1. THE CHINESE PHOTOVOLTAIC CLUSTER IN WUXI
ECONOMICS AND MANAGEMENT
OF ENERGY BUSINESS OK
Group 8
Benedetta Polverelli
Charlotte Calliauw
Roberto Riga
Serena Sebastiani

2. AGENDA An Overview of the Chinese PV Industry
National Competitive Advantage
Wuxi: between local developing zones and a successful photovoltaic cluster
Photovoltaic technology and prevalence in Wuxi
The case of Suntech
Issues: Dangers and Debates on the components of a photovoltaic panel
Chinese Energy Policies
Conclusions

3. PV in China: Facts and Figures
China produces 1/3 of solar photovoltaic global production.
Its internal market is growing 5.6% each year, but remains until now small.
Over 90% of Chinese PV cells and modules are exported.
China’s production capacity since 2004 is growing at rates of % each year.
Cell capacity is growing, each cell contains more than 4 GW per wafer.
China’s solar technology is less sophisticated when compared to global leaders.
Crystalline Silicon (c-si) is the dominant production method , which alone covers 80% of global production
Most of all PV panels’ cost of production is highly correlated to the price of silicon as a commodity.
Source: J Campillo, S Foster “Global solar photovoltaic industry: analysis with focus on the Chinese market”, Malardalen University, 2008

4. Chinese PV Industry Analysis
Competitive rivalry:
Fierce, with more than 30 players. High growth perspectives might attract new comers
Barg. Power of Suppliers:
Silicon costs are declining, and there are long term agreements to fix the prices
Threat of new entrants: semiconductor firms are attracted by high growth margins. Costs are decreasing
Barg. Power of Buyers:
70-80%of the price depends on silicon as a commodity
Threat of Substitutes: medium, Thin film, but higher costs and low technology transfer rate
Source: J Campillo, S Foster “Global solar photovoltaic industry: analysis with focus on the Chinese market”, Malardalen University, 2008

5. Does China have a National Competitive Advantage?
Key drivers that support China’s dominance:
Growing demand for energy, especially renewable.
Announcements of feed-in tariffs and government support.
High availability of Indium and Gallium
Source: N. Marigo “The Chinese Silicon PV Industry and Market: a critical review of trends and Outlook”, Imperial College London, 2006

6. China needs to be “green”
China is highly dependent on coal and oil, therefore, to diminish its GHG, it is very likely that the government will invest highly on PV and other alternative ways to produce clean energy.
Internal demand for energy is growing annually at 5.6%, and, if China will fail to find alternative solutions, annual increments are expected to be absorbed for 90% by fossil fuel combustion.

7. Government subsidies and R&D
Public funds for R&D have doubled in the last decade.
The government’s “Brightness Program” is an attempt to provide PV renewable energy to 23 million of citizens by

8. Other considerations…
Silicon shortage showed in how there is a high dependency on a single element. China is diversifying its technologies. R&D in Thin Film technology has started in order to increase conversion efficiency rates
BUT…
Chinese labor force is enough skilled for a basically manual assembling line but not as comparable with a much more intensive technology production.

9. Wuxi New District
In the 1992 the district was founded as an industrial zone in order to attract large foreign companies. It is defined a high-tech developing zone.
In this Developing Zone there are six clusters identified:
- Photovoltaic
- Electronics
- Electric cars
- Purple clay tea ware
Environmental protection
Equipment electric wires and cables
The creation of this Developing Zone was crucial for the development of all the area.
Source: Overview of the Industrial Cluster in China – Li & Fung

10. Photovoltaic Cluster
The most successful cluster is certainly the photovoltaic high-tech industry cluster. Its leader is Suntech. The main features are:
A level of advanced technology
A complete industrial chain
An independent innovation ability
A strong international competitiveness
Some data:
In 2008, the base’s sale was 32.7 billion Yuan, with an increase of 166%, accounting for 40% of the national total. The exports of photovoltaic enterprise had reached 2.5 billion U.S. dollars total, with an increase of 71.32%. There are more than 40 photovoltaic production enterprises.The investment of R & D accounts for about 5% of gross sales, and there are more than 40 patents now.
Source: Overview of the Industrial Cluster in China – Li & Fung

11. Components of a Panel
A photovoltaic panel is composed by cells, able to convert solar rays to electricity.
This can happen thanks to a particular component inside the cells: crystalline silicon also known as ‘solar grade silicon’.
In particular the most important kind of crystalline silicon is silicon tetrachloride (SiCl4). But it is also the most dangerous especially if it comes in contact to water.

12. Value Chain Polysilicon
Photovoltaic converts light into direct current through the photo-electric effect in this five steps:
Wafers
Cells
Module
System

13. Silicon tetrachloride+ =
SiCl4 + 2 H2O SiO2 + 4 HCl
This is the chemical reaction with water. It generates Hydrochloric Acid that is the dangerous consequence of silicon tetrachloride because at ambient temperature is gaseous and when it is inhaled it is corrosive and irritating.

