China’s new king of solar

Suntech’s Shi Zhengrong built one of the world’s biggest solar-power companies. Now, with economies slowing, he faces the challenge of a lifetime.

The deepening global economic crisis has changed the dynamics of Shi’s industry abruptly. Rapid growth is now yesterday’s story; significant overcapacity is today’s. The global financial crisis has hurt the ability of solar customers in Europe and elsewhere to get project financing – the critical component in building more solar capacity. Only recently, Shi says, has there been a sign of thawing in the financial markets that might let some planned projects go forward in Europe.
The global slump has also crushed the prices of natural gas and coal, which compete with solar to generate electricity. As a result, Suntech’s stock – like all those in the sector – has also been crushed. It closed on Jan. 21 at just $9.31 per share, wiping out some $4 billion of Shi’s net worth.

The rapid success of Chinese solar companies such as Suntech has spawned lots of imitators. And that’s why the market is now plagued by overcapacity. A new report from research company iSuppli says 11.1 gigawatts of panels will be produced in 2009, up 62% from 7.7 gigawatts in 2008. However, iSuppli says just 4.2 gigawatts are expected to be installed in 2009, up from 3.8 gigawatts in 2008.

Shi has responded by significantly scaling back planned capacity increases in 2009. Suntech had originally hoped to raise production from its current one gigawatt to 1.4 gigawatts by the end of 2009, and two gigawatts by the end of next year. Now, Shi says, expansion plans are on hold until the financial crisis passes and the market improves.

That’s part of the reason that Suntech fired 800 employees at the end of 2008 – the first layoffs in the company’s short lifetime. Shi believes that the scale Suntech has already achieved will enable the company to withstand what will be an industrywide shakeout – with smaller producers of cells and panels falling by the wayside.

CNN