Caixin
Jan 02, 2020 06:46 PM
BUSINESS & TECH

Solar Manufacturer Powers Up With $1 Billion Investment

China is the world’s largest maker of solar panels and components.
China is the world’s largest maker of solar panels and components.

JA Solar Technology Co. Ltd. on Thursday unveiled a plan to build a 6.6 billion yuan ($947.7 million) production base for solar cells and their components, as it secures its leading position in China’s solar market after consolidation of the sector over the last few years.

The Shenzhen-listed company plans to spend 2.78 billion yuan, or 42% of the total investment, on facilities to make solar cells with annual production capacity of 5 gigawatts (GW), according to a statement (link in Chinese) filed with the Shenzhen stock exchange. The rest will go toward building a component factory with 10 GW of annual production capacity. Both projects will be located in the city of Yiwu in Eastern China’s Zhejiang province, and will take four years to complete.

“This is a normal move for large solar companies in China, to help maintain their leading positions in the market. Utilizing advanced facilities and improving output quality can reduce their costs and boost profits,” UBS analyst Alex Liu said.

China is the world’s largest maker of solar panels and components, following a rapid buildup over the last decade on the back of government support.

China is also a major consumer of such panels, following a drive to rapidly build up solar power production in a bid to promote the renewable and clean energy source. But as the technology matures and becomes more cost-competitive with traditional energy sources like coal and natural gas, many governments are rolling back subsidies they once gave to encourage its development.

That rollback, combined with regulatory measures to improve the quality of solar farms, has led to a sharp downturn in new solar power generation growth in China. It has also helped drive sectoral consolidation that has eliminated many small- and mid-sized manufacturers, and pushed larger firms like JA Solar to build facilities like the newly-announced Yiwu base to maintain their competitive position.

China installed 45 GW of solar power generation capacity in 2018, representing 45.1% of global capacity growth that year, according to the International Energy Agency. But new installations plunged to just 18 GW in the first 11 months of 2019 after subsidies were scaled back midway through the year, Liu said, though he expected that another 8-10 GW was installed in December.

Liu predicted new capacity installations would rebound to 35 GW this year. He added that late release of government subsidy plans in 2019 resulted in 10 GW of “leftover” installations, which could bring new 2020 installations as high as 45 GW.

Shares of JA Solar rose about 1% Thursday after its manufacturing expansion plan was announced.

Contact reporter Yutong Lu (yutonglu@caixin.com)

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