14. Issues: When is there the danger?
Silicon Tetrachloride is inside the cell and the danger could be in two situations:
In usage
In recycle
During the usage, if the quality of solar panels is not so high or also if there is not a lot of maintenance, rain can go into the cell dispersing hydrochloric acid that at ambient temperature it is gaseous.
During the recycle, if the dumping process is not regular and very appropriate, silicon tetrachloride can become hydrochloride acid with the rain polluting all the area.

15. Some Cases
Luoyang Zhonggui High-Technology Co. is considered a green energy company in China but some years ago it started to dump all the old panels. The dumping process was implemented in Henan region. Which is the result?
In all that area it is impossible to cultivate, with terrible consequences to the local economy.
In all that area there is a high concentration of respiratory diseases, in particular for children and old people.
Source: Solar Energy Firms Leave Waste Behind China – Washington post – Ariana Eunjung Chan

16. Main types of energy technologies currently developed in China:PV
main technology for the generation of solar electric power
CSP (Concentr. Solar Power)
Systems which use lenses and mirrors to concentrate a large area of sunlight. Light is converted to heat which drives a heat engine connected to electric power generator. It is a new tech but has brilliant perspectives.
BIPV (Building Integrated PV)
PV materials which replace conventional building materials. It is a relatively underdeveloped technology with high growth opportunities
SWH (Solar Thermal Water Heating)
China is global leader for both installed capacity and production
Source:“Commercialization of Solar PV system in China”, Centre
for renewable energy development, Energy Research Institute

17. Solar Photovoltaic:
Electrical power is generated from solar radiation and directly converted into electricity. For this process, semiconductors are used to exhibit the photovoltaic effect.
Materials used:
monocrystalline silicon,
polycrystalline silicon,
amorphous silicon,
cadmium telluride,
copper indium selenide/sulfide.

18. Concentrated Solar Power (CSP)
CSP plants generate electricity using heat.
Reflectors focus sunlight onto a fluid-filled vessel. The heat absorbed by the fluid is used to generate steal that drives a turbine to produce electricity.
Ideal location: deserts.
Advantages:
carbon-free & clean
no fuel costs

19. Building-Integrated Photovoltaic
Photovoltaic materials that are used to replace conventional building materials in parts of the building envelope such as the roof, skylights, or facades.
Transparent solar panels use a tin oxide coating on the inner surface of the glass panes to conduct current out of the cell. The cell contains titanium oxide that is coated with a photoelectric dye.
Ultraviolet radiation

20. Solar Thermal Water Heaters
ACTIVE SYSTEM (aka pumped system)
Alternative source, activated when temperature is too low
Collector that pumps heated fluids
Anti-freeze (alternative ‘drain-back’)
PASSIVE SYSTEM (aka compact system)
Collector that drives fluids naturally
Anti-freeze (alternative ‘drain-back)

22. Company Overview
Suntech Power Holding Co Ltd. was founded in September 2001 and now is a global leader in the PV modules manufacture.
Nowadays it is the cheapest and largest PV module producer but also as the leading firm of the sector for reliability and cutting edge products.
In the technology-intensive and fast- moving PV industry, Suntech has been aware that an ongoing learning process had to be settled. R&D has been carried on both internally and in collaboration with external academic institutions .

23. Suntech’s strategy
LINKAGE
Established interactions with research agencies and universities.
Industrial linkages.
Agreements with suppliers in order to solve the shortage of silicon.
Geographical expansion (JV with MMA Renewable Ventures in the US).
LEVERAGE
On the international experience of dr. Shi.
Looking for external resources and quickly expanding the production capacity improving the technological capabilities to reach higher cell's conversion efficiency.
LEARNING
R&D has been carried on both internally and in collaboration with external academic institutions.
As latecomer, focus on manufacturing competences.
Source: Mathews, J. A.: “Latecomer strategies for catching up : linkage, leverage, and learning” (2007)

24. The “PLUTO” technology
Lower reflectivity to capture more sunlight throughout the day without direct solar radiation (more efficiency).
Substitution of expensive silver paste with copper to make contacts (cost innovation).
Pluto is a proprietary technology with patent- pending application that is based on the PERL technology developed at the Australian UNSW, Dr. Shi university, where 25% efficiency record has been already achieved in the laboratory.
Pluto cells (left) vs standard cells (right). The metal lines in Pluto cells have a width of about 25 microns and are spaced only 1.0 mm apart .
Source: Company website

25. Chinese Energy Policies
China plans to increase their renewable energy consumption to a full 10% by 2010.
It has to be considered that the law includes some very clear penalties for non compliance.
Yet a Chinese feed-in tariff still does not exist.
There is no doubt that China's main strength lies in their ability to increase manufacturing levels quickly

26. Conclusion
From our research, important strengths and reliable competitive advantages of China in the photovoltaic industry came out.
The industry is relatively new but, thanks also to the creation of the Wuxi cluster, it is growing fast and shortly acquired a leading position globally.
It now needs a stronger support from the government in order to flourish more and to successfully gain market share in the long term.
The analysis of Suntech, conducted using the LLL strategy, shows how the Chinese photovoltaic firms can pursue an accelerated internationalization and also, the ability to transform a technological-intensive industry in a labour-intensive one, in order to lower costs and easily switch from a technology to another.

27. Thank you! Q&A