fact book prepared as context for the key findings of the renewable energy sector team the china...

Fact Book

Prepared as Context for

the Key Findings of

the Renewable Energy Sector Team

The China Solar Energy Market

2

Contents

Overview of the China Solar Power Industry

Segment Definition

Market Context

Regulatory Environment

Existing and Emerging Standards

Technology Innovation and Alternative Solutions

Competition and Industry Structure

Financial Investment

2

China Solar Energy Fact Book

3

China’s solar energy industry is poised to make a major impact on the worldwide solar energy market

Solar Energy – overview

Source: XYZ.

There are four major types of solar energy technologies currently being used in China:– Solar Photovoltaic (PV) is the main technology used in China for the generation of solar electric power

– Concentrating Solar Power (CSP) is a technology that is new to China

– Building-Integrated Photovoltaic (BIPV) is a relatively under-developed technology branch expecting rapid growth in China

– Solar Thermal Water Heaters (SWH) in which China is a world leader in terms of both production and installed capacity

The Chinese market for solar components is export oriented:– Currently, over 90% of Chinese made PV cells and PV modules are exported to overseas markets

– Based on government targets for China’s domestic market for accumulated PV installation is expected to reach 300MW by 2010, up from only 10MW installed in 2006 – although government targets are currently being revised upwards

China is a leader in the production of solar components:– Since 2004, China’s solar cell production capacity has reached growth rates ranging from 100-400% per year contributing

to the world’s shortage of poly-silicon feedstock

– In 2008, cell capacity of 4 Gigawatts (GW) was announced and, after growing a projected 40% in 2009, China’s solar wafer capacity will also reach 4GW

Chinese solar technology is less sophisticated compared to the applications employed by overseas competitors:

– The average efficiency of Chinese c-Si PV technology is approximately 16–17%

– Chinese solar industry enterprises are still at a disadvantage when competing with global technology leaders, especially in terms of new Thin Film PV technologies


4

Contents


Segment Definition

Market Context






4


5

There are four major types of solar technologies currently produced and used in China, or with high growth potential

Solar Energy – definition – overview

5

Source: Wikipedia; XYZ.

Types of Solar Technologies


Solar Thermal Water Heater

The most common types of thermal water heaters include evacuated tube collectors (44%), glazed flat plate collectors (34%) generally used for domestic hot water heaters and unglazed plastic collectors (21%) used mainly to heat swimming pools

Generation of Heat EnergyGeneration of Electricity

Solar Photovoltaic (Solar PV)

Concentrating Solar Power (CSP)

A solar cell, or photovoltaic cell (PV), is a device that converts light into direct current using the photoelectric effect

Solar PV is the main technology used in China for the generation of electric solar power

Concentrating solar power (CSP) technologies use lenses or mirrors and tracking systems to focus a large area of sunlight into a small beam, then convert the concentrated light to heat for power turbines to generate electricity

Building-Integrated Photovoltaic (BIPV)

Building-Integrated Photovoltaic (BIPV) technologies integrate photovoltaic cells into buildings to generate electricity as a distributed energy solution

BIPV technologies are relatively new in China, but growth in applications is expected under new MOF & MOHURD subsidy

The Solar PV value chain includes silicon suppliers, wafer, cell and module manufacturers, system installation and end use

Source: UBS Asia Solar Report 2007; XYZ Note1: Based on Deutsche Bank Solar Photovoltaic Industry report, Jan 2009

Photovoltaic (PV) Energy Value Chain and Participants

IIIustrative Industry Activities: Poly-silicon

sorting Poly-silicon type

check Poly-silicon Etch Solar Grade

Poly-silicon manufacturing

Polysilicon feedstock is crystallized into ingot

Ingot shaping and sizing

Ingots are cut and shaped then sliced into wafers

Entails etching, doping, coating of wafers and applying electrical contacts to form a PV cell

The assembly and array of multiple cells on a solar panel, along with electrical connections

Power conditioning equipment to convert generated electricity for home use / transmission

Installation equipment to mounting racks, wiring

Installation labour

Solar power farm BIPV LED Solar Battery

Thin Film Approach

Crystalline Silicon (c-Si) Approach

Manufacturing Equipments

Material Manufacturing Services Energy Sales

Ancillary Equipments

Poly-silicon Wafer/Ingot PV Cell PV Module End Use

PV Cell PV Module

PV System Integration End Use

End UsePV System Integration

New Financing and Partnering1

6


Solar Energy – definition – value chain – Solar PV

7

CSP systems use mirrors to concentrate sunlight onto receivers and convert it to heat to power traditional steam turbines

Concentrating solar power (CSP) systems use lenses or mirrors and tracking systems to focus a large area of sunlight into a small beam

Concentrated light is then used as a heat source for a conventional power plant or is concentrated onto photovoltaic surfaces

Claimed to be better than photovoltaic for large scale (50-200Mw) power plants, whilst PV applications are much better suited to smaller, decentralised applications

Concentrating solar power systems are divided into concentrated solar thermal (CST) and concentrated photovoltaics (CPV)

Solar Energy – definition – CSP

Concentrating Solar Power (CSP) Definition

Concentrated solar thermal (CST)

Used to produce renewable heat or electricity (generally, in the latter case, through steam)

Uses lenses or mirrors and tracking systems to focus a large area of sunlight into a small beam

Concentrated light is then used as heat or as a heat source for a conventional power plant (solar thermoelectricity)

Concentrated photovoltaics (CPV)

Employ sunlight concentrated onto photovoltaic surfaces for the purpose of electrical power production

Solar concentrators of all varieties may be used, and these are often mounted on a solar tracker in order to keep the focal point upon the cell as the Sun moves across the sky

Schematic of an Active Concentrating Solar Power System

Source: Wikipedia; XYZ.China Solar Energy Fact Book

8

Note: CSP is a new industry, and the roles and actors in the value chain vary significantly by technology and project. In addition, the value chain structure is still evolving; R&D is an integral part of the value chain and conducted by a single company or by closely related companies; there is significant vertical integration across the five stages of the value chain; CSP is very new to China and there are very few domestic players (Himin, a key Chinese component provider, is an exception).

8

Concentrating Solar Power (CSP) Value Chain

The CSP value chain includes five stages, but can vary significantly by technology and project

Source: Center on Global Governance & Competitiveness, company annual reports, individual interviews, and company websites.

Industry Activities: Materials include steel,

copper, brass, concrete, plastic, silica, synthetic oil and molten salt

Components include collectors, mirrors, heat collection elements, steam generators, heat storage and central controls

The finished products including solar technology and plant development

Distribution is via ownership and operation of the CSP plant

The end users are utility companies

Materials ComponentsFinished Products

Distribution End Use

Selected Companies: Boeing, Chicago, IL 3M Company, Siemens Luz/Solel Alanod

Luz Acciona Abengoa Solar Carrizo Energy BrightSource

Sunray Energy Florida Power&Light Acciona Arizona Public Abengoa Solar BrightSource

Southern California Edison

Nevada Power Co Sierra Pacific Power Co Pacific Gas & Electric Co Florida Power & Light San Diego Gas & Electric


Solar Energy – definition – value chain – CSP

http://www.solwafer.eu/dynamisch/generator/big_21_Solar_energy_value_chain.jpg

9

Solar water heaters (SWH) technologies transform solar energy into heat, and are now widely applied worldwide

Solar heating systems are generally composed of solar thermal collectors and a fluid system to move the heat from the collector to its point of usage

May use electricity for pumping the fluid, and have a reservoir or tank for heat storage and subsequent use

May be used to heat water for a wide variety of uses, including home, business and industrial uses

Three types of solar thermal water heaters are being widely applied

Solar Energy – definition – SWH

Solar Thermal Water Heater (SWH) Definition

Formed plastic collector

Formed plastic collectors (such as polypropylene, EPDM or PET plastics) consist of tubes or formed panels through which water is circulated and heated by the Sun's radiation

Often used for extending the swimming season in swimming pools

Flat plate collector

A flat plate collector consists of a thin absorber sheet (of thermally stable polymers, aluminum, steel or copper, to which a black or selective coating is applied) backed by a grid or coil of fluid tubing and placed in an insulated casing with a glass or polycarbonate cover

Vacuum tube Made of a series of modular tubes, mounted in parallel, whose number can be added to or reduced as hot water delivery needs change

Schematic of an Active Solar Heating System

Source: Wikipedia; XYZ.China Solar Energy Fact Book

http://upload.wikimedia.org/wikipedia/en/0/0c/Active_Solar_Water_Heater_Diagram.svg

10 10

Solar Water Heater (SWH) Value Chain

The Solar Water Heater (SWH) industry is characterized by a highly fragmented manufacturing base throughout the value chain

Source: Company annual reports, individual interviews, and company websites

Industry Activities: Materials include

aluminum, steel, copper, fibreglass, plastic, polyutherane foam

Components include collectors, storage tanks, valves and central pumps and controls

The finished products, including add-on product manufacturers

Independent sales representatives

Wholesale distributors Retailers

Builders and developers Contractors and

plumbers Homeowners



Selected Companies: Consol Changzhou Changzhou Flying

Water Heater Co. Huayang Solar Energy

Beijing Tsinghua Solar Systems

Sunrain Hi-min Solar

Solahart (Australia) Sunshore Linuo Paradigma

Sangle Solar Energy Mondial Energy (Canada)

Manufacturing Equipments Building Integration

Given the relatively low technology requirements and barriers to entry for SWH manufacturers, the industry is extremely fragmented with over 5,000 players – of these, only a few stand out

based on product quality and technological innovation


Solar Energy – definition – value chain – SWH

http://www.solwafer.eu/dynamisch/generator/big_21_Solar_energy_value_chain.jpg

11

Contents


Segment Definition

Market Context






11


12

Solar energy’s potential application in China exceeds existing government targets, with high long-term growth expected

Market Context Overview

Source: XYZ

Market Size

China has abundant solar resources; two-thirds of the country enjoys over 2,200 radiation hours annually, and 70% of the country has solar resources in excess of 500KJ/square cm/year (in contrast, solar market leader Germany averages only 400KJ/square cm/year

The Chinese government has set a solar target of 5% total energy consumption by 2050; however, the potential of solar energy is much greater

Energy Security

Provides an alternative electricity and heat energy source, suitable for both utility scale (electricity supplied through the grid) and as a distributed energy solution

Could reduce China’s dependency on world energy imports, and inherent vulnerability to world energy price fluctuations

LimitlessRenewable

Provides a limitless natural resource that is not depleted like conventional energy sources of oil and coal

Socio-economics

The development of the solar energy industry may generate millions of direct and indirect employment opportunities and social and economic benefits

In China, over 150,000 jobs are linked to the Solar Photovoltaic (PV) sector - over RMB150 billion revenue is generated per year with a CAGR over 20%, with significant ongoing growth potential

Carbon Regulation

Various forms of carbon regulations facilitating “cleaner” energy industries are gradually taking place In March 2009 MOF and MOHURD announced a RMB20/Watt subsidy for Building Integrated PV (BIPV) applications

DRIVERS

Resources

Solar Energy - market context - overview

Renewable Energy Final Deliverables

https://www.usgbc.org/ShowFile.aspx?DocumentID=4030






13

China is abundant in solar resources and leads in manufacturing, but solar energy remains a government-driven market

Solar Energy – market context – overview

Solar Photovoltaics (PV):– China is the world’s largest PV cell/module producer, but domestic installation levels are

comparatively small– China’s government is seeking to stimulate domestic market demand – China’s abundant solar resources, economic considerations and national energy strategies make

Solar PV an attractive market

Solar Water Heater (SWH):– China is the world’s largest market for solar thermal water heaters, accounting for almost two-thirds of

total production and installation capacity – Even though solar thermal water heaters are widely utilized in China, average usage per capita is still

very low

Concentrating Solar Power (CSP) Market:– Dormant since the early 1990s, solar CSP technology is undergoing a re-evaluation in the solar-rich

areas of the world– The U.S., Germany and Spain are leaders in CSP projects, with China still at an early stage of

development

Solar Energy – market context – overview

Market Context Overview

Source: XYZ.


