A new Chinese media report shows that after more than a year of talk, Beijing is finally turning its aggressive talk on solar energy into action by more than doubling its approval of new solar power plants this year. The main question now is: Will any of its struggling solar panel makers survive long enough to enjoy the expected boom in business when some of these new plants start to get built. Of course industry watchers will know the answer is probably "yes", as Beijing and local governments get set to hand out generous rescue packages to support these companies through a massive supply glut that has sent prices plunging and left everyone reporting big losses.
Let's take a look at the latest news, which comes in a Chinese media report saying the National Development and Reform Commission (NDRC), China's powerful state planner, has approved 60 new solar power projects so far this year with a total installed capacity of 1.17 gigawatts. Presumably that number is through September, meaning the final figure could come out to around 80 new projects with 1.55 gigawatts of new capacity by the end of the year if the NDRC keeps approving new projects at the same rate.
That would mark more than a doubling from last year, when the NDRC approved 36 projects with installed capacity of just 0.34 gigawatts. So based on these figures, it's clear that the number of projects itself is not only growing fast, but the size of each of these projects is growing even faster. If all these projects are built, it would mean that China will add nearly 2 gigawatts worth of solar power capacity to its national grid over the last 2 years. While that's not bad, the figure seems likely to accelerate even more next year since China previously set a goal of installing 15 gigawatts worth of solar power producing capacity by 2015, a target that looks difficult to achieve based on these latest figures.
We're already starting to see some of the results of this aggressive building binge, with mid-sized player JA Solar (Nasdaq: JASO) announcing in late September it had received orders from 2 customers for panels capable of producing 160 megawatts of power at planned new facilities in the interior provinces of Qinghai and Xinjiang.
Of course, this is the same JA Solar that also announced earlier this week that it has been notified by the Nasdaq that its shares could soon be de-listed after they traded below the minimum $1 threshold for more than 30 consecutive trading days. Its shares now trade at $0.71, meaning they are unlikely to cross above the necessary $1 mark anytime soon and will probably be de-listed. Larger peer Suntech (NYSE: STP) is also in danger of de-listing for the same reason, underscoring how far these former high-flying companies have fallen in the current downturn.
Beijing is reportedly in the process of assembling a rescue package that it will extend to about a dozen of the nation's largest producers, which will presumably require them to shutter a big portion of their capacity and also merge with some smaller rivals. If and when that happens, perhaps the coming consolidation, combined with what looks like a big new wave of construction, could finally help to move this struggling industry back into the profit column.
Bottom line: New data indicates Beijing is ramping up construction of new solar power plants, which together with a government-led retrenchment could help to return the industry to health.
This blog was originally published on Young's China Business Blog and was republished with permission.
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