Intersolar China opens with call for more R&D

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The Intersolar China Conference began today with an opening ceremony and four sessions on PV manufacturing and the Chinese and Asian PV markets. The conference runs over the next three days from March 25th to March 27th, covering a wide range of topics in the Chinese and international PV industry. Intersolar China is the largest solar conference and exhibition in northern China and, for the first time, will be held in conjunction with the CIPV Expo and Clean Energy Expo China.

Quality has been a consistent theme for the Chinese PV industry for both the upstream and downstream segments. In the opening ceremony, Junfeng Li, President of the Chinese Renewable Energy Industry Association, encouraged Chinese PV manufacturers to move up the quality chain by investing more in R&D instead of focusing on producing the lowest cost modules, adding that the lowest-cost bidder system does little to incentivize R&D and puts installers at greater financial risk.

In an afternoon session on the Chinese PV market, Xiaoting Wang of Bloomberg New Energy Finance illustrated this point when showing the Q3 2013 earnings before interest and taxes (EBIT) of the major Chinese PV manufacturers. While their EBIT have recovered over the last few years, many of the manufacturers still have EBITs hovering around zero.

Quality appears to be a concern on a more basic level in the downstream PV market in China. PV power plants in China are in need of greater quality control to ensure the long-term production of electricity. The capacity based subsidies the Chinese government initially used to support the PV industry encouraged system developers to reduce installation costs to maximize initial profit. Yet because the subsidies were not tied to production, developers disregarded the long-term performance of the power plants for short-term profits. This has hurt the reputation of PV power plants in the eyes of banks and other investors.

Financing concerns

Financing for both utility scale and distributed projects is one of the largest hurdles to greater PV deployment. Leo Xiang, Director of Renewable Energy at Aon-COFCO Insurance Brokers, hopes to bridge the quality gap between developers and banks by providing insurance for engineering, procurement, and construction (EPC) companies.

In his presentation, Leo explained his work in trying to insure utility-scale PV power plants. Based on EPC insurance in Germany and the USA, the EPC company would first hire a third-party auditor to verify the quality of the components, design, and construction. With the auditor’s approval, the EPC company could then take out an insurance policy on the PV power plants, which would then greatly increase the project’s likelihood of receiving financing from banks.

The banks would not only have the third-party auditor’s approval to ensure quality, but would also have the insurance policy to reduce their risk in case of any component or design failures.

The key is for the insurance policy to remain inexpensive. The utility-scale market is still fairly young in China and quality continues to be a concern, so constructing an insurance policy that properly evaluates the risks while still being cheap enough for EPC companies will be a challenge.

Leo believes he will be able to produce such an insurance policy in six to eight months. If successful, such an insurance policy could be critical in pushing the downstream PV market in China towards higher quality installations and greatly expanding the pool of financing.

Over the next few days, the Intersolar China conference will include sessions on concentrated PV manufacturing and systems development, distributed and utility-scale PV systems, and energy storage. Tomorrow will also mark the beginning of the Intersolar China Expo, with 260 expected exhibitors and more than 10,000 expected visitors over the three days of the exhibition.