14

Solar Energy – market context – background

14

Solar energy accounts for a tiny fraction of both the Chinese and global energy mix

Primary Energy Mix – China Versus Global

Primary Energy Mix in the World (2006)

Source: European Photovoltaic Industry Association; China Solar PV Report – 2007; China Environmental Science Press.

The International Energy Association has indicated that solar power generation currently accounts for less than 1% of the world’s total electricity output, but that the proportion is

expected to increase to approximately 20% by 2040


Primary Energy Mix in China (2006)

15

China is abundant in solar resources and has great potential for solar energy development

15

Solar Energy Resources in China

Solar Energy – market context – resources

China lies between 20N and 40N, and the North and West are almost completely cloudless

Two-thirds of the country enjoys over 2,200 radiation hours annually

70% of the country has solar resources in excess of 500KJ/square cm/year (by comparison, Germany and Japan average only 400KJ/square cm/year and 450KJ/square cm/year respectively)

Source: Chinese Academy of Meteorological Science, http://www.cams.cma.gov.cn.

Distribution of Solar Energy Resource in ChinaUnit: ： MJ/Square Meter


http://www.cams.cma.gov.cn/

16 16

Solar Photovoltaic (Solar PV)

Solar Thermal Water Heater (SWH)


China is the world’s leader in the solar hot water market and over 95% of the core technology is held by Chinese companies

As of 2007, the global capacity of solar hot water systems was approximately 154 GW

China is ranked number one worldwide in PV cell production

In 2007, China’s PV cell production was 1189 MW*, which accounted for approximately 29% of worldwide installation. By 2008 cell production capacity was 4GW

Over 90% of China’s Solar PV cells and PV modules are exported

U.S., Germany and Spain are leaders in this technology

Chinese companies like Himin have been investing in R&D

Note: Megawatts - 25 MW solar cell with a conversion rate of 7% can light up 10,000 LED lamps.Source: XYZ based on China Daily news.

China’s Solar Energy Market – Production and Installation

China is the world’s largest solar thermal water heater market; it installed 70 GW and 107GW of capacity in 2006 and 2007 respectively, or about two-thirds of the world’s total capacity

China’s long term goal is 210GW by 2020

China’s domestic demand accounts for only 4% of total global PV installations

Government targets are seeking to stimulate domestic demand – 2010 target is 300MW, and 2020 1,800MW target will likely be upgraded to over 10,000MW

Estimated that worldwide installed CSP capacity will reach 6,400 MW in 2012

Development is still at an early stage in China, with a stronger PV manufacturing base

Supply

Demand

China has the world’s largest solar PV and SWH production capacity, but domestic demand is still under-developed

Solar Energy - market context – market size


17

Solar Energy – market context– growth – solar PV

17

In terms of installed capacity, the global solar PV industry has grown rapidly with an average annual growth rate over 30%

Global PV Capacity and Installations

Global Cumulative Solar PV Installed Capacity

Source: European Photovoltaic Industry Association.

MW Growth Rate %


Global PV capacity is projected to increase to approximately 21.9 GW by 2010

Technology improvement and government subsidies also effectively reduce the cost of solar energy

Increasing oil and coal prices bring solar energy good opportunities to expand more market share as an alternative energy source

Cumulative Solar PV Installations by Regional Share (2007)

China is still a small market for PV systems and installation with domestic demand accounting for only 1% of the total market in 2007

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In July 2008, Morgan Stanley believed the solar PV industry well insulated against recession, predicting sustained medium-term growth at 27% CAGR: they have dampened solar PV industry growth forecasts for 2009, but long term outlook remains positive

Analysts believe that with re-instatement of incremental financing, coupled with lower silicon prices, and driven by new regulations and incentives in US and China, there is pent-up demand that will be realised with high growth predicted for 2010

Solarbuzz projects that by 2011 Germany will account for 28-30% of total global market demand while the U.S. will likely account for 16-23% of the total – Spain’s annual solar installation capacity is predicted to decline rapidly in line with reduced incentive schemes, reflecting a policy-driven market

Market projections suggest that China will exceed original 2020 target of 1800MW installed capacity – a new target is expected to be announced in excess of 10,000MW

Due to global solar PV industry troubles analysts have dampened growth forecasts for 2009, but long term outlook remains positive

18

Annual Global Solar Installation, MW

Source: Solar Buzz 2008, Green World Scenario, CICC, Morgan Stanley; Barclays Capital estimates, www.chinadaily.net

Annual China Solar Installation, MW

South Korea China Rest of world

Germany Spain Japan USA

2007 2008E 2009E Base 2009E Low

2826

4307

6177

4177

Solar Energy– market context – demand forecast – solar PV


http://www.chinadaily.net/

19

Solar Energy – market context – size – solar PV

The global solar PV market is predicted to double or triple 2006 revenue of US$ 10 billion within five years

19

Source: Solarbuzz annual world PV Market Review, 2007

Global Solar PV Annual Installation (Volume)

Global Solar PV Annual Revenue (Value)

Unit: MW

Unit: USD in million

Conservative Scenario

7,630

1,744

Optimistic Scenario

CAGR: 24%

10,589

30,463

Global Solar PV Annual Installation (Volume)Unit: MW

Global Solar PV Annual Revenue (Value)Unit: USD in million

CAGR: 12%

1,744

10,589

4,177

18,619

Solar PV Market Growth Scenarios – Demand


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China Solar PV Cumulative Installation (1990 – 2007)

Unit: MW

Annual Installed Capacity Cumulative installed Capacity

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China’s PV installation levels are small even though China’s PV cell manufacturing sector is the world’s largest

China Solar PV Production and Demand

In 2007, China’s cumulative solar PV installation reached 100 MW, which accounted for less than 4% of the worldwide installation capacity

Dependent on coal consumption and petroleum imports to meet its energy needs, China is actively providing incentives to boost solar PV installation

During the last five years, China’s PV cell production has increased at between 100%-300%

In 2007, China’s PV cell production amounted to 1,189 MW accounting for approximately 29% of worldwide installation, followed by Germany and Japan

World Solar PV Cell Production (2007)Unit: MW

Source: European Photovoltaic Industry Association; China Solar PV report 2007; PwC Research.China Solar Energy Fact Book

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Solar Energy – market context – size – solar PV

World Total:9200MW

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Our Solar PV market context analysis examines market characteristics by value chain components

The following slides will analyze the key components of the solar PV value chain, focusing on the following market characteristics:

Solar Energy – market context – solar PV - value chain components


Historical market size and growth

Forecasted market size estimates

Market dynamics

Market trends

Solar PV Value China Components

Source: XYZ.

22

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Demand Supply

By late 2008, the polysilicon market experienced overcapacity and subsequent price erosion

As a result of polysilicon shortages and high-surging ASP, aggressive capacity expansion occurred during 2006-2008 and resulted in excess output

It is estimated that there will be around 30% overcapacity during 2009 resulting in decreasing prices When the cost per KW of solar PV generated electricity falls below the average retail price of grid supplied electricity, the

industry will likely absorb this excess capacity

2007-2010 Highly Pure Polysilicon Production in ChinaUnit: MT

Polysilicon Production

Source: Hongyuan Securities Co.,Ltd.; XYZ.

Worldwide Polysilicon Demand and ProductionUnit: MT


Solar Energy – market context – solar PV - value chain component – poly-silicon

1,1304,110

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Despite poly-silicon prices falling more than predicted, global solar demand growth has been smaller than analysts expected

23

Poly-silicon and PV Wafer Price Outlook

Precipitated by global financial crisis, poly-silicon prices have dropped precipitously since 4Q08, matriculating down the solar PV value chain, affecting cell and module prices

February 2008 SunTech estimated 10-15% drop in crystalline silicon module ASPs in 2009 while Deutsche Bank estimated 20%+ drop in ASP

Elasticity of demand in the near term has been much lower than expected due to:

- Project financing constraints- Slower grid electricity price CAGR

In January 2009 Deutsche Bank forecast 4.6GWp global demand growth in 2009 followed by 6.6GWp in 2010

As a result there has been demand and supply mismatch

2007 2008 2009E 2010E

Total Capacity (MWp) 13300 19600 28600

C-Si Module Prouction (MWp) 2520 3630 5663 9131

CdteModule Prouction (MWp) 208 498 1100 1590

Amorphous-Si Module Prouction (MWp) 144 323 688 1252

Total Solar Module Prouction (MWp) 2872 4451 7451 11973

Industry utilization (%) 33.5% 38.0% 41.9%

Reduction from DB Q208 forecast (%) 3% 18% 12%

3000 4800 7900

800 1500 2700

3800 6300 10600

Reduction from prioe forecast(%) 2.6% 22.2% 28.3%

-607 -1090 -1613S&D mismatch(MW)

c-Si Module Sales(MWp)

Thin film Module SalesMWp)

Total solar Module Sales(MWp)

Cell and Module Price Outlook

Supply and Demand Dynamic

Source: Lazard Report, 2008, Suntech Interview in May 2009, DB, PV Industry Looking through the storm, 2009. Feb



24

Rapid capacity expansion is likely to continue driving down polysilicon solar prices in the near term

Source: XYZ.

Polysilicon Capacity – History and Forecasts


Solar Energy – market context – solar PV - value chain component – dynamic – poly-silicon

Description

2002-2005Worldwide tight supply

Silicon supply constraint s were the most important hurdle during this period as the tight silicon market created significant disadvantages for many players that lacked the capability to secure feedstock suppliers

Smaller solar firms found conditions particularly difficult as they tended to be less successful in obtaining silicon supply , a fact that contributed to lower utilization rates, lower profit margins and missing growth plan targets

2006-2008Rapid capacity expansion

A breakthrough in high quality polysilicon production technology occurred as nearly 40 enterprises developed high quality polysilicon projects

Over 3000 tons of high quality products were expected in 2008, with production to reach as high as 20,000 tons by the end of 2009

2009-2010 ForecastOvercapacity and decreasing ASP

• An oversupply dynamic likely will emerge in 2009 resulting from the rapid expansion of capacity between 2006 and 2008

• Demand increase from system manufacturers may slow due to the economic downturn as well as the changing subsidy policies in major PV markets such as Spain and Italy

• The production of polysilicon is forecasted to reach 125,000mt, with 97,000mt destined for solar energy applications (the realistic demand for polysilicon for solar may only be 83,000 in 2010)

25

As polysilicon accounts for the largest portion of PV module costs, price erosion will pave the way for downstream integration

Polysilicon Capacity and Production Forecast

Source: Deutsche Bank 2009

Price Erosion:- Fundamentally, polysilicon material currently comprises 20-25% of solar PV

system cost, or 40-50% of PV module cost, or 70-80% of PV cell cost, and so comprises the largest lever for cost reductions

- Historically, polysilicon was available at US$40-50/kg, but rapid growth in the solar sector resulted in supply constraints that led to poly costs reaching as high as US$400/kg(spot) and US$150-200/kg(contract) in 2Q08

- As polysilicon oversupply sets in, it is estimated that spot prices will fall about 70% over 3Q08-4Q10F

- Factoring in contracted polysilicon (assuming 50% for the industry buys on contract basis), it is estimated that blended polysilicon costs will fall by about 57%

Impact on downstream:- Adequate polysilicon supply will enable module production to precipitate an

oversupply situation- Consequently, the present supply shortage will revert to a module overcapacity

dynamic for a few years beginning in 2009- The oversupply dynamic will initiate a short-term shakeout within the solar PV

industry among public and private companies- However, consolidation will be a strong long-term positive for the industry as

companies are forced to be more efficient and accelerate the march to grid parity- Over time, commodity parts of the value chain (modules) will be less attractive

and the return on selling energy under a distributed model will be more attractive

Impact on business model:- Critical for solar companies to realign business modules with industry reality- For solar PV module manufacturers, being low cost is crucial (i.e., Thin Film is

imperative)- Control the value chain to the end user and energy provisioning at commercial

level will be desired in order to enhance competitiveness

Price Implications on Downstream Integration

An oversupply dynamic in the poly-silicon would lead to falling prices which would matriculate down the value chain, resulting in an industry shake-out



26

China was the world’s largest producer of PV cells in 2007

Regional and National Shares of Global PV Cell Production (2007)

Source: European Photovoltaic Industry Association.

