Defective Panels Threatening Profit at China Solar Farms: Energy

China's Solar Market
Solar panels mounted on lamp posts stand at the Sino-Singapore Tianjin Eco-city in Tianjin, China. The courtry became the world’s biggest solar market in 2013 and accounted for about a quarter of global solar additions in 2014, according to Bloomberg New Energy Finance. Photographer: Tomohiro Ohsumi/Bloomberg

Flaws found in some Chinese solar panels can drastically eat into their efficiency, reducing how much power the panels will produce as the country races to meet aggressive goals to hold the line on fossil fuel emissions.

The defects, found in products set to be used only in China, are in a coating that suppresses reflections on glass, allowing the panels to capture more light. About 23 percent of samples taken from dozens of Chinese companies failed to meet requirements, according to regulators in China. For samples from Jiangsu, the eastern province where much of the glass is made, the rate was as high as 40 percent.

China is promoting both large solar farms in remote areas and smaller, rooftop systems within cities, and domestic demand for panels is climbing. In a landmark pact announced with the U.S. in November, China set a target of getting as much as 20 percent of its energy from clean sources by 2030. That goal will rely heavily on its rapidly growing solar industry, which controls about 70 percent of the global market.

“A reduction in power generation caused by quality imperfections means declining investment returns or even losses from solar farms,” said Meng Xiangan, vice chairman of the China Renewable Energy Society, an industry group.

China became the world’s biggest solar market in 2013 and accounted for about a quarter of global solar additions in 2014, according to Bloomberg New Energy Finance. Its total solar installations surged almost 10-fold in the past three years to about 33 gigawatts.

The findings, which didn’t identify specific manufacturers, feed into criticism that quality problems at solar panel makers are a result of cost cuts as prices have plunged in recent years.

‘Unwise to Panic’

“It would be unwise for investors to panic about the findings, but equally it remains important for buyers to conduct good technical due diligence on suppliers and on projects before making a purchase,” said Jenny Chase, lead solar analyst with New Energy Finance, in an e-mailed response to questions.

The defects typically won’t emerge until long after the panels are installed, and will reduce power output and cut potential profit for solar-farm developers. Most of China’s solar farms have been built since 2012, when the nation started boosting domestic demand, in part to aid manufacturers as orders from Europe started to slow.

“Photovoltaic quality problems may not occur immediately but will be revealed after about two years of operation or longer,” said Peng Peng, director of policy research at the Chinese Renewable Energy Industries Association. That presents “an uncertain risk for investors.”

Developer Concerns

Developers are already expressing concern about suppliers. United Photovoltaics Group Ltd., a Hong Kong operator of solar farms, has developed a list of preferred suppliers for panels and other equipment, spokesman Stephan Yao said.

Sky Solar Holdings Co., a Hong Kong-based project developer, plans to invest in China only at a “careful” pace because of quality concerns, Chief Executive Officer Su Weili said.

The defective glass was found in tests conducted in the third quarter with samples from 30 companies and reported by a Beijing regulatory agency known as the General Administration of Quality Supervision, Inspection and Quarantine. The producers represent about half of China’s suppliers of anti-reflective glass, and the agency didn’t name them.

Officials from Xinyi Glass Holdings Ltd. and Changzhou Almaden Stock Co., which are among China’s top producers of solar glass, didn’t reply to e-mailed requests for comment.

‘Boosting Quality’

CSG Holding Co., a Shenzhen, China-based maker of specialized glass and ceramic materials, said in a statement that it “always focuses on boosting product functions and quality.”

Solar panels are subject to several layers of inspection, said Sebastian Liu, director of investor relations at JinkoSolar Holding Co. The Shangrao, China-based company makes silicon wafers, cells and panels, and also builds solar farms using its products.

“There’s no motive for us to cut corners,” Liu said.

Broader questions about quality continue to dog the industry. Almost a third of 425 utility-scale solar farms surveyed by the Beijing-based China General Certification Center from 2012 to 2014 had flaws of some sort, according to an official at the center who asked not to be identified because he isn’t authorized to speak publicly on the matter.

Those problems, including faulty panels, poor construction, design flaws and project mismanagement, mean the solar farms are producing less power than initially expected, according to the official.

Those tests included 3.3 gigawatts of projects, about 10 percent of China’s installed solar capacity at the end of 2014.

— With assistance by Feifei Shen

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