China's solar industry rebounds, but will boom-bust cycle repeat?

Thu Jan 23, 2014 6:21pm EST
 
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By Charlie Zhu

HONG KONG (Reuters) - China's solar panel industry is showing signs of booming again after a prolonged downturn - raising fears of another bust when the splurge of public money that is driving a spike in demand dries up.

Lured by generous power tariffs and financing support to promote renewable energy, Chinese firms are racing to develop multi-billion dollar solar generating projects in the Gobi desert and barren hills of China's vast north and northwest.

The sweeteners have not only lured traditional energy investors like China Power Investment Corp, but also a host of solar panel makers and even companies such as toll road operator Huabei Express and Jiangsu Kuangda Auto Textile Group.

Some solar panel manufacturers, encouraged by a recovery in sales in the last two quarters - largely on surging demand from China and Japan - are expanding production capacity, even though the overall sector remains mired in a severe glut.

But industry officials worry fast-growing generation capacity will increase fiscal pressures on China and Japan and force them to cut subsidies which will then hit demand, just as happened with previous big solar users Germany, Spain and Italy.

"The key is whether the Chinese government is determined enough to boost solar generation," Sun Haiyan, senior executive at Trina Solar, said when asked if the current solar expansion in China was sustainable.

China already boasts solar manufacturing capacity of about 45 gigawatts (GW), enough to meet global demand this year.

Trina Solar, JinkoSolar, Yingli Green Energy and Canadian Solar - among the world's largest solar manufacturers that also include Japan's Sharp Corp and U.S. SunPower Corp - are adding 3 GW of capacity, according to industry specialists and Chinese media.   Continued...

 
A worker inspects solar panels at a solar farm in Dunhuang, 950km (590 miles) northwest of Lanzhou, Gansu Province September 16, 2013. REUTERS/Carlos Barria