China ranks number one in PV cell production and capacity,

accounting for almost one-third of the world’s total production

PV Market Share by Region/Country


Solar Energy – market context – solar PV - value chain component – size – PV cell

27

Solar PV cell production capacity increased significantly In 2007, China’s solar PV cell production exceeded 1 GW,

and 97.5% of the total output was exported to overseas markets

China accounted for 29% of global PV cell production in 2007

The worldwide production of PV cells is predicted to reach 7.2 GW in 2009

Worldwide Polysilicon Cell Production and Thin Film Cell production

27

Worldwide Annual PV cell Production

Source: Hongyuan Securities Co., Ltd. Report on the development of the Photovoltaic Industry in China (2006-2007).

MW

Global Production of Thin-film PV CellsMW Growth Rate%

Estimated that thin-film market share will reach about 20% of the total production of PV cells by 2010 and around 30% by 2015

Among thin-film PV technologies, amorphous silicon (a-Si) development is most significant in terms of technology maturity, production, application scales and installation capacity (approximately 5.2% of the total market in 2007)

Compared with the average conversion rate of crystalline silicon- based (c-Si) PV cell (15-20%), thin-film PV cell’s average conversion rate (5-10%) still needs to be improved greatly

Growth Rate %

4100

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Solar Energy – market context – solar PV - value chain component – size – PV cell

28

4.45

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4.95

USA Europe

Solar PV modules are expected to decrease in price during 2009, partly due to the new passive policy adopted by EU countries

Since demand for the major solar energy products produced in China is driven by exports, U.S. and European retail prices are more relevant to domestic suppliers

JP Morgan estimates that by 2009 module ASPs will likely decline by 14-26%, depending largely on the terms of a new Spanish subsidy

In 2007, China’s PV solar module production exceeded 1.7GW, while the total generation capacity installed was much less (only 100MW in 2007 and 120-130MW in 2008)

The solar PV domestic market will scale up continuously:- Solar PV rooftop system demonstration projects are

being implemented- BIPV has been installed at commercial buildings,

Olympic facilities and the Beijing Airport- RMB20/watt subsidy from government

Source: Solarbuzz, 2008.

Retail Price Per Watt Peak

Unit USA:USD/Watt; Europe: Euro/Watt

2006 20072005 2008 2009

Solar PV Module Dynamics


Solar Energy – market context – solar PV - value chain component – trend – PV module

29

Different Solar PV modules compete primarily for lowest LCOE, but high conversion efficiencies are also a consideration

Source: DB, PV Industry Looking through the storm, 2009. Feb, Company Data

Cost Curves of c-Si and CdTe ModulesCrystalline

Silicon (c-Si)

Thin Film

Highest power per area Requires less racking

and support material Fewer modules mean

lower shipping costs Large number of module

choices Greater inverter flexibility

Output less affected by temperature

Less manufacturing materials used

Lower cost per watt Good aesthetics for building-

integrated applications Faster energy payback Non-glass substrates

possible More shade tolerant

× High cost per watt

× High temperatures impact output more

× Low shade tolerance

× Individual cell visibility

× Lower power per area

× Takes months to stabilize output

× Twice as much rack material required

× More modules mean higher shipping costs

× Lower series-string capacity

× Less suitable for battery charging

× Requires more combiner boxes

Limited inverter flexibility Fewer module manufacturer

choices

Deutsche Bank’s View:

c-Si cannot challenge CdTe at the module level: although the gap will narrow, CdTe module cost and ASP leadership will not be effectively challenged by average conversion efficiency c-Si modules, even as c-Si module ASP begins to approach $2.00/Wp and installed system approach $4.00/Wp

High efficiency c-Si will be the only volume technology able to compete with CdTe in terms of Levelized Cost Of Electricity (LCOE)

Deutsche Bank’s View:

c-Si cannot challenge CdTe at the module level: although the gap will narrow, CdTe module cost and ASP leadership will not be effectively challenged by average conversion efficiency c-Si modules, even as c-Si module ASP begins to approach $2.00/Wp and installed system approach $4.00/Wp

High efficiency c-Si will be the only volume technology able to compete with CdTe in terms of Levelized Cost Of Electricity (LCOE)

C-Si module market is likely to become a commodity market with gross margins under 15% compared with 40% for CdTe Modules



In the near-term CdTe Thin Film technology holds a significant LCOE advantage over c-Si

Poly Ingot Wafter Cell Module Total

Industry Average US $/Watt produced

0.7 0.2 0.25 0.35 0.45 1.95

Target for 2011 US $/Watt produced

0.39 0.15 0.2 0.2 0.3 1.24

Poly-Si Price $/KG (Processing Cost $1.25)

1.25 50 60 70 100 125 150 175 200

6.60 1.58 1.65 1.71 1.91 2.08 2.24 2.41 2.57

6.70 1.59 1.65 1.72 1.92 2.09 2.26 2.42 2.59

6.80 1.59 1.66 1.73 1.93 2.10 2.27 2.44 2.61

6.90 1.60 1.66 1.73 1.94 2.11 2.29 2.46 2.63

7.00 1.60 1.67 1.74 1.95 2.13 2.30 2.48 2.65

7.10 1.61 1.68 1.75 1.96 2.14 2.32 2.49 2.67

7.20 1.61 1.68 1.75 1.97 2.15 2.33 2.51 2.69

7.30 1.62 1.69 1.76 1.98 2.16 2.35 2.53 2.71

7.40 1.62 1.69 1.77 1.99 2.18 2.36 2.55 2.73

The current cost of PV system installation is $3.20, the direct cost is $2.25 (including BOS, Inverter, labors and others, excluding land costs) - according Deutsche Bank, the direct cost could fall to $1.69

Source: 1. DB, PV Industry Looking through the storm, 2009. Feb, Company Data 2. MorganStanley Research, Sempra Energy, FSLR, NREL

30

LCOE Inputs (2009)Sub-Assembly Cost Of c-Si, US$/Watt produced

Gra

ms o

f /W

p

13.86 €LCOE, €/kWh¹

10.86 €LCOE, €/kWh

$30.00 Fixed O&M ($/MWh)

$0.00 Variable O&M ($/MWh)

O&M Costs

$3.17 Total Capital Cost ($/W)

20%Gross Margin (%)

$0.55 Labor & Design ($/W)

$0.75 BOS ($/W)

$0.25 Inventer ($/W)

$1.00 Moduel ($/W)

Captial Costs

30%Federal Incentive (%, total capital cost)

Subsidies

3%Inflation Rate (%)

35%Tax Rate (%)

9.28%Discount Rate/WACC (%)

20%Loan Term (Yrs)

8%Debt Required Return (%)

12%Equity Required Return (%)

40%Debt Financing(%)

60%Equity Financing (%)

Financing

23.21st year generation (GWhs)

20%Capacity Factor (%)

0.80%Output Degradation (%, starting year 2)

20Lifetime

12,600DC Rating (KW)

System

Assumptions

13.86 €LCOE, €/kWh¹

10.86 €LCOE, €/kWh

$30.00 Fixed O&M ($/MWh)

$0.00 Variable O&M ($/MWh)

O&M Costs

$3.17 Total Capital Cost ($/W)

20%Gross Margin (%)

$0.55 Labor & Design ($/W)

$0.75 BOS ($/W)

$0.25 Inventer ($/W)

$1.00 Moduel ($/W)

Captial Costs

30%Federal Incentive (%, total capital cost)

Subsidies

3%Inflation Rate (%)

35%Tax Rate (%)

9.28%Discount Rate/WACC (%)

20%Loan Term (Yrs)

8%Debt Required Return (%)

12%Equity Required Return (%)

40%Debt Financing(%)

60%Equity Financing (%)

Financing

23.21st year generation (GWhs)

20%Capacity Factor (%)

0.80%Output Degradation (%, starting year 2)

20Lifetime

12,600DC Rating (KW)

System

Assumptions



However, new Thin Film technologies and core equipments are dominated by American, Japanese and European companies

Source: Company data and public reported

Leading Thin Film CompaniesCompany Year Founded Location Technology Production

EquipmentCell Efficiency Module

EfficiencyCosts/Wp Capacity

2008Expansion Goal Finances

Solyndra Jan .2005 USA CICG on glass cylinders

Proprietary development

12-14% 7.6-10% $3.5 to $4 per Wp

110 MW 520 MW in next few years

Investors includes argonaut Private Equity, ARTIS, CMEA VC, Masdar

NanoSolar May 2002 USA Printed CIGS cells Proprietary development

9-14.50% N/A The goal is 35¢ per W

*0MW 430 MW Benchmark, MDV VC, etc, $420 million

Solibro End of 2006 Germany CIGS on glass Proprietary development

16% 8-12% N/A 30MW 45 MW; 90MW Qcell

Miasole 2003 USA CIGS on steel Proprietary development

10.20% 50MW KPCB

GlobalSolar Energy

1996 USA CIGS on Flexible materials

10.20% N/A 65MW 85MW Privately held

Wurth Solar 1999 Germany CIS 13% N/A 30MW 30MW Wholly-owned subsidiary of the Würth Group

Flexcell 2000 Switzerland

Amorphous silicon Proprietary development

10.90% 3% 60 euro cents (76.2¢)

25MW A second line with another 25MW

Qcell

Nesxpower tech

2005 Taiwan Amorphous-Si ULVAC 7% N/A 25MW 100MW in 2010 Founded by UMC Group

Kaneka 1998 Japan Micromorphous silicon Proprietary development

9-10% $1 per W after 2010

40MW (plus 30 MW a-si)

240MW by 2011

Ommon stock traded: Tokyo, Osaka Nagoya

Sontor 2007 Germany Micromorphous silicon Applied

Films

Up to 12% 7-8% N/A 25MW 120MW Qcell

Inventux Tech 2007 Germany Micromorphous silicon Oerlikon Solar AG 8.50% Goal:<€1($1.27)

33MW 100MW by 2010

Financial secure until 2010, Oerlikon, BEOS, Berlin Partner

AVA Solar 2007 USA Cadmium telluride Proprietary development

10.50% (Expected)

N/A Less than $1 per W

Pilot line with 3MW

200MW in 2009 $150 million DCM, GLG Partners, Tchnology Partner, Invus etc.

