THE CHINESE PHOTOVOLTAIC CLUSTER IN WUXI

Group 8

Benedetta PolverelliCharlotte CalliauwRoberto RigaSerena Sebastiani

ECONOMICS AND MANAGEMENT OF ENERGY BUSINESS

An Overview of the Chinese PV Industry

National Competitive Advantage

Wuxi: between local developing zones and a successful photovoltaic cluster

Photovoltaic technology and prevalence in Wuxi

The case of Suntech

Issues: Dangers and Debates on the components of a photovoltaic panel

Chinese Energy Policies

Conclusions

AGENDA

PV in China: Facts and Figures

China produces 1/3 of solar photovoltaic global production.

Its internal market is growing 5.6% each year, but remains until now small.

Over 90% of Chinese PV cells and modules are exported.

China’s production capacity since 2004 is growing at rates of 100-400% each year.

Cell capacity is growing, each cell contains more than 4 GW per wafer.

China’s solar technology is less sophisticated when compared to global leaders.

Crystalline Silicon (c-si) is the dominant production method , which alone covers 80% of global production

Most of all PV panels’ cost of production is highly correlated to the price of silicon as a commodity.

Source: J Campillo, S Foster “Global solar photovoltaic industry: analysis with focus on the Chinese market”, Malardalen University, 2008

Chinese PV Industry Analysis

Competitive rivalry:

Fierce, with more than 30 players. High

growth perspectives might attract new comers

Barg. Power of Suppliers:

Silicon costs are declining, and there are long

term agreements to fix the prices

Threat of new

entrants: semiconductor

firms are attracted by high growth

margins. Costs are decreasing

Barg. Power of Buyers:

70-80%of the price depends on silicon as a

commodity

Threat of Substitutes: medium, Thin

film, but higher costs and low

technology transfer rate

Source: J Campillo, S Foster “Global solar photovoltaic industry: analysis with focus on the Chinese market”, Malardalen University, 2008

Does China have a National Competitive Advantage?

Key drivers that support China’s dominance:

Growing demand for energy, especially renewable.

Announcements of feed-in tariffs and government

support.

High availability of Indium

and Gallium

Source: N. Marigo “The Chinese Silicon PV Industry and Market: a critical review of trends and Outlook”, Imperial College London, 2006

China needs to be “green”

China is highly dependent on coal and oil, therefore, to diminish its GHG, it is very likely that the government will invest highly on PV and other alternative ways to produce clean energy.

Internal demand for energy is growing annually at 5.6%, and, if China will fail to find alternative solutions, annual increments are expected to be absorbed for 90% by fossil fuel combustion.

Government subsidies and R&D

Public funds for R&D have doubled in the last decade.

The government’s “Brightness Program” is an attempt to provide PV renewable energy to 23 million of citizens by 2010.

Silicon shortage showed in 2004 how there is a high dependency on a single element. China is diversifying its technologies. R&D in Thin Film technology has started in order to increase conversion efficiency rates

BUT… Chinese labor force is enough

skilled for a basically manual assembling line but not as comparable with a much more intensive technology production.

Other considerations…

Wuxi New DistrictIn the 1992 the district was founded as an industrial zone in order to

attract large foreign companies. It is defined a high-tech developing zone.

In this Developing Zone there are six clusters identified:

- Photovoltaic- Electronics- Electric cars- Purple clay tea ware- Environmental protection - Equipment electric wires and

cables

The creation of this Developing Zone was crucial for the development of all the area.

Source: Overview of the Industrial Cluster in China – Li & Fung

Photovoltaic ClusterThe most successful cluster is certainly the photovoltaic high-tech industry cluster. Its leader is Suntech. The main features are:

- A level of advanced technology - A complete industrial chain - An independent innovation ability- A strong international competitiveness

Some data:In 2008, the base’s sale was 32.7 billion Yuan, with an increase of 166%, accounting for 40% of the national total. The exports of photovoltaic enterprise had reached 2.5 billion U.S. dollars total, with an increase of 71.32%. There are more than 40 photovoltaic production enterprises.The investment of R & D accounts for about 5% of gross sales, and there are more than 40 patents now.

Source: Overview of the Industrial Cluster in China – Li & Fung

Components of a Panel

A photovoltaic panel is composed by cells, able to convert solar rays to electricity.

This can happen thanks to a particular component inside the cells: crystalline silicon also known as ‘solar grade silicon’.

In particular the most important kind of crystalline silicon is silicon tetrachloride (SiCl4). But it is also the most dangerous especially if it comes in contact to water.

Value ChainPolysilicon

Module

System

Photovoltaic converts light into direct current through the photo-electric effect in this five steps:

Cells

Wafers

SiCl4 + 2 H2O SiO2 + 4 HCl

This is the chemical reaction with water. It generates Hydrochloric Acid that is the dangerous consequence of silicon tetrachloride

because at ambient temperature is gaseous and when it is inhaled it is corrosive and irritating.

Silicon tetrachloride

+ =

Issues: When is there the danger?Silicon Tetrachloride is inside the cell and the danger could be in two situations:

- In usage- In recycle

During the usage, if the quality of solar panels is not so high or also if there is not a lot of maintenance, rain can go into the cell dispersing hydrochloric acid that at ambient temperature it is gaseous.

