Friday, September 10, 2010

"Lesson From Vestas to First Solar: Stay Out of China" (FSLR; VWS.C))

After dropping almost 4% yesterday Vestas closed down another .91% . First Solar has been on a bit of a tear but is giving back .85% today, at $137.11.
From bnet:
First Solar (FSLR) is looking to regain market share lost to crystalline silicon-based module makers from China. Contrary to expressed confidence by management, an ambitious strategy to stake a claim on Chinese soil — if successful — is unlikely to be profitable long-term.

Crystalline PV module supplier Suntech Power (STP) shipped more solar modules during second-quarter 2010 than any other manufacturer, according to the latest analysis from IMS Research. First Solar slipped behind its Chinese rival for the first time since third-quarter 2008 — the result of capacity constraints due to component shortages for certain products (not because of weakening demand).

The company hopes to first plant its flag on 16,000 acres in the Mongolian desert, near Ordos City in Inner Mongolia, Northern China, with the build out of the world’s largest solar farm: a 2 gigawatt (GW) solar generation facility.  The project was to be built in multiple phases, with one GW of power to come online by 2014, and the second GW scheduled for completion by 2019, according to the “Cooperation Framework Agreement” signed last November.
The solar farm is expected to generate enough electricity to power 3 million Chinese households, according to First Solar.

The company had planned to break ground on a demo 30-megawatt plant in June 2010. Due to delays in reaching an accord with either central or provincial governments on minimum feed-in-tariffs (FiT) — the price subsidies that China’s electricity grids would need to pay for power (generated from these solar farms to make the project economically viable — the project stalled.
Nonetheless, CEO Rob Gillette told investors on the quarterly earnings call the company expected to begin construction of the oft-delayed project early next year. Gillette and his staff might want to consider scrubbing
 the entire mission


Recent data from GTM Research revealed that China’s global module production, as measured in MW-dc (megawatt - direct current), grew from 30 percent of the global total in 2007 to 40 percent in 2009. China’s four largest PV module producers — Suntech Power, Yingli Green (YGE), Trina Solar (TSL), and Solarfun (SOLF) — all rank in the top ten PV module producers globally, accounting for a total of 1.9 GW of module production in 2009.

Of more immediate concern, despite renewable initiatives supported by the central government in the last few years, more than 90 percent of the estimated 3.6 GW of solar cells produced in China last year was exported, mostly to European markets, like Germany and Italy. Promotional measures for the domestic solar industry, such as the “Golden Sun Demonstration Program,” have only had the unintended effect of increasing exports — contrary to dual wants of building an export business and the creation of a domestic solar market....MUCH MORE
See also:
First Solar's China Project Not a Done Deal (FSLR)
"First Solar awaiting China decision on subsidy" (FSLR)
 First Solar’s Gift to China: How to Build a Solar Farm (FSLR)