Calyxo 2005 Germany Cadmium telluride Proprietary development

Up to 16% 6% N/A 25MW A second line with 60MW

Qcell

CSG 1995 as Pacific Solar

Germany Crystalline thin-film silicon on glass

Proprietary development

10.40% 6.10% N/A 20MW No plans Qcell

First Solar 1999 USA Cadmium telluride 10.90% $.93/watt 735MW 1.1 GW end of 2009

NASDAQ listed

31



Chinese players have invested in a-Si R&D and manufacturing, but lag in CdTe and CIGS Thin Film production and development

Source: company data and public report and interview

Company Year Founded

Location Technology Production Equipment Recent progress Expansion Goal

Finances

Shenzhen ChuangYi

1993 Shenzhen Guangdong

a-Si Domestic or Proprietary development

5-6%; 50MW-100MW; produce 25MW in 2007

1000MW by 2013

Intel 20M M S

JinTaiYang a-Si, uc-Si/tandem

Domestic or Proprietary development

6-7%; 200MW around IDGVC

PuLe 2006 Bengbu Anhui a-Si Domestic or Proprietary development

12-18MW; 5-6% 200MW by 2012

SAIF not Close

XinAo 1995 Langfang Hebei uc-Si/tandem AMAT (5.72m²) Small batch production, they will produce at the end of this month

500MW by 2010

IFC 15M M S

ZhengTai 2006 Hangzhou Zhejiang

uc-Si/tandem Oerlikon (1.43m²) Equipment just arrived and in the process of debugging

380MW by 2010

50M M S? SaiBoLe investment together

Hangzhou LongYan

2008 Hangzhou Zhejiang

CdTe Domestic or Proprietary development

In the process of debugging of 30CM*30CM

Lenovo, morning star,GSR; 10M M S around

Hangzhou ShengTong

2008 Hangzhou Zhejiang

CdTe Domestic or Proprietary development

Just set up, complete the debugging at the end of the year

Private enterprises in Zhejiang province. 4M M S

University of SiChuan

Chengdu Sichuan CdTe Domestic or Proprietary development

In the process of debugging 0.3MW of 60CM*30CM

Wuxi ShangDe

Suzhou FST 2006 Suzhou Jiangsu CIGS Optorun & Proprietary development

10CM already complete, 13% change frequency and in the process of debugging of 3MW

40MW by 2010

8.6M M S; individual investor

NUVO Solar 2006 Chengdu Sichuan CIGS Proprietary development 9%, in the process of 3-5MW

2.7M M S; in financing

Thin Film Companies in China

32



CIGS technology is currently untested at commercial scale, but has low LCOE and high conversion efficiency potential

There are more than 30 companies which use their own technical roadmap, coating, printing, vapor deposition or sputtering and different bottom material

The laboratory data has shown 19.9% conversion efficiency, but only Global Solar, Wurth, Showa Shell have industrial-scale production

Venture capital has backed it excessively, keen to find the next First Solar: Nano Solar, 420mms

They want to control the cost to within $1Watt

It is believed that AMAT have just established a group which research and develop the equipment of CIGS

Technology- Control of multi-layer coating - Unavailable of the standard process and tools- Home made equipment

Cost- The output of Indium was only 510 tons in 2007,

84% of it used to the coating of display and 13% used to do the additives and catalysts

- At present, all the costs are estimated

Large-scale Production- Compared with the production of the a-si and

CdTe, this process is much more complex

At present, whilst a-Si companies are looking at ramping production, key players in CIGS development are still looking at how to industrialize the

technology, and very few Chinese companies are actively engaged

Status Challenges

33

Source: Deutsche Bank Solar Photovoltaic Industry report, Jan 2009



34

The overall positioning of Chinese companies upstream in the value chain leave them vulnerable to current industry shake-out

Chinese companies are disproportionately positionedupstream in supply chain, leaving many vulnerable: Chinese companies are major producers of solar-grade

polysilicon, as this graph demonstrates The oversupply dynamic has significant impact

downstream on other Chinese solar companies:

China has around 140 solar-grade crystalline silicon wafer makers who are expected to be adversely affected

China was the world’s largest producer of solar PV cells in 2007, accounting for 29% of production

Lazard estimate a 30% drop in module ASPs this year1, Deutsche Bank believe module market will become a commodity market

It is estimated that between 50% and 80% of Chinese module manufacturers have closed their factories since February 2009

Overall Chinese solar companies are suffering: Chinese solar stocks plummeted from $23/share in Sept 2008 to $3.45/share March 2009, compared to an equivalent fall of 45% in US stocks2

Oversupply of Polysilicon is Expected Across 2009

Source: Hongyuan Securities Co.,Ltd.; XYZ.1 Lazard Solar report Jan 2009, 2 Barclays Solar Report, May 2009

2007-2010 Highly Pure Polysilicon Production in ChinaUnit: MT

1,1304,110

10,000

30,000

0

5000

10000

15000

20000

25000

30000

35000

2007 2008 2009(E) 2010(E)

Po

ly-silicon

Wafer

Cell

Mo

du

leD

ow

nstream

Polysilicon oversupply dynamic: As a result of polysilicon shortages and high-surging ASP, aggressive capacity expansion occurred during 2006-08 and resulted in excess output and falling prices

Excess capacity expected to be absorbed when the cost per KW of solar PV generated electricity falls below the average retail price of grid supplied electricity


Solar Energy – market context – solar PV - value chain component – China overview

Evaluation of China’s Solar Production Capacity and Inhibitors

35

Production resource

Manufacturing equipment

Financing

Technological comparisons

Suitable companies

China’s competitive position

Quantity vs. quality: China a world leader in production capacity, but questions exist about the quality of production

Oversupply dynamic: position of Chinese companies upstream in supply chain is negative

Government incentives in the form of feed-in tariffs can act as an annuity stream for project investors, similar to interest earned on a government bond – although investors faith in government commitment is central

Cell conversion rates are lower on average than companies in other countries. Concerns over silicon quality and development of new high technologies

New market entrant in high technologies like CdTe and CIGS, and also a new market entrant to CSP and BIPV technologies

Position in value stream leans heavily towards cell-level and upstream Chinese companies are net manufacturers: 2007 cell production represented

29% global installations, but installed capacity was only 4%1

Major Chinese firms focus on a-Si and c-Si – leaders in new technologies Human resource shortfall in downstream parts of value chain like installation

Source: XYZ1 China Greentech Analysis based on China Daily news

Overall, China’s solar industry lacks some competitive advantages, especially in new technology areas


Solar Energy – market context – solar PV – China’s competitive overview

36

The Global Concentrated Solar Power (CSP) industryis expected to grow rapidly in the next few years

Global CSP market

Solar Energy – market context – size – CPS

Global CSP Pipeline by CountryUnit: MW

Dormant since the early 1990s, solar CSP technology is being re-evaluated in the solar-rich areas of the world

2007 was a pivotal year for solar CSP development as both Acciona and Abengoa inaugurated 65 MW of parabolic trough and 11 MW of central receiver technologies respectively

There are over 5,800 MW of solar CSP projects in the planning stages worldwide with Spain and California taking the lead – although only financially sound players are moving forwards with projects

With close to 130 projects under development in Spain and over 50 projects in the U.S., the CSP sector may require as much as US$80 billion of investment over the next decade

Source: Emerging Energy Research.China Solar Energy Fact Book

Cannot edit since we do not have the data. MangoStrategy colors should be used.

Note: More specificity to source info?

37

Funding requirements: With close to 130 projects under development in Spain and over 50 projects in the U.S., the CSP sector will demand as much as US$80 billion of investment over the next decade

Global CSP Players altering their strategies amidst the backdrop of a troubled global economy: Financially sound players are moving forward with their 3,000 MW of planned projects as emerging players revaluate their strategies to utilize the US$420 million in capital raised in 2008

Development in Spain is key to industry success as U.S. market remains questionable: Spain’s 130-Project 5,700MW pipeline is taking on greater significance amidst the U.S. economic downturn and the lagging U.S. permitting process

CSP supply chain build-out creates opportunity for new entrants: A new group of CSP technology providers are emerging to meet the 23 GW global capacity that has been proposed

Global Concentrated Solar Power (CSP) implementers are continuing cautiously amidst the global economic downturn

Key Trends in Global Concentrated Solar Power (CSP) Development

Solar Energy – market context – market dynamics – CPS

Source: Emerging Energy Research.


38

The Building-Integrated Photovoltaics (“BIPV”) market is forecasted to expand rapidly in the future

According to Frost & Sullivan market research, the emerging building-integrated photovoltaic (BIPV) market sales amounted to US$199 million in 2007, representing an annual growth rate of 33%

According to the NanoMarkets report "Building Integrated Photovoltaics Markets 2008”:- By 2013, there will be an installed capacity of

10.8GW peak of BIPV, of which 4.6GW peak will come from Europe and 3.7 GW peak will come from the U.S.

- BIPV market is estimated to exceed US$4 billion in revenues by 2013 and surpass US$8 billion in 2015

- About 7 GW peak of total BIPV capacity by 2013 will be from residential applications

- Rooftop installations will continue to dominate the market

- Facade BIPV will reach 1.1 GW peak in five years

Solar Energy – market context – Solar PV – trend – BIPV

Cost Structure for Large Commercial BIPV Installation

Source: Frost & Sullivan Market Research; NanoMarket Report “Building Integrated Photovoltaic Markets 2008”; United Solar.

BIPV Historical Growth – Future Market Size and Cost Structure


6.4

13.415

18

23.4

2000 2004 2005 2006 2007

39

Chinese companies account for two-thirds of SWH global production, and dominate leading technologies

China Solar Thermal Water Heater (SWH) Production

39

China Solar Water Heater Production (2000-2007)Unit: square meters in million

Source: National Development and Reform Commission’s (NDRC) comments; XYZ.

China is now the number one solar thermal water heater producer in the world accounting for over 50% of total production

Over 95% of the core technology for production is held by Chinese companies

Some leading firms, such as Huang Ming, have already improved technology transfer rates from 35% (the average) to 38% or higher

Solar Energy – market context – size – solar thermal water heater


China Solar Thermal Water Heater Export (2005-2007)

Unit: USD in million

40

China, as the world largest market for solar thermal water heaters, also accounts for two-thirds of installed systems

40

Global Solar Thermal Water Heater (SWH) Market

Source: Renewable Energy Policy Network for the 21st Century.



Solar Thermal Water Heater Market Installation Size by Country (2006)

Market Demand: - China accounts for about 65% of world total installed

capacity- Europe is the second largest market for solar thermal

water heaters with Spain and Germany the most important individual countries

- Japan’s penetration rate reached its peak in the mid-1980s with installation of over 110,000 sets

- Other solar rich countries and regions such as Australia and Brazil show increasing market demand

Impact of Government Policy on Demand: - Israel’s penetration rate of solar water heater exceeds

90% with the highest use of one square meter per capita due to compulsory laws on using solar water heaters

- Since 2000, the usable area of solar water heaters in Germany has grown rapidly due to subsidies on solar energy and other beneficial policies for renewable energy

- Spain became the second country (after Israel in 2005) to regulate the installation of solar hot water systems

- Japan’s growth lags as a result of government policy

41

However, although government targets will be met, average usage per capita is still much lower than in the EU

China Solar Thermal Water Heater Installation

41

China Solar Thermal Water Heater Accumulative Installation (2000-2020E)

Unit: Square Meters in million

Source: National Development and Reform Commission’s (NDRC) comments; XYZ; China Custom; Renewable Energy Policy Network for the 21st Century; People’s Daily Online, 15 April 2009

As the world largest market for solar thermal water heaters, China’s total accumulative installation was over 100 million square meters (m3) in 2007, an amount that may reach 150 million m3 in 2010 and 300 million m3 by 2020 if government targets are met

However, even though solar thermal water heaters are widely used in China, the average usage square per capita is only 0.038 compared to an EU average of 0.3-0.5

According to the National Development and Reform Committee’s Medium-Long Term Plan, China’s target is to reach a 20%-30% household penetration rate by 2010, with solar energy consumption to be over 2% and 5% of the nation’s total energy consumption in 2010 and 2020 respectively

Latest figures show Chinese industry meeting government targets: in 2008, accumulative installation reached 125 million m3, and production capacity reached 40 million m3



42

The overall attractiveness of solar implementation in China is mostly driven by national energy strategies

Resourceconsideratio

ns

Energy security

considerations

Economicconsideration

s

China lies between 20N and 40N,and the North and West are almost completely cloudless

Cloudless Weather Long Sunshine Hours

Rich in Solar resource

Dependency on Imported Petroleum

Dependency on Coal

Environment Protection

Job Creation Value Added Rural Market Potential

China’s Target for Solar Energy

2050 Solar PowerInstallation:

1000MW

2010 Solar Power Installation:

300MW

By 2050, attain 5% of total electricity

generation capacity

Source: National Development and Reform Commission http://www.ndrc.gov.cn; National Energy bureau http://nyj.ndrc.gov.cn; XYZ and individual interviews.

