China's shipments of solar power-related products to the EU have been strong despite reduced subsidies. Although makers are exploring alternative destinations, the EU remains the key export market.
Despite subsidy cuts, China PV manufacturers will continue to focus on the EU market for the next few years. Some of the larger enterprises, however, will be expanding their reach to other destinations, including the US and Southeast Asia.
|Yuhuan Sinosola's EU customers typically ask for 1MW of solar panels per order.|
One of the reasons the EU will remain the primary market is that buyers there place large-volume orders. Michael Guo, manager at Yuhuan Sinosola Science & Technology Co. Ltd, said its EU customers typically requisition more than 1MW of solar panels. Orders from other markets such as Singapore are smaller in terms of volume. Suppliers are generally unwilling to accept such transactions because the average unit manufacturing costs are higher and likely to eat into their profit margins.
Zhejiang Hengji PV-Tech Energy Co. Ltd exports 80 percent of solar cells and modules output to the EU, including Italy, Spain and Germany. Manager Susan Xu said orders have not decreased since the subsidy cuts were announced, and have actually continued to go up. The company is even planning to boost capacity 50 percent this year.
Xu said that while the reduction may give some buyers reason for pause, the large customer base in the EU means China makers may not feel the impact at all. Apart from power generating plants, there is demand from residential communities that employ solar energy.
Guo said the subsidy cuts have not affected Yuhuan Sinosola's business.
China's highly export-oriented solar power industry has been accelerating in recent years. Only 10 percent of PV output is sold to the domestic market. Of those earmarked for overseas sales, 90 percent go to the EU.
But larger makers have now started to branch out into other regions. Yuhuan Sinosola, for instance, is taking to steps to be UL-listed so that it can export to the US and Canada.
One of the country's major PV makers, Yingli Green Energy Holding Co. Ltd built a 100MW solar cell plant in Hainan last year. The factory was constructed in China's southernmost province because it is the closest to Southeast Asia. Since output from the facility will be exported mainly to countries in that region, transportation costs will be minimized.
Zhejiang Hengji is looking at cultivating sales at Japan, South Korea, the US and Africa. The company is in the process of obtaining required certification, including having its products carry the CE mark and be UL-listed.
Germany decreased subsidies to solar power generators by 3 to 15 percent early this year. The rate of reduction depends on the annual installed capacity at these companies. As of 2010, Germany's installed PV capacity reached 7GW. This accounted for half of total global installed capacity for that year.
Similarly, France cut feed-in tariff subsidies roughly 3 percent this year. Spain is also planning to reduce installation subsidies 30 percent over the next three years.
Although Italy has not made an announcement regarding subsidy cuts yet, it is expected to follow suit.
Zhang Shuai, new energy industry analyst at Sinolink Securities, said these subsidy reductions reflect a maturing PV market in the EU. Governments that once introduced subsidies to encourage more companies to invest in new energy are now stepping back and allowing the industry to grow on its own. In fact, despite the subsidy cuts, solar power remains a popular alternative energy source among developed countries in the EU, especially given soaring crude oil prices.
Because of this, Zhang believes the subsidy cuts will not pull down demand sharply this year. They may, however, discourage potential new China players from joining the industry.
IMS Research, which provides consultancy services to the global electronics industry, estimates worldwide installed capacity for solar power to jump 30 to 40 percent this year to 18 to 20GW. Market research company iSuppli projects Germany's installed capacity will be between 7.3 and 9.4GW in 20011, while Italy's will have 3 to 4GW.
Note: This article "EU still top market for solar" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.
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