The growing Chinese solar industry

The Wall Street Journal this morning reports that First Solar, a US-based company that is a leading manufacturer of photovoltaic solar systems, is entering into a partnership with a Chinese solar firm, China Power International New Energy Holding Ltd. The two companies will “collaborate on solar-energy projects in China, the U.S. and other markets.”

First Solar’s motivations are clear: sales are down, the European market is depressed and expecting cuts to solar subsidies, and China offers the best growth market out there for renewable energy projects. With all the restrictions and protections imposed by the Chinese government on foreign firms operating in China, the only viable entry into that market is through a partnership with a Chinese firm.

Meanwhile, China Power International New Energy Holding Ltd. wants to get its hands on First Solar’s advanced technology.

This reminds me of an article by Mure Dickie from the Financial Times, printed last September. The article described the rapid growth of China’s high speed rail industry (of all things), and the way Chinese companies had partnered with foreign firms, “digested” their technologies, and then gone on to compete against their former partners in the global markets. Executives in the foreign firms knew that Chinese firms were after their technology, but seemed to expect a ramp up time than was actually required:

Executives just never imagined that, within six years, China would be running identical-looking trains at world-record operational speeds and marketing them to third countries.

(The Financial Times puts a ridiculous 30-word restriction on how much can be quoted. That quote would be way better if they’d give me another sentence or two.)

It’s reasonable to assume that the Solar industry now faces the exact same situation that the rail industry contemplated just a few years back: First Solar knows it’s arming potential competitors, but the market incentive is too good to resist. I’ll be interested to see, 10 years from now, how the solar market is structured, and who the major players are.

I’m guessing they’ll be in China.