Two-thirds of the country enjoys over 2,200 radiation hours annually

70% of territory has solar resources in excess of 500KJ/square cm/ year

Over 150,000 jobs linked to the sector

Over RMB150 billion revenue per year with a CAGR over 20%

Suitable for stand-alone power stations in rural areas without easy access to other traditional energy sources

Current high petroleum import dependency (over 50%) should decrease to a reasonable degree

Current coal consumption dependency (over 70%)

China’s CO2 emissions account for 15.1% of the world’s total, the largest of any country


Solar Energy – market context – demand driver

http://www.ndrc.gov.cn/

http://nyj.ndrc.gov.cn/

43

China’s solar energy market is expected to expand rapidly in the next few years, influenced by market and regulatory drivers

Market Context Implications

Solar Energy – market context – implications

43


Market Context and Implications

Solar Energy – market context – implications

Solar PV: The solar PV market in China is currently driven by government subsidies; however, significant cost reductions will create price-elastic demand and replace subsidies as the main market driver

Solar Thermal Water Heaters: The lower than average usage per capita of solar thermal water heaters in China implies that there is still large room left for market participants

CSP: Improving technologies create more opportunities in CSP markets which also results in a high demand for investment in the market

BIPV: As a new technology in the solar PV industry, BIPV may contribute to the creation of a dynamic new market

Source: XYZ. 1. Solar Technology, Asia Pacific, 24 Nov 2008

“The solar industry is entering a new era. The main demand driver so far has been government subsidies. We expect significant cost reductions will set the stage for price-elastic demand creation that will replace subsidies as the main driver”1

44

Contents


Segment Definition

Market Context



Technologies Innovation and Alternative Solutions



44


45 45

Incentives and privileges have been allotted by the Chinese government to boost China's solar industry

Overview

Given that solar energy is one of China’s key renewable energy sources, ambitious targets have been established:

- The national targets for solar PV of 300MW by 2010 and 1.8 GW by 2020 are currently being revised upwards – the new 2020 target is likely to exceed 10,000 MW

- Existing SWH uptake targets of 150 and 300 million square meters by 2010 and 2020 respectively may be re-examined as China is expecting to beat targets – some estimates expect 800 million square meters by 2030 1

- If the two proposed Gigawatt-sized solar power plants located in the western plateau provinces of Qinghai and Yunnan are completed, China will have the world’s largest solar power stations

A number of regulatory agencies oversee China’s solar energy market:

- National Development and Reform Commission (“NDRC”)

- Ministry of Environment Protection (“MEP”)

- Ministry of Commerce and Ministry of Science & Technology (“MST”)

A long awaited “Measurement of Financial Subsidy for Photovoltaic Building Construction” was recently announced and is expected to substantially boost the solar power industry

Solar Energy – regulatory environment – overview

Source: National Development and Reform Commission http://www.ndrc.gov.cn; XYZ. 1. http://www.unep.org/PDF/ourplanet/2008/dec/en/OP-2008-12-en-ARTICLE3.pdf


http://www.ndrc.gov.cn/

http://www.unep.org/PDF/ourplanet/2008/dec/en/OP-2008-12-en-ARTICLE3.pdf

National

46

Institutional Arrangements for Renewable Energy

Numerous regulatory agencies are involved in the management of China’s renewable energy resources

Source: XYZ

Government organized bodies

Grid Companies China General Certification Center (CGC)

State Council(SC)

Urban Construction Commission

(UCC)

Local Price Bureaus

(PBs)

NationalPeople’s Congress

National Development and Reform

Commission (NDRC)

Sub-national

Ministry of Housing & Rural-Urban Development (MOHRUD)

Ministry of Science and Technology

(MOST)

Environmental Protection

Bureaus (EPBs)

Ministry of Environment Protection (MEP)

Price Bureau(PB)

Ministry of Finance (MOF)

State Electricity Regulatory Commission (SERC)

Local Bureau of Finance

(BF)

Provincial Government

Direct oversight

Indirect oversight

Chinese Wind Energy Association (CWEA)

Provincial Offices of the State

Administration of Taxation

Photovoltaic Subcommittee of Chinese Renewable Energy Society (CRES)

Ministry of Land and Resources (MOLR)

Ministry of Agriculture (MOA)

National Energy Bureau

Solar Energy – regulatory environment – regulatory entities


47

As the largest emitter of carbon dioxide worldwide, China has established targets to reduce its coal consumption

Energy Consumption Targets Related to the Solar Energy Industry

Source: a. “China Passes Renewable Energy Law,” RenewableEnergyWorld.com, http://www.renewableenergyworld.com/rea/news/story?id=23531; b. Ivan Lee and Evan Li, Global Equity Research: Climate Change in China, Lehman Brothers, 2008.

Solar Energy – regulatory environment – targets

Use Renewable Energy Sources

The Chinese government envisions that 10% and 15% of China’s total energy needs will be met by renewable energy by 2010 and 2020a

National Energy Consumption

Goals

Laws and Regulations Enacted to Support These Targets Include:b

• The Renewable Energy Law• Medium and Long-Term Development Plan for Renewable Energy (2004-2010)• Medium and Long-Term Energy Conservation Plan (2004-2010)• National Promotion Plan for the Use of Solar Energy• Measures of Financial Subsidy for Photovoltaic Building Construction• National Climate Change Program• Program of Action for Sustainable Development

Energy Efficiency

Regulations have been set to reduce energy consumption per GDP by 20% by 2010b


http://www.renewableenergyworld.com/rea/news/story?id=23531

48

Effective January 1, 2006, the objectives of the law are:• Develop and utilize renewable energy• Improve the energy structure• Diversify energy supplies• Safeguard energy security• Protect the environment• Realize the sustainable development of the economy

The general provisions of the law extend to:• Resource Survey and Development Plan• Industry Guidance and Technology Support• Promotion and Application• Price Management and Fee Sharing• Economic Incentives and Supervisory Measures• Legal Responsibilities

Medium and Long-Term Development Plans and National Promotion Plan

Measures and Programs

The Renewable Energy Law seeks to have 15% of China’s energy mix by 2020 be comprised of renewable energy

The Renewable Energy Law

Constitution of PRC

Solar Energy – regulatory environment – policies and incentives

Source: The Renewable Energy Law – The People’s Republic of China document, January 1, 2006.


49

Provisions of the Renewable Energy Law display the government’s support of the renewable energy industry

49


Source: The Renewable Energy Law – The People’s Republic of China document, January 1, 2006.

Solar Energy – regulatory environment – regulations and incentives

Investment Pricing Rural Area Planning

Financial institutions may offer preferential loans with financial interest subsidies to renewable energy development and utilization projects

The grid power price of renewable energy power generation projects shall be determined by the price authorities from the State Council

Energy authorities of various local governments above the county level shall – on the basis of local economic and social development requirements and ecological protection and health needs – prepare renewable energy development plans for rural areas to promote biomass energy, household solar, small-scale wind energy and small-scale hydraulic energy use

The government will establish a renewable energy development fund to support research, development and promotion of renewable energy

The excess costs associated with the purchase of renewable power (compared to the purchase of power generated by conventional sources) will be factored into the selling price

Encouragement and support for the development and utilization of renewable energy in rural areas is stressed

The government will grant tax benefits to projects listed in the renewable energy industrial development guidance catalog

Grid connection expenses paid by grid enterprises for the purchase of renewable power and other reasonable expenses may be included in grid enterprise power transmission costs and recouped from the selling price

Governments above the county level shall provide financial support for renewable energy utilization projects in rural areas


50

Medium and Long Term Development Plans and National Promotion Plan


The Medium and Long-Term Development Plan is aimed at increasing the use of renewable energy


Medium and Long-Term Development Plan For Renewable Energy (2004-2020)

Establish sustainable and stable market demand by means of favorable price policies, Mandated Market Share (MMS) policies, government investment, and concession programs

Improve the market environment by formulating regulations that encourage the use of renewable energy

The renewable power tariff and cost-sharing policies are based on renewable energy development and sound economic principles

Increase fiscal inputs and tax incentives to activities related to research and development of renewable energy

Accelerate technology improvement and industry development through the integration of various renewable energy technology resources, the improvement of the technology and industry service systems, speeding up of human resource development, and increasing all aspects of technical innovation capabilities and service levels

Constitution of PRC


1

Source: Ivan Lee and Evan Li, Global Equity Research: Climate Change in China, Lehman Brothers, 2008.


51



The Energy Conservation Plan supports China’s goal of reducing energy consumption per capita by 20% by 2010


Medium and Long-Term Energy Conservation Plan (2004-2020)

The law is comprised of the following steps:–Assess the current situation with respect to energy utilization in China–Create tasks for energy conservation–Prepare the way forward for energy conservation, principles and objectives–Formulate key energy conservation projects–Implement measures

Encourages the utilization of different types of renewable energy in various industries such as solar power

Designed to monitor the energy utilization efficiency using advanced countries as a model Geared toward reducing the annual emission of sulfur dioxide and other harmful substances that are

catalysts for greenhouse gases and environmental pollution Positioned to stimulate a sustainable, rapid and sound development of the national economy

Constitution of PRC


2

Source: “China Medium and Long Term Energy Conservation Plan,” World Resources Institute, http://projects.wri.org/sd-pams-database/china/medium-and-long-term-energy-conservation-plan.China Solar Energy Fact Book

http://projects.wri.org/sd-pams-database/china/medium-and-long-term-energy-conservation-plan

52



The National Promotion Plan for the Use of Solar Energyprovides guidance to China’s solar energy industry


National Promotion Plan for the Use of Solar Energy Section 1:

Promote the application of solar power utilization technologies via mandatory policy measures Section 2:

Promote the use of solar power applications Section 3:

Strengthen the use of solar thermal management Section 4:

Establish and improve the use of solar thermal technology and promote economic development by issuing incentive policies

Section 5:

Match projects with subsidies based on several conditions that aim to promote efficiency and effectiveness in the sector Section 6:

For 2009, the subsidy will be 20 RMB/Watt with specific criteria to be adjusted based on the integrity of construction and the degree of technical sophistication of photovoltaic projects

Constitution of PRC


3

Source: Jeff Osborne, “New Subsidy Announced - Can The Chinese Government Prevent The Solar Industry From Seeing Red?,” Thomas Weisel Partners, March 26, 2009.


53



The program is being supported by the Chinese Renewable Energy Fund


Constitution of PRC

Introduced by the Ministry of Finance and the Ministry of Construction: Section 3: Subsidies supporting projects should meet the following

conditions:- Solar photovoltaic products installed capacity for single

projects must be not less than 50kWp- Sc-Si products must be more than 16%, the efficiency of

polisilicon products must be more than 14%, and the efficiency of non-crystalline silicon PV products must be more than 6%

- The projects that combine and integrate solar electricity PV components and buildings will be prioritized

- Grid-connected solar photovoltaic building projects will be prioritized

- Building projects related to schools, hospitals, government offices and other public utilities will be prioritized

Section 6: Subsidy will be 20 RMB/Watt in 2009

China formulated policies to substantially decrease its greenhouse gas emissions in order to help mitigate climate change

Some of these policies and measures are related to the solar power industry:- Continuous support for the development and utilization of wind, solar,

geothermal and tidal energy, including popularizing family-use photovoltaic power systems or small-scale photovoltaic power plants in remote areas; disseminating integrated solar energy buildings, solar energy-based hot water supply, space heating and cooling pilot projects in urban areas and popularizing household solar water heaters, solar greenhouses and solar stoves in rural areas

- Prioritize the development of low-cost and scale exploitation and utilization technologies, including the development of large-scale wind-power generation equipment, high-performance and low-cost PV battery technology, solar thermal power generation, integrated solar energy building technology, and biomass and geothermal energy development and utilization technologies


Source: “China’s National Climate Change Programme,” Embassy of the People’s Republic of China in the Islamic Republic of Pakistan, http://pk.china-embassy.org/eng/ep/t326796.htm .

1 National Climate Change Program2Measurement of Financial Subsidy for

Photovoltaic Building Construction

The Chinese Renewable Energy Fund aims to promote the efficiency of the domestic solar industry


http://pk.china-embassy.org/eng/ep/t326796.htm

54

State policies and regulations also contribute to the development of the U.S., Japanese and European PV industry

United States Japan France Spain Germany Italy

The Investment Tax Credit (ITC) policy is a tax refund of up to 30% of the total investment (or up to US$2,000 for residential solar energy projects)

Expired at the end of 2008

In 2008, a subsidy for PV systems installed (>50kw) in small to mid-sized enterprises designed to provide one-third of the total investment costs was implemented; a subsidy for home use PV systems of up to 70000 JPY(ca. US$715) was also established

The fixed rate price of PV electricity was modified: the uniform fixed price 0.45 EUR/W (the price before 2009: BIPV 0.55 EUR/W, roof project and power generation station 0.45 EUR/W)

Fixed rate of price reduced to as much as roof project equivalent (0.33 EUR/W, ground project 0.29 EUR/W)

Gradual price deduction for small- sized, large sized and ground PV project to as much as 10% in 2009- 2010, and 9% in 2011-2012

Fixed price rate cut down: 2% in 2009 and 2010

The fixed rate price will be discussed and modified in 2010

Since 2009, ITC policy extensions of eight years for commercial PV projects and two year extensions for residential PV projects are allowed; the upper limit of US$2,000 can be exceeded

Since April 2008, the subsidy to school/hospital/rail station PV projects has been increased to one half of the total investment

Selected Photovoltaic – International Regulations

Solar Energy – regulatory environment – international

Source: www.chinadialogue.net; www.docin.com; www.china-solarenergy.com; www.renewableenergyworld.com; www.mysolarshop.co.uk; www.austrade.gov.au; XYZ.


http://www.chinadialogue.net/

http://www.docin.com/

http://www.china-solarenergy.com/

http://www.renewableenergyworld.com/

http://www.mysolarshop.co.uk/

http://www.austrade.gov.au/

55

Several countries have issued tariffs to regulate the circulation of concentrated solar power products

United States Spain Italy

The government gives preferential tax treatment to concentrated solar power users

A guaranteed tariff of 0.27 EUR per kWh A guaranteed tariff of 0.27 EUR per kWh

Concentrated Solar Power – International Regulations

Solar Energy – CSP – regulatory environment – international

Source: S. Sakakura,“Sunshine project of the Japanese Government,” The Smithsonian/NASA Astrophysics Data System , http://adsabs.harvard.edu/abs/1975ente.proc..105S.


http://adsabs.harvard.edu/abs/1975ente.proc..105S

56

China is implementing regulations and various value-added incentives in order to guide the solar power industry


Subsidies and incentives are granted by the Chinese government to certain companies that enter the domestic solar power industry market

Various strategic plans and programs have been established by the Chinese government to regulate and monitor movement in the solar power industry

Policies and measures should give full play to the solar power industry and use economic, legal and necessary administrative means to actively promote the use of solar thermal technology and the development of solar power industries

Other tax, tariff and fiscal incentives will probably be needed to drive the green transformation of China’s solar power industry further

Aside from China, other countries also stimulate their solar industry by establishing regulations and fiscal policies

Solar Energy – regulatory environment – implications

Source: XYZ.


57

Source: 1 NDRC press converence, March 2009, 2 www.chinadaily.com, 3 XYZ

Breakdown of ¥4 Trillion Stimulus Package1 Analysis of Package

Overview of Commitment2

Of the ¥4 Trillion ($586 million) package only ¥210 billion ($30 billion) is directly earmerked for green investments

However, HSBC estimate that $221 billion has green features, including grid and infrastructure investments, making it the largest green stimulus package in the world

America’s green stimulus package stands at only $112 billion, although the economy is 1.5 times larger

Qualitative Considerations3

As with the Renewable Energy Law, the effectiveness of measures will depend on ensuring sufficient detail and transparency to remove uncertainties and improve spending quality

The finalized package will be locked in later this year and is expected to favor SOEs, limiting opportunities for foreign companies

Infrastructure 1.5 trillion yuan

Rural civilian projects 1.5 trillion yuan

Civilian projects 400 billion yuan

Sustainable environment 210 billion yuan

Technology advances/ industry restructuring 370 billion yuan

Post-earthquake reconstruction 1 trillion yuan

Social welfare 150 billion yuan

38%

9% 10%5%

9%

25%

4%

The NDRC stimulus package is the largest green stimulus in the world, but it’s effectiveness is dependent on the detail

Solar Energy – regulatory environment – stimulus package


http://www.chinadaily.com/

58

Contents


Segment Definition

Market Context






58


59

Internationally standards have been set for installation of both on- and off-grid solar PV systems

Solar Energy – standards – solar PV - international

Source: www.saiglobal.com; www.mbipv.net.my; www.sunsecond.net


International Standards on Solar PV

AS 4777.1-2005

Grid connection of energy systems via inverters Part 1: Installation requirement

AS 4777.2-2005

Grid connection of energy systems via inverters Part 2: Inverter requirements

AS 4777.3-2005 :

Grid connection of energy systems via inverters Part 3: Grid protection requirements

MS 1837-2005 :

Installation of Grid-Connected Photovoltaic (PV) System

AS4509.1-1999 :

Stand-alone power systems Part 1. Safety requirements

AS4509.2-2002 :

Stand-alone power systems Part 2. System Design Guideline

AS4509.3-1999 :

Stand-alone power systems Part 3. Installation and Maintenance

AS4086.2 -1997 :

Secondary batteries for use with stand-alone power systems

National Electrical Code (NEC) 2005 Article 690

NF C57-310-1988

Direct transformation of Solar energy into electrical energy; Photovoltaic pumping system

NF P50-503-1985

Solar Energy

Solar collectors Methods of measurement of optical characteristics

NF C57-100-1986

Direct transformation of solar energy into electrical energy, terrestrial photovoltaic modules

Stand Alone PV Systems (Off-grid systems)Installation of Grid Connect PV Systems Module

http://www.saiglobal.com/

http://www.mbipv.net.my/

http://images.google.com/imgres?imgurl=http://www.flagsaustralia.com.au/images/Australia-1908-(blue)l.jpg&imgrefurl=http://www.flagsaustralia.com.au/NationalFlag.html&usg=__e4n-heioBs1hmLDDFyBVYW8WdGQ=&h=300&w=600&sz=95&hl=en&start=1&tbnid=vVm_rrHDUNPi5M:&tbnh=68&tbnw=135&prev=/images%3Fq%3Daustralia%2Bnational%2Bflag%26gbv%3D2%26hl%3Den%26newwindow%3D1

http://images.google.com/imgres?imgurl=http://www.topnews.in/files/Malaysia-Flag.jpg&imgrefurl=http://www.topnews.in/regions/kuala-lumpur%3Fpage%3D6&usg=__6yD0rYl_1Qxo0r63oVSzXz9JVuE=&h=334&w=500&sz=32&hl=en&start=2&tbnid=wAktgjU37kw38M:&tbnh=87&tbnw=130&prev=/images%3Fq%3Dmalaysia%2Bnational%2Bflag%26gbv%3D2%26hl%3Den%26newwindow%3D1


http://images.google.com/imgres?imgurl=http://www.mexican-flag.org/mexican-640.gif&imgrefurl=http://www.mexican-flag.org/&usg=__CsodeRjgc9Tzt5v6GYQyCPkxhGI=&h=365&w=640&sz=18&hl=en&start=1&tbnid=DlENZHWnWzcspM:&tbnh=78&tbnw=137&prev=/images%3Fq%3Dmexico%2Bnational%2Bflag%26gbv%3D2%26hl%3Den%26newwindow%3D1

http://images.google.com/imgres?imgurl=http://www.draxysoft.com/wallpapers/NationalFlags/French_flag.jpg&imgrefurl=http://www.waterwych.com/&usg=__n8BlMETr-TR4FjuoPX7VUKAxf6M=&h=1200&w=1600&sz=18&hl=en&start=4&tbnid=CQxgiHauoLu-kM:&tbnh=113&tbnw=150&prev=/images%3Fq%3Dfrance%2Bnational%2Bflag%26gbv%3D2%26hl%3Den%26newwindow%3D1








60

China has established key standards designed to manage Solar PV sector components

GB/T19064-2003 Solar home system specifications and test procedures

GB/T2680-1994 Determination of light transmittance, solar direct transmittance, total solar energy transmittance and ultraviolet transmittance for glass in building and related glazing factors

NF C57-326-1996 Covers photovoltaic devices and requirements for reference solar modules

Solar Energy – standards – Solar PV


Domestic Solar PV Standards

Source: www.bjzhxy.com; www.51zbz.com; www.sunsecon.net; www.standardcn.com;

http://www.bjzhxy.com/

http://www.51zbz.com/

http://www.standardcn.com/

61

Industry standards have been structured to ensure the quality of solar-related products

Domestic Solar PV Standards – Panels and Generating Systems

Solar power – standards


GB2297 － 89 :Terminology of solar photovoltaic energy system GB2296 － 2001: Designation method of solar cells (PV device) GB12632 － 90: General specification of single silicon solar cells GB6497 － 1986: The general rules of terrestrial solar cell calibration GB6495 － 86: Measurement procedures for electrical characteristics of

terrestrial solar cells IEEE 1262-1995: Recommended practice for qualification of photovoltaic

(PV) modules GB/T 14007-92: General specification for terrestrial-use solar cell

modules GB/T 14009 － 92: Measurement procedures for parameters of solar cell

modules GB 9535-1988: Environmental test methods for terrestrial silicon solar cell

module GB/T 14008-92: General specification for sea-use solar cell modules GB11011 － 89: General rules for measurements of electrical

characteristics of amorphous silicon solar cells

GB/T6495.1 － 1996: PV devices Part 1:Measurement of PV current-voltage characteristics

GB/T6495.2 － 1996: Photovoltaic devices Part 2: Requirements for reference solar cells

GB/T6495.3 － 1996 : Photovoltaic devices Part 3:Measurement principles for terrestrial PV solar devices with reference spectral irradiance data

GB/T6495.4 － 1996: Procedures for temperature and irradiance corrections to measured I-V characteristics of crystalline silicon photovoltaic devices

SJ/T11127-1997: Overvoltage protection for PV power generating systems GB/T9535-1998: Crystalline silicon terrestrial PV modules-design qualification

and type approval GB/T18210-2000: Crystalline silicon photovoltaic （ PV ） array ─ On-site

measurement of I-V characteristics GB/T18479-2001: Terrestrial photovoltaic(PV)power generating systems GB/T19064-2003: Solar home system specifications and test procedures

Source: www.standardcn.com; www.bylm.net; www.geoenv.cn; www.elecm.com

http://www.standardcn.com/

http://www.geoenv.cn/

62

These standards cover a wide array of operating systems, including batteries

Domestic Solar PV Standards - Batteries

Solar power – standards


GB 13337.1-91 Stationary acid spray-proof lead-acid batteries Technical conditions GB 5008.1-85 Lead-acid starter batteries Technical requirements and methods of test GB 9368-88 Nickel-cadmium alkaline secondary cells GB/T14162-93 Sampling procedures and tables for product quality audit (Apply to inspection by attributes for

nonconformities per hundred units)

Source: www.gb99.cn; www.chinaeeb.gov.cn.

http://www.gb99.cn/

http://www.chinaeeb.gov.cn/

63

Although it is a new technology in China, the Concentrating Solar Power (CSP) sector is also being standardized

NF P50-530-2-2003 Thermal solar systems and components - Solar collectors - Part 2: test methods

NF C57-323-1994 Photovoltaic devices. Part 3: measurement principles for terrestrial photovoltaic (PV) solar devices with reference spectral irradiance data

NF C57-322-1994 Photovoltaic devices. Part 2: requirements for reference solar cells

Solar Energy – standards – domestic - CSP


Domestic Concentrating Solar Energy Standards

Source: www.sunsecond.net

64

Leading countries in the solar energy industry have also developed standards for solar water heating (SWH)

AS/NZS 2712:2002 Solar and heat pump water heaters – design and construction

CAN/CSA-379.1-88 Solar domestic hot water systems

E 1056-85 Standard practice for installation and service of solar domestic water heating systems for one- and two-family dwellings

CNS 12555 Solar water heater for dwellings

NF P50-601-1/A1-1998

DTU 65.12.

Building works - plain solar collector installations using heat transfer liquid (used for heating and the production of domestic hot water)

NF P50-601-2-1993

DTU 65-12.

Building works, private contracts, plain solar collectors (uses heat transfer liquid for heating and production of hot water)

JIS A 4111: 1997 Solar water heater for dwellings

Solar Energy – standards – international - SWH

Source: http://www.standards.co.nz; www.egnret.ewg.apec.org; www.astm.org; www.bzcity.net; www.sunsecond.net; www.bzjsw.com


International Standards for Solar Thermal Water Heaters

Note: More specificity to source info?


65

The revision and integration of national standards can help accommodate the evolving SWH market

GB/T12936.2-1991 Solar energy—Thermal applications—Terminology part 2

GB/T12936.1-1991 Solar energy—Thermal applications—Terminology part 1

Solar Energy – standards – domestic - SWH


Domestic Solar Thermal Water Heater Standards

The solar thermal water heater (SWH) industry is handicapped by decentralized production and inconsistent product quality

To ensure the continued growth of China's SWH industry, the government has established a series of national SWH standards and three national testing centers

The China General Certification Centre (CGC) has developed the “Golden Sun” product certification and labelling system in order to:

- Help manufacturers meet explicit and consistent quality requirements and to identify and fix deficiencies

- Improve quality control in order to contribute to the creation of reputable Chinese solar water heating products and brands

Source: www.86ne.com; www.efluid.com.cn

66

China needs to establish a set of national solar energy standardsin order to support the proper development of the sector

Standards – Implications

Solar power – standards – implications

Note: SWH – Solar Water Heater.Source: “Standards for Solar Water Heaters Orientation Workshop.” Capacity Building for the Rapid Commercialization of Renewable Energy in China, Beijing

September 14th-15th 2000.

Although China has developed certain standards for solar water heaters over the course of the last 20 years, these standards have not been developed in a systematic manner

National standards that need to be urgently developed in the near future include: – Technical specifications for the design, installation, checking and accepting for solar water heating systems– Technical specifications for flat type solar water heaters– Testing methods for the performance of flat type solar water heaters– Testing methods for the reliable and enduring ability of vacuum tube solar water heaters– Testing methods for the performance of vacuum tube solar water heaters– Technical specifications for vacuum tube solar water heaters– Testing methods for the quality and safety requirements of solar water heater components (mainly water tanks)

China should also consider the establishment of a national quality testing and inspection center which is fair, impartial and independent


67

Contents


Segment Definition

Market Context






67


68

C-Si PV technologies compete with Thin Film based on cost per watt and conversion efficiencies under different conditions

Source: Erika Weliczko, “Solar-Electric Options: Crystalline vs. Thin-Film,” Home power website, October/November 2008, http://www.homepower.com/view/?file=HP127_pg98_Weliczko.

Solar Energy – technology and innovation – solar PV


Crystalline Silicon Versus Thin Film

Crystalline Silicon (c-Si) Thin Film

Advantages

Highest power per area Requires less racking and support material Fewer modules mean lower shipping costs Large number of module choices Greater inverter flexibility

Output less affected by temperature Less manufacturing materials used Lower cost per watt Good aesthetics for building-integrated

applications Faster energy payback Non-glass substrates possible More shade tolerant

Disadvantages

High cost per watt High temperatures impact output more Low shade tolerance Individual cell visibility

Lower power per area Takes months to stabilize output Twice as much rack material required More modules mean higher shipping costs Lower series-string capacity Less suitable for battery charging Requires more combiner boxes Limited inverter flexibility Fewer module manufacturer choices

69

Solar Energy – technology and innovation – solar PV

Polysilicon cells are far more efficient and cost effective compared with other classes of crystalline silicon cells

Source: “Solar Panels,” Planetary power website http://www.planetarypower.com.au/solar_panels.htm.


Polycrystalline Versus Monocrystalline

Polycrystalline(Polysilicon)

Monocrystalline(Monosilicon)

ApplicationMost common (and cheapest) application Typically used in telecommunications applications

In use for over 20 years

Efficiency

Conversion efficiency of sunlight to electricity is 12-12.5%, meaning that one square meter of panels exposed to the full sun will generate 120W-125W of electricity

Conversion efficiency of sunlight to electricity is similar to the efficiency levels of polycrystalline cells

PriceRetails at between US$8.50-9.50 per watt Retails at between US$10.00-11.00 per watt

Selected CompaniesBP SX (formerly Solarex), Sharp and Kyocera BP and Siemens

70

As dependence on silicon is gradually reduced over time, PV retail prices will tend to decrease as well

Price Decreasing Trend of Solar Energy Cells

300

240

200180 170 160 150

12

7.588.5

910

11

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008 E2009 E2010

0

2

4

6

8

10

12

14

Silicon consumption(g/wp) wafer thickness(um)

Less Silicon Dependency of Solar Cell ManufacturersUSD/Wp

In a market characterized by low-level concentration rates, the intense competition among solar cell manufacturers inevitably results in price erosion

Some leading manufacturers implemented technology innovations in order to improve the efficiency rate of wafers and reduce their thickness, actions which greatly reduced the cost of silicon and the attendant risks from silicon/wafer supply variations

The reduction in the use of silicon raw material in solar cell manufacturing will likely enhance the downstream bargaining power of manufacturers and also increase their profit margins

Solar Energy – technology innovation and alternative solutions – drivers

Source: Sino-link Securities Co., Ltd. China Solar Energy Fact Book

71

Advantages of Various Solar PV Technologies

71

Polysilicon Wafer/Ignot PV Cell

PV Module PV System & Installation

Amorphous •Proven technology•Flexible substrate

CIGS•No degradation•Highest efficiency•Flexible substrate

CdTe• Low production cost

Crystalline Silicon High module efficiency Low BOS cost No degradation

Source: NanoWin Technology Co.,Ltd

Different Thin Film PV technologies are emerging as serious competitors within the solar energy industry

Solar Energy – technology innovation and alternative solutions – Thin Film


Thin Film Low manufacturing cost Higher accumulated electricity generation Lower $/KWh costs Attractive physical appearance Light weight modules Potential production cost of US$1/watt

Raw Materials Copper Indium Gallium Selenium

Glass MaterialCIGS powder onto sputtering target

E.g. CIGS (pictured)

Thin Film CellCIGS Solar Cell

E.g. Nanowin 12% CIGS Solar Module

72

Thin Film technology is less reliant on silicon than its crystalline silicon competition

Description Pros & Cons

Amorphous silicon (a-Si),

A Si PV cells can be used with glass (or other materials as substrates)

The use of glass as a substrate for conventional glass walls with plated membrane is used for making PV curtain walls

Most developed Thin Film technology to dateCan achieve further development by combining the stable

high efficiency of Si technology with the simpler and cheaper large area deposition technology of amorphous silicon

Cadmium telluride (CdTe)

Utilizes long flat mirrors at different angles that focus sunlight on one or more pipes containing heat-collecting fluid

High efficiencyEasier to deposit and more suitable for large-scale

production× Toxicity (still being debated)

Copper-indium-gallium-

diselenide (CIGS)

Made by depositing several layers of metal compounds on semi-conductive films (with a thickness of about 2-3 microns)

CIGS has demonstrated the highest laboratory efficiency rates

Stable performance Non-polluting High anti-radiation capacity Long service life

Thin Film PV uses Thin Film coating technologies similar to those used for putting metallic and transparent coatings on plastics and glass for food processing, architectural glass, mirrors, eyewear, etc.

A temporary shortage of silicon has given the Thin Film sector an opportunity to increase its market share

The European Photovoltaic Industry Association expects Thin Film applications to represent approximately 20% of total PV cell production by 2010


Source: “Solar Panels,” NanoWin Technology Co.,Ltd., http://www.planetarypower.com.au/solar_panels.htm.


73

Cadmium telluride (CdTe) will define Thin Film module production volumes over the near-term

73

Value Proposition:– An excellent semiconductor for solar cells because its band-gap of 1.4 electron-

volts is matched nearly perfectly to the solar spectrum– The device structure also includes a very thin layer of cadmium sulfide that

allows most sunlight to pass through to the CdTe layer– Current research is geared towards:

Boosting efficiencies by, among other things, exploring innovative transparent conducting oxides that allow more light into the cell to be absorbed and that more efficiently collect the electrical current generated by the cell

Studying mechanisms such as grain boundaries that can limit the voltage of the cell

Understanding the degradation that some CdTe devices exhibit at contacts and then redesigning devices to minimize this phenomenon

Designing module packages that minimize any outdoor exposure to moisture Engaging aggressively in both indoor and outdoor cell and module stress

testing (e.g., tests for thin-film modules in hot and humid climates)

Commercialization:– NREL currently holds the world-record conversion efficiency for CdTe of 16.5%

Description Utilizes long flat mirrors at

different angles in order to focus sunlight on one or more pipes containing heat-collecting fluid which are mounted above mirrors

Selected Actors First Solar (U.S.) PrimeStar (U.S.) AVA (U.S.) Sichuan Apollo Solar Science &

Technology Co., Ltd. Sichuan Xinju Mineral Resource

Development Co.

Source: “Solar Panels,” Planetary power website, http://www.planetarypower.com.au/solar_panels.htm.


74

Amorphous silicon (a-Si) is expected to establish a presence in the market given the strong backing of several major companies

China's Solar Power Industry Fact Book

Value Proposition:– Amorphous silicon is full of natural defects, but said defects do not affect the

overall characteristics of the material too drastically– Current research is geared towards:

Improving the stability and conversion efficiency of a-Si modules in actual use (in a detrimental phenomenon called the Staebler-Wronski effect, the conversion efficiency of an a-Si module decreases when the module is first exposed to sunlight)

Reducing the capital equipment costs for manufacturing a-Si panels by improved manufacturing processes that include increasing the rates of depositing material

Improving module-packaging designs to make them more resilient in outdoor environments and less susceptible to glass breakage or moisture ingress

Developing new module designs for building-integrated applications Commercialization:

– Amorphous silicon is expanding its market share as a result of increasing efficiencies, proven manufacturability, and innovative products

Cost-Benefit Analysis:– With an efficiency of sunlight to electricity rate of 6.3% (about half that of

polycrystalline or monocrystalline panels), an array of amorphous panels will require about twice as much roof space as an array with a similar rating using other types of panels, thereby presenting a challenge when the amount of unobstructed roof space is limited

Description A Si PV cells can be used with

glass (or other materials) as substrates

The use of glass as a substrate for conventional glass walls with plated membrane is used for making PV curtain walls

Selected Actors Sharp Applied Unisolar (retails at US$10.00

per watt) China Solar Energy Holdings

Ltd. (has a thin-film panel turn-key production line)

Sinonor Corporation – Hsichu, Taiwan, 3MW

Tianjin Jinneng Solar Cell Co. Ltd. (produces a-Si, multi-junction, glass or SS substrate)

Source: “Solar Panels,” Planetary power website, http://www.planetarypower.com.au/solar_panels.htm.


75

Copper-Indium-Gallium-diSelenide (CIGS) has great potential, but very little is currently being produced

Value Proposition:– After two decades of R&D and with prototype modules reaching efficiencies

greater than 11%, CIGS is being introduced to the market– CIGS is also enjoying success in the laboratory, with cell efficiencies climbing to

a world-record rating of 19.2%– Current research is geared towards:

Pushing efficiencies even higher by exploring the chemistry and physics of the junction formation and by examining concepts to allow more of the high-energy parts of the solar spectrum to reach the absorber layer

Dropping costs and facilitating the transition to commercial production by increasing the yield of CIS modules, a stage which requires increasing the percentage of modules and cells that make it intact through the manufacturing process

Decreasing manufacturing complexity and cost and improving module packaging

Commercialization: - Production volume was only 5MW in 2006

- Production capacity is estimated to reach 213MW by end of 2009

Cost-Benefit Analysis: - A production cost US$1/watt was achieved by Nanowin Technology Co.Ltd

(although CIGS technology is untested at commercial scale)

Description CIGS is made by depositing

several layers of metal compounds on semi-conductive film (with a thickness of about 2-3 microns)

Selected Actors International Solar Electric

Technology GSF GroupSat Solar Nanowin Technology

Source: Sun & Wind Energy


76

Thin Film manufacturing capacity is expected to increase to about 4GW in 2010, close to one-third of total PV production capacity

Source: Street Research

Thin Film Manufacturing Capacity

Announced 2007 Manufacturing Capacity

Announced Expected Manufacturing Capacity in 2010


77

Improvements in solar cell technology are aimed at reducing manufacturing costs and increasing overall efficiency

Description

First Solar (2007)

Produced 200 MW of CdTe solar cells making it the fifth largest producer of solar cells in 2007 and the first ever to reach the top 10 from production of second generation technologies alone

Wurth Solar

(2007)

Commercialized its CIS technology in 2007 producing 15 MW in the process

Honda Soltec Co.,

Ltd., (2008)

Began to commercialize its CIGS base solar panel in 2008

Nanosolar (2007-2008)

Commercialized its CIGS technology in 2007 and reached a production capacity of 430 MW for 2008 in the U.S. and Germany

Third generation technologies aim to enhance the poor electrical performance of second generation (thin-film) technologies while maintaining very low production costs

Current research is targeting conversion efficiencies of 30-60% while retaining low cost materials and manufacturing techniques, a move that should allow producers to exceed the theoretical solar conversion efficiency limits for a single energy threshold material of 31% under 1 sun illumination and 40.8% under maximal concentration of sunlight

In 2007 CdTe production represented 4.7% of total market share, thin-film silicon 5.2% and CIGS 0.5%

While there is a trend among major manufacturers towards implementing second generation technologies, commercialization of these technologies has proven difficult


Second and Third Generation Solar Cell Development

Source: Company Annual Reports and Presentations; XYZ.


78

Each of the four CSP technologies have relative advantages and risks in various areas of application

Note: CSP – Concentrating Solar Power.Source: XYZ.

Description Pros and Cons

Parabolic Trough

Parabolic Trough power plants consist of large parallel arrays of parabolic trough solar collectors which constitute the solar field

Currently the technology with the strongest track record and cost efficiencies (costs are to US$0.10/kwh or less)

Heat storage by melted salt and hybridization with gas firing allows the system to work during the night and cloudy days

Fresnel Mirror

Instead of using trough-shaped mirrors that track the Sun, Fresnel Mirrors utilize long flat mirrors at different angles that have the effect of focusing sunlight on one or more pipes containing heat-collecting fluid which are mounted above the mirrors

Relatively cheap to manufacture Easy integration into buildings Shaded areas under the mirror provide a suitable environment

for plants

Power Towers

Power towers are towers surrounded by a large array of heliostats (mirrors that track the sun and reflect its rays onto the receiver at the top of the tower)

Higher conversion efficiency Heat storage by melted salt and hybridization with gas firing

allows the system to work during the night and cloudy days × Lack of a commercial track record × High financial risks

Dish/Stirling-engine

systems and concentrating

PV(CPV)

Solar dish systems consist of a dish-shaped concentrator (like a satellite dish) that reflects solar radiation onto a receiver mounted at the focal point

Higher conversion efficiencySmaller PV area is needed× Not well suited to hybridization with gas firing and cannot be

stored by melted salt meaning that its operations are subject to weather conditions

× Less able to provide dispatchable power

Solar Energy – technology innovation and alternative solutions – CSP


79

Hi-Min has taken the lead in developing CSP technologies for applications in China

79

Hi-Min Solar Energy Group Ltd. was the first manufacturer to discover new applications for CSP infrastructure technologies, beginning R&D into CSP technologies in 20001

These new technologies/applications have strong advantages over earlier versions:

- The investment and operating costs of Fresnel power generation systems are much lower

- The life span of the system is longer than comparable alternatives

- Maintenance is easier given the absence of moving parts in the collector apparatus

Hi-Min Solar Energy Group Ltd.’s competitiveness in both thermal water heater technologies and CSP applications are core advantages that should allow the company to weather the current economic downturn

Solar Energy – technology innovation and alternative solutions – CSP

Source: XYZ, 1. www.chsel.com/english/news/2009-5-27/110434-1.htm

Hi-Min Solar Energy Group Ltd.


80

Highly reliable in the long-term with a life span of 20-25 years Maintenance-free panels Cost-saving for building owners No extra space is taken up No extra supporting structure is necessary for installation The burden on electricity supply can be reduced The deterioration level of grid-line network can be reduced Conventional building material can be replaced by BIPV Can be integrated with the other building systems including protection,

control and operation

Building Integrated Photovoltaic (BIPV) systems incorporate solar PV materials (whether crystalline or thin-film) into the building structure itself and can integrate with windows, or can be laminated onto a low-slope industrial roofs

Section 3 – Value Chain

BIPV Advantages

BIPV Sub-Categories

The most widely installed version to date is a thin-film cell integrated to a flexible polymer roofing membrane

Modules shaped like multiple roof tiles Solar shingles are modules designed to look and act like

regular shingles, while incorporating a flexible Thin Film cell

Modules mounted on exterior faces of buildings can provide additional weatherproofing or simply be used as a style element

(Semi) transparent modules can be used to replace a number of architectural elements commonly made with glass or similar materials such as windows and skylights

Limited cost-down potential Low manufacturing yield and higher risk related to product safety and

durability leads to high installation costs As modules account for over 50% of system cost, cost-down potential is

limited for both crystalline-based modules and Thin Film modules due to material price hikes for the former and lower efficiency for the latter

While cost reductions can be achieved by improvements in efficiency, optimized design and economies of scale, the potential is quite limited on the BOS (Balance-of-System) front, especially for thin-film-based systems given their lower efficiency and operating voltage

Higher energy generation costs would require higher subsidies to boost demand

While Thin Film modules are superior to standard roof mounted systems in terms of aesthetics and transparency, low efficiency and questionable scalability are problems

BIPV Disadvantages

Different types of modules can be integrated into various Building Integrated Photovoltaic (BIPV) applications

Source: XYZ.

BIPV Applications

Solar Energy – technology innovation and alternative solutions – BIPV


Pitched roofs

Flat roofs

Facades

Glazing

81

Various PV technologies are consistently being developed to stimulate interest in efficient and effective renewable energy

Alternative Solutions and Technologies

Solar Energy – technology and innovation – solar PV implications

81

Though Crystalline Silicon PV units yield the highest output per area, they also have the highest cost per watt

Thin Film PV, on the other hand, has a lower cost per watt but also provides lower power per area

With over 90% of the solar industry market share, Crystalline Silicon PV technology is bound to face intense competition as Thin Film PV emerges as a less silicon-dependent technology

Consistent improvements in the PV industry are geared toward reducing manufacturing costs and heightening overall quality of PV units

Various CSP technologies provide simple solar structures that can be utilized to fit potential PV locations wherever they are available

Source: XYZ.


82

Contents


Segment Definition

Market Context






82


83 83

China’s solar energy industry faces a shakeout among both public and private companies

China’s Solar Energy Sector in Transition

China’s solar PV production capacity is mainly exported due to the small size of domestic market demand

The competitive landscape within China is also undergoing a transition:- The degree of consolidation is increasing along the value chain of solar PV, with decreasing

profit margins in each sector- It is estimated that between 50% and 80% of Chinese module manufacturers have closed their

factories since February 2009- CSP will become increasingly attractive to investors as prices fall with refinements in the

technology and economies of scale- China’s solar water heater sector is a highly fragmented market

A wide range of state-owned and private companies, both domestic and foreign, are involved in China’s solar energy market:

– Many of the largest players in China’s solar energy industry are listed on the Shanghai, Hong Kong or international stock exchanges

– The manufacturers in different market segments (e.g., solar PV, thermal water heater and CSP) face various challenges and opportunities

Solar Energy - competition - overview


84

Core components in the Solar PV industry are generally controlled by companies outside China

Illustrative Global Solar PV Landscape

Source: Clean Tech Overview, Morgan Stanley, 21 July 2008.

Solar Energy – competition – solar PV


85

Several Chinese firms specializing in Solar PV have successfully listed on international and domestic stock exchanges

Selected Companies

Listed Market

Capacity (2008)

Unit: MW

Polysilicon

Ingot/

Wafer

PV Cell

ModuleSystem

Integration

Application

c-Si

Thin Film

Mono-Si Poly-Si a-Si Cd-Te CIGS BIPV

Suntech NYSE 1000

Renesola AIM 580

Trina NWSE 350

CSI Changsu NAS 1500tons

JASolar NAS 500

Solarfun NAS 360

CEEG NYSE 600

Yingli NYSE 600

LDK NYSE 1000

Solargiga HKSE 2000tons

Topray SHSE 55

Notes: BIPV=building-integrated photovoltaic


Solar PV Competition Landscape

Source: Company Annual Reports and news clips; XYZ.


86

Chinese solar PV companies are generally perceived as not being technology leaders

Source: Asia Solar, UBS, September 7, 2007.

High Medium Low


Solar PV Companies Leading Technology Sustainable Cost Competitiveness

Branding Financial Strength Profitability Revenue Growth

REC

Sunpower

LDK

MEMC

Q-Cells

Suntech

Solarworld

Yingli

Trina

Ersol

Renesola

JA Solar

Sino American

Conergy

Evergreen Solar

Motech

E-ton

Canadian Solar

Solarfun

Aleo Solar

Solon

Akeena Solar

Phoneix SS

Solar-Fabrik

Reinecke+Pohl


87 87

Analysis of the relative competitiveness and market size for sub-sectors of the value chain reveal some clear trends

Competitive Variables Across China’s Solar PV Value Chain


Source: XYZ.

Degree of fragmentation

Import

Export

Profitability

Historic growth

Polysilicon Wafer/Ingot PV Cell

PV Module PV System & Installation

Key Observations

High entry barriers to upstream characterized by only a few silicon suppliers

Numerous players and markets with highly dispersed structure and intense competition

High quality polysilicon for solar energy cells is still dependent on overseas suppliers

Over 90% