
• The Five-Year plan also sets goals for production costs for the next decade. Costs per kilowatt, with which a module is manufactured, converted to Euros, are set to be lowered to € 0.87 per kilowatt by 2015. By 2020, the goal is to manufacture at only € 0.62 per kilowatt. It may sound realistic, however it does not explain why you can already buy Chinese modules for € 0.47 in Europe today.

It is obvious that the Chinese government is not going to easily give up on its ambitions to support national PV solar production in the future. China has already invested huge resources in the PV plan, and has many more to allocate to further the goals set out in the Five-Year Plan.

Chinese monopoly in all renewable energies?

The Solar PV industry is not the only industry in trouble. China is also endangering other European producers of renewable energy materials and systems, such as wind turbines. If Europe doesn’t act now, soon one key industry after another will cease to exist in Europe.

Denmark’s Vestas, the world’s largest manufacturer of wind turbines, made a loss last year for the first time since 2005. Its market share has dropped from 28 percent in 2007 to just 12.9 percent last year. Four of the top 10 turbine producers are now Chinese, including second place Goldwind. Source Global Post April 7, 2012

Two Chinese wind turbine makers are looking into launching takeover bids for world number one Vestas Wind Systems, according to Danish daily Jyllands-Posten. China's second-biggest wind turbine maker Xinjiang Goldwind Science & Technology Co and Sinovel Wind Group have discussed the possibility with a number of corporate bankers after a plunge in Vestas' shares, Jyllands-Posten said, citing unidentified Danish corporate financiers. Source Reuters 16 April 2012

Poor long term prospects?

People's Republic of China has recognized that the environmental technologies, especially photovoltaics, are among the fastest growing industries. By using unfair trade practices China is now trying to generate market share in Europe and might soon become a quasi-monopoly for photovoltaic technology. If this trend is not halted, Europe may lose its fastest growing industry and the key to a sustainable energy wealth.

Scenario

• If Europe loses its photovoltaic industry, hundreds of thousands of jobs will disappear in the industry, commerce and trade. Since jobs are sometimes the strongest argument in politics, it can be expected that the acceptance for the promotion of this technology in politics and public sinks considerably. This will slow down the energy transition, if not stop it totally - a scenario devastating to the EU target of a sustainable energy supply, fatal to humans, environment and climate.

• If the solar PV technology leaves Europe to the People's Republic of China, Europe will enter a new dependency. Dumping is merely a means to an end: if China becomes a de facto monopoly, the prices will eventually go up, as obviously the goal of creating this new industry in China is to generate profit in the end. Innovation will also be impacted, as there will be no more positive impulses from the European solar industry.

• European funding schemes for the use of solar energy will continue to flow to China. Dumped Chinese prices are a reason for many customers to choose Chinese products, therefore the investment made into the funding schemes indirectly benefits Chinese producers. Again this might lead to a considerably lower acceptance for the funding schemes policy. In fact this is already happening and in 2012 some EU countries alredy cut back the FITs schemes. Earlier the prices followed FITs, now FITs follow the prices.