Chinese panel manufacturers focussing on domestic market

China’s solar panel producers embattled by heavy duties from anti-dumping probes in both the United States and Europe are focusing on the domestic downstream power generation sector to offset their export losses.

The LDK Solar Co., one of the world’s largest manufacturers of solar wafers, has seen engines in its workshops in Xinyu, East China’s Jiangxi Province, roar again.

This month, the company has obtained a number of new deals of building photovoltaic power plants in China.

The New York-listed company’s stock dived to $0.71 per share on October 19 from an earlier high of $76.75dragged by the United States Commerce Department’ final approval to heavy punitive duties on billions of dollars of solar-energy products from China for the next five years.

The duties range from 18 percent to 250 percent.

“Perhaps the toughest time is passing, as most of the customers and banks have been very supportive of us,” said Sam Tong, president and chief operating officer of LDK Solar Co., on Tuesday.

In order to tackle the tight cash flow, the company transferred some of its fixed assets to other medium-sized solar companies as a mortgage, suspend standing orders and seek new business partnerships with Chinese downstream power generating enterprises by building solar PV power stations.

The company had seven more production lines resuming operations in November.

LDK Solar chose to sell 19.9 percent of its shares to a state-backed company on October 19, which generated an immediate $23 million , said Tong.

The company’s active response to overcome the export crisis has effectively boosted investors’ confidence on its stocks.

LDK Solar saw a 25 percent share price jump the day after its new funding source.

The company also gained $70.4 million as compensation by suspending long-term agreements providing solar wafers for its European customers and Japanese customer Sumitomo.

Tong said the price of solar PV products has bottomed out and China’s domestic solar panel market will see at least a 30 percent surge in the future, with the momentum of building PV power stations.

According to a report released by the National Energy Administration in August, China will have 21 million kilowatts of installed solar power generation capacity by 2015, which will be six times more than currently.

The administration also asked local authorities to make plans for establishing distributed photovoltaic generation demonstration centers to boost the domestic solar industry.

According to the requirement, each provincial-level region may apply to establish no more than three solar energy demonstration areas with a total installed capacity not exceeding 500,000 kilowatts.

The building cost of China’s distributed solar power stations now stands at 7 to 8 yuan per kilowatt-hour, which means these small-scale solar power stations can recover their costs within 3-4 years of operation in solar resource rich regions.

Shanghai-headquartered JinkoSolar Holding Co. Ltd., one of the only two profitable enterprises among China’s companies listed in the US, began to cut its market share in US and European countries last year, and has been expanding in the domestic market.

“Domestic sales volume now accounts for 30 percent of the company’s gross sales,” said Chen Kangping, chief executive officer of the company. He added that the firm has set up a special team to prompt home marketing.

“China is transforming from a big solar panel producer to a big user with technology upgrading and policy support for the clean energy use,” said Yao.

Commerce Minister Chen Deming told reporters on the sidelines of the 18th National Congress of the Communist Party of China earlier this month that the US is losing out with its decision to approve steep duties on Chinese-made solar panels.

“The unilateral trade action against China’s solar panel export will also impact the instigator. China is developing, urbanizing, China has a lot of construction under way and will need solar products,” he said.

President Hu Jintao noted in his report at the 18th CPC national congress that China’s economic development should be driven more by domestic demand and strategic emerging industries, which will enable the country to sustain long-term development.

China has carried out a spate of supportive measures aiming at shoring up the solar panel producers and promoting the use of solar energy.

The State Grid Corporation of China (SGCC), announced a plan in October to facilitate the connection of solar power stations to the main electronic grid, breaking the bottleneck that has stifled domestic demand for solar panels.

It said that SGCC will allow solar generators with less than 6 megawatts of installed capacity to be connected to the grid, and also provide technological assistance and waive charges associated with connection.

Analysts said the move will boost domestic demand and help the solar panel producers weather through its current hardship, which is too dependent on the overseas market.