Article
Stimulus spending
Suntech, and Dr. Shi now have high hopes for the execution of US president Barrack Obama’s nearly 800 billion dollars stimulus package. It includes a 150-bilion-dollar investment over the next 10 years to support new energy.
A: Let’s talk a little bit about the global economic crisis and what governments are doing to stimulate economies again. Is it something very beneficial for you?
S: Obama’s stimulus plan really helps solar and other renewable energy in the US. For example, he’s talking about in the 150 billion in the US dollars investment in renewable energy in the next 10 years. He’s talking about double in renewable energy in application in a volume in next 3 years. And, also, we know, in last year, eventually after 18 years of this lobbing submit proposal to the Congress, the last time they passed this ITC Program. ITC, basically, is tax rebate. The investors, you know, who invest in solar can get 30% tax rebate. As you know, this year, probably, very few companies can make money, so that means no tax. So, in State, you know, DUE actually change the program to instead of 30% rebate, they just give 30% grant to any solar project, which start before the end of 2010. So, all this shows the stimulate program really will help solar, of course, will help Sun tech.
A: We should talk a little bit about grid parity. First, if you could explain to our viewers what it is and also you are probably one of the most optimistic persons I’ve ever met in terms of grid parity in saying that it probably will happen in 2010?
S: 2010-2012.
A: You believe that?
S: Yes.
A: Is that over energetic estimation? Or is it something you honestly believe we can accomplish?
S: First of all, let’s explain what is grid parity. The grid parity is like electricity generated by solar to comparable to the electricity price paid today. Like in California for example, we are talking about 50 US cents per kilowatt-hour. In China our target is about 1 RMB per kilowatt-hour. The reason I said 1 RMB is because, in the next few years, conventional electricity price will go up. And electricity from solar will come down; so 1 RMB per kilowatt-hour is reasonable. So that’s grid parity. The reason I believe, initially I think we can reach this target around 2012 timeframe. But because of this oversupply situation, partially caused by this economic downturn, there’s oversupply situation, because if a whole solar value chain, a lot of profit was captured in upstream. Silicon, especially silicon manufacturers, their profit, we don’t talk about 30% or 50%; you are talking about 200% or 300%. That’s not right. So the profit needs to be evenly distributed along the value chain. With this economic downturn, the silicon manufacturers, they have to give away the profit, because there is oversupply. When the oversupply happens, the upstream probably was in the worst case along the value chain. So they start to give away their profit, when their profit level come down to about 30% -50% margin level, is reasonable for the whole value chain to hit this grid parity. I think within the next 2-3 years time, reach grid parity is quite reasonable.
A: Even with the current economic situation? Is that overoptimistic?
S: Of course, we are cautiously optimistic. Everybody knows, solar should be a major alternative energy source. And in the past, people always thought solar was expensive. And I think we have to give credit to solar industry and solar players in this country, of course give to Suntech myself. About 1 and a half years ago, I personally, I raised target for the whole industry; we need to reach 1 RMB per kilowatt-hour quickly. The reason I decided to do so is to send this message to the government, just to give the government confidence. Because I understand government will not help or support an industry, which talking about 4 RMB per kilowatt-hour in the next 10 or 20 years. They will think there’s no hope. So as industry, we have to show the government, we can do it. That’s one thing. Secondly I think the central government and all other levels of government, they understand clearly the problem we are facing. Global warming, international pressure, China has to do something very quickly. Secondly, energy crisis, now Hu Jingtao, Wen Jiabao, they talk everyday. We need to change the pattern of economic growth. What is more important, just finished the annual congress meeting, Wen Jiabao, specifically mentioned solar power in his report. It’s the first time he did that. So that actually send very clear signal to the national wide, China needs to go solar, quickly.
Although the situation has been anything but bright recently in the solar industry, things are looking up for companies like Suntech. On top of the 2.6 billion US dollars earmarked in the US stimulus package for energy efficiency projects. At the end of March, China introduced a subsidy which could lead to a huge sales boost in rooftop systems across the country, that, experts say, could potentially soak up the excess capacity and double the solar market.