Chinese solar panel companies will be faced with challenges at home from some European companies.

Simon Currie, partner and global head of energy of UK law firm Norton Rose LLP, believes that the whole world is eyeing Chinese photovoltaic (PV) product manufacturers because the photovoltaic industry will play a decisive role in opening overseas markets, compared to wind farms.

"The wind power industry cannot develop without the support of national policy and ordinary people can´t use wind power easily. However, solar energy is quite different, ordinary people may buy solar modules or solar panels," said Currie.

Nevertheless, Currie, who has been involved in European renewable-energy project financing for a long time, maintains that Chinese companies have not fully opened the door to European markets, mainly because product quality cannot be fully guaranteed. China is a major producer of PV products in the world, and its market share is over 30% with famous companies such as Suntech /quotes/comstock/13*!stp/quotes/nls/stp (STP 7.82, -0.45, -5.44%) and Yingli /quotes/comstock/13*!yge/quotes/nls/yge (YGE 10.25, -0.47, -4.38%) .

In Currie´s opinion, the less-costly "Made in China" products may not dominate the market. "Renewable energy is not a low-cost manufacturing industry. Whether China can be a real competitor against those countries such as Germany and Denmark depends on if China can ensure the quality of its products."

Today, Chinese PV companies rely heavily on exports. Statistics show that the output of China´s solar PV cells in 2008 exceeded 2,000 megawatts, of which 97% was exported, mainly to Germany, Italy, Spain, Greece and other countries. Although exports in 2009 figures had a mild decrease, they still accounted for around 90% of the PV market in China.

In such cases, Chinese PV companies are vulnerable to even slight fluctuations of the European market. After the financial crisis, Spain, which was next only to Germany in terms of PV installed capacity in the world, suffered a drastic shrinking of its photovoltaic market. The export volume of Chinese PV companies also suffered accordingly.

Today, the European economy is recovering, and Chinese PV companies are regaining their vitality and more orders are coming in. However, the former bustle in the business has yet to return.

With Spain´s announcement that the solar PV market was saturated, the country has cut subsidies and raised the PV feed-in tariff threshold. On July 13, amendments to the Photovoltaic Feed-in Tariffs of Germany´s Renewable Energies Act reduced subsidies in rooftop PV systems. Starting October, subsidies will be reduced even further.

"Now we have some very saturated markets in Europe, like Spain, but China holds a lot of potential," said Currie.

However, European investors have doubts over China´s renewable policy.

"China has not fully developed in terms of solar-power application, and the construction of solar-power plants lags far behind the PV product manufacturing industry. This is why European PV companies are holding a wait-and-see attitude," said Currie.

In his opinion, to attract overseas investors, China should first have a stable market environment and consistent renewable-energy policy. Currie says he believes that such an investment climate would also be beneficial to the development of Chinese renewable-energy companies.

In addition, Currie said that subsidies for grid connection and compatibility of grids are also essential to overseas investors.

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25.08.2010, marketwatch.com

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