Capturing the sun: the future of China's solar power.

• Author: Li, Zijun
• Position: Solar industry

With retailers now advertising "solar" backpacks and camera bags to consumers, it's clear solar power has hit the big time. The world's solar industry registered growth rates above 30 percent a year for each of the last five years, and securities markets have seen a surge in the stocks of photovoltaic (PV) cell producers.

Not surprisingly, China wants in on the action. Last December, Suntech Power Holdings, the country's leading manufacturer of traditional mono- and polycrystalline cells and modules, became the first Chinese solar stock to be traded on Wall Street. The successful initial public offering (IPO) raised US$396 million and was considered a major development in China's solar energy industry.

Most significantly, the remarkable growth of Suntech and other Chinese players has convinced even fervent devotees of the oil industry to cast an eye toward China's solar sector, given the country's enormous solar production capacity and low-cost manufacturing capabilities. Yet despite the clamor, some analysts remain skeptical about the future of solar energy in China.

Solar Sells

China isn't the only up-and-comer on the world solar scene, of course. Solarbuzz LLC, an independent research firm based in San Francisco, reports that global installations of PV systems, a key measure of market size, reached a record 1,460 megawatts (MW) in 2005, growing at an annual rate of 34 percent. Led by Japan and Europe, production of solar cells increased 45 percent to nearly 1,730 MW, six times the level in 2000. With a tight oil market, soaring world energy demand, and government incentives favoring solar energy in several countries, the trend towards expanded solar use shows little sign of slowing.

This robust global appetite has enabled China to break into the US$12 billion-a-year industry. Over the next three years, the country expects to significantly boost its manufacturing capacity. An entire solar supply chain is being formed, from the development of polysilicon feedstock to the production of wafers, cells, and modules. The top three domestic manufacturers, Suntech, Tianwei Yingli, and Chinese Electrical Equipment Group, had a combined PV cell manufacturing capacity of 300 MW last year, out of a Chinese total of more than 400 MW.

After adding a new 30-MW solar cell line in late 2005, Suntech's production capacity jumped to 150 MW and continues to grow. "With another manufacturing base in Luoyang currently under construction, we expect our capacity...