During the recycle, if the dumping process is not regular and very appropriate, silicon tetrachloride can become hydrochloride acid with the rain polluting all the area.

Some CasesLuoyang Zhonggui High-Technology Co. is considered a green energy company in China but some years ago it started to dump all the old panels. The dumping process was implemented in Henan region. Which is the result?

In all that area it is impossible to cultivate, with terrible consequences to the local economy.

In all that area there is a high concentration of respiratory diseases, in particular for children and old people.

Source: Solar Energy Firms Leave Waste Behind China – Washington post – Ariana Eunjung Chan

Main types of energy technologies currently developed in China:

PV main

technology for the generation of solar electric

power

CSP (Concentr. Solar Power)

Systems which use lenses and

mirrors to concentrate a large area of

sunlight. Light is converted to

heat which drives a heat

engine connected to electric power generator. It is a new tech but

has brilliant perspectives.

BIPV (Building Integrated PV) PV materials which replace conventional

building materials. It is

a relatively underdeveloped technology

with high growth

opportunities

SWH (Solar Thermal Water

Heating) China is global leader for both

installed capacity and production

Source:“Commercialization of Solar PV system in China”, Centrefor renewable energy development, Energy Research Institute

Solar Photovoltaic:

Electrical power is generated from solar radiation and directly converted into electricity. For this process, semiconductors are used to exhibit the photovoltaic effect.

Materials used: ◦ monocrystalline silicon,◦ polycrystalline silicon, ◦ amorphous silicon, ◦ cadmium telluride,◦ copper indium selenide/sulfide.

Concentrated Solar Power (CSP) CSP plants generate electricity using heat. Reflectors focus sunlight onto a fluid-filled

vessel. The heat absorbed by the fluid is used to generate steal that drives a turbine to produce electricity.

Ideal location: deserts. Advantages:

◦ carbon-free & clean◦ no fuel costs

Building-Integrated Photovoltaic Photovoltaic materials that are used to replace

conventional building materials in parts of the building envelope such as the roof, skylights, or facades.

Transparent solar panels use a tin oxide coating on the inner surface of the glass panes to conduct current out of the cell. The cell contains titanium oxide that is coated with a photoelectric dye.

Ultraviolet radiation

Solar Thermal Water Heaters ACTIVE SYSTEM (aka pumped system)

-Alternative source, activated when temperature is too low

- Collector that pumps heated fluids

- Anti-freeze (alternative ‘drain-back’)

PASSIVE SYSTEM (aka compact system)

-Alternative source, activated when temperature is too low

- Collector that drives fluids naturally

-Anti-freeze (alternative ‘drain-back)

Suntech Power Holding Co Ltd. was founded in September 2001 and now is a global leader in the PV modules manufacture.

• Nowadays it is the cheapest and largest PV module producer but also as the leading firm of the sector for reliability and cutting edge products.

• In the technology-intensive and fast-moving PV industry, Suntech has been aware that an ongoing learning process had to be settled. R&D has been carried on both internally and in collaboration with external academic institutions .

Company Overview

Suntech’s strategyLINKAGE

• Established interactions with research agencies and universities.• Industrial linkages.• Agreements with suppliers in order to solve the shortage of silicon.• Geographical expansion (JV with MMA Renewable Ventures in the US).

LEVERAGE

• On the international experience of dr. Shi.• Looking for external resources and quickly expanding the production capacity improving

the technological capabilities to reach higher cell's conversion efficiency.

LEARNING

• R&D has been carried on both internally and in collaboration with external academic institutions.

• As latecomer, focus on manufacturing competences.

Source: Mathews, J. A.: “Latecomer strategies for catching up : linkage, leverage, and learning” (2007)

The “PLUTO” technology Lower reflectivity to capture

more sunlight throughout the day without direct solar radiation (more efficiency).

Substitution of expensive silver paste with copper to make contacts (cost innovation).

Pluto is a proprietary technology with patent-pending application that is based on the PERL technology developed at the Australian UNSW, Dr. Shi university, where 25% efficiency record has been already achieved in the laboratory.

Pluto cells (left) vs standard cells (right). The metal lines in Pluto cells have a width of about 25 microns and are spaced only 1.0 mm apart .

Source: Company website http://eu.suntech-power.com/en/technology/pluto.html

Chinese Energy Policies China plans to increase their renewable energy

consumption to a full 10% by 2010. It has to be considered that the law includes some very

clear penalties for non compliance. Yet a Chinese feed-in tariff still does not exist. There is no doubt that China's main strength lies in their

ability to increase manufacturing levels quickly

Conclusion From our research, important strengths and reliable competitive

advantages of China in the photovoltaic industry came out. The industry is relatively new but, thanks also to the creation of the

Wuxi cluster, it is growing fast and shortly acquired a leading position globally.

It now needs a stronger support from the government in order to flourish more and to successfully gain market share in the long term. The analysis of Suntech,

conducted using the LLL strategy, shows how the Chinese photovoltaic firms can pursue an accelerated internationalization and also, the ability to transform a technological-intensive industry in a labour-intensive one, in order to lower costs and easily switch from a technology to another.

Thank you!

Q&A