Emerging Markets

Paul French examines China’s growing role as a CSP component supplier to Europe and the USA, the dangers of market saturation and the role of import tariffs.

By Paul French

China has lagged behind many other countries when it comes to CSP technology installation and adoption. While there are areas of the vast country suitable for CSP projects they are almost all a long way from the areas of greatest energy demand along the coast and in southern and eastern China. Transferring CSP generated energy from the most suitable regions for large scale projects in Western China to the coast is problematic due to China’s rather antiquated transmission grid and the natural obstacles of geography such as mountains and rivers. The general consensus in China is that meaningful CSP adoption will have to wait for the creation of a better transmission system and smart grid. This is happening but China is large and the distances involved immense so it will take time. Additionally China is presently focussed on nuclear, wind and PV solar as its major commitments to alternative energy.

However, this isn’t stopping Chinese firms from starting to get into the CSP technology related component business. In fact it’s a natural outgrowth of their significant move into solar cells and panels and domination of the PV business. Bill Dodson, a Suzhou based consultant and analyst with TrendsAsia Ltd and author of a forthcoming book on innovation and technology in China (China Fast Forward) is based in Suzhou (a city in Eastern China that is home to many solar component manufacturing firms) and has been a long term watcher of the solar components business in China. He believes that the vast majority of foreign companies looking to get CSP projects off the ground will come to China to source components. He says, “China is still a workshop of the world with incredible economies of scale and a highly developed cross sector infrastructure (for example, solar cell manufacturers are closely linked to panel manufacturers) while the solar components business is encouraged, subsidised and funded by both the central government in Beijing and local governments (such as Jiangsu province’s government that covers Suzhou). 

Dodson sees no reason why anyone in Europe or any other developed market would manufacture components locally if they were available from China as the PRC would always be cheaper. Of course tariffs are a possibility and have been imposed on Chinese solar panel manufacturers by the USA recently with anti-dumping tariffs of at least 31 per cent announced by the US Department of Commerce in Washington DC back in May. Chinese manufacturers have reportedly tried a variety of ways to get around these tariffs – from sourcing components in Taiwan and South Korea to investing in the USA itself. However, analysts like Dodson do not see the policy of tariffs being extended to CSP components, believing that there was a specific problem with PV solar cells and panels.

And herein lies the longer-term problem with sourcing from China. Right now China is cheapest and though most costs are rising in China – labour costs are up 10% per annum on average, land rents by over 30%, energy costs by 12-15% and taxes more rigorously enforced than previously – the country remains capable of economies of scale in production of advanced technology that are not found at a comparable price anywhere else at present. Production can be found in nascent form in other places in South East Asia but there is not the supporting infrastructure – ports to ship from, expressways to move things about. Nor does any regional country starting to manufacture have a potential domestic market anything like China’s.

Dodson points out that Beijing has prioritised clean and alternative energy technologies and subsidised them but, as has been seen most clearly in the solar sector, prices of PV cells and panels have been dramatically driven down. Even with China’s burgeoning solar market, overcapacity and too many manufacturers competing for sales globally outside of China has meant that supply and demand have been out of sync and so an entire sector – solar in this case – has been driven down; first in China, then globally.

According to Dodson, European governments who are keen to stop subsidizing FiT in the current economic climate are citing falling panel prices and lower costs as evidence that installations are cheap enough without government subsidy –German, Italian and Spanish manufacturers have been hit hard as European feed in tariffs have been taken advantage of by Chinese manufacturers with no American-style import tariffs imposed. Dodson is also keen to point out that CSP has been adversely hit by this process as it has meant that the, “bread and butter profits generated by solar panel and cell manufacture have been lost effectively killing research and development investment (R&D) as reinvest to boost efficiency has been impossible for many firms forced to focus on price competition.”

China will remain the major components supplier to the global CSP industry indefinitely, believes Dodson, and this could boost local CSP projects using Chinese re-engineered technology with lower cost components sold to and used in North Africa, the Middle East, Latin America and even more developed markets such as Australia. 

To comment on this article write to Paul French,

Or contact the editor, Jennifer Muirhead