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Q-Cells and Hanwha: Solar Geopolitics Gets Messy

The pending sale of bankrupted Q-Cells, once the largest solar cell maker in the world, to Korea-based Hanwha Group is the latest reminder that playing geopolitics in the world of solar will only get harder.

The creditors of the German company agreed to the sale with a vote on Wednesday, though the sale still requires regulatory approval before it’s finalized. Hanwha will gain a sterling silicon solar cell maker by buying Q-Cells, which was the reigning cell maker back in 2008, before it ceded the spot thanks to the financial market crash and the rise of well-financed Chinese solar cell makers.

Though silicon solar technology was the core of its technology portfolio, Q-Cells, when it was in better financial health, experimented with different thin film processes and gambled with the idea of using refined, metallurgical-grade silicon as a substitute for the more expensive and purer silicon to make cells. It also entered into the solar power plant development business. The company filed for bankruptcy in April this year.

Despite its financial trouble, Q-Cells remains a symbol of good Germany solar engineering. And now it’s set to look to a Korean conglomerate for directions about its future. Several Korean conglomerates have scooped up or at least taken a stake in many solar companies in recent years. Hanwha took over China-based Solarfun Power and renamed it Hanwha SolarOne. It invested in several American startups, a solar energy system developer tenKsolar, installer OneRoof Energy and silicon wafer makers 1366 Technologies and Crystal Solar. Hanwha bought Solar Monkey to enter the power plant development business — the company formally announced its entry earlier this summer. It also invested in energy storage developer Silent Power.

Hanwha’s aggressive push into the solar market is taking place at a time when tension is rising between Chinese solar manufacturers and some of their rivals in the U.S. and Europe.  SolarWorld, a German solar cell and panel maker, led a trade complaint in the U.S. and Europe against Chinese silicon solar cell makers over the past years. The complaint alleges that Chinese companies have received unfair subsidies from Chinese government and flooded the market with cells that are below fair market value. The trade case reflects the intensifying competition among solar manufacturers in a market that has been plagued by a gross oversupply of solar panels. Many companies in the U.S., Europe and Asia already have filed for bankruptcy or shrunk their operations in the past year and a half.

U.S. authorities already are imposing preliminary tariffs on imported Chinese cells after finding merits to SolarWorld’s case. They are scheduled to make a final decision on the tariffs before the year ends. German Chancellor Angela Merkel, meanwhile, is seeking to play the mediator in the European case.

Which side should a company like Hanwha take in this battle against Chinese companies? Hanwha SolarOne’s executives told me during a meeting at Intersolar in San Francisco in July that the company wasn’t “immune to the challenges of the marketplace” in terms of manufacturing, but they saw good opportunities to invest in different solar sectors at the same time. To avoid the preliminary tariffs on China-made solar cells, the company is using solar cells from Taiwan to make panels for the U.S. market (other Chinese companies are doing the same).

Although the solar manufacturing sector is suffering, the project development and installation business is thriving, particularly in countries with government mandates and incentives, such as the U.S., India, China and Japan. The growth has come in part because of the rapidly declining solar panel prices and efforts to reduce in other areas, such as securing permits and simplify installation methods. For solar energy proponents, all the competition and resulting price reduction of solar equipment is a good thing. They see a trade complaint as an attempt to stall the move toward a greater goal: to make solar electricity as cheaply as power from fossil fuels.

The sentiment that Chinese companies haven’t played fair isn’t coming only from SolarWorld and those who have joined SolarWorld’s trade complaints. But executives at many non-Chinese manufacturing companies will only be diplomatic when they are on the record to discuss the trade dispute. And they do so because they know that drawing a line between China and the rest of the world isn’t a good idea when there is a growing interdependence among companies of various nationalities to grow their business in the global market. Hanwha’s acquisition of Q-Cells is a good reminder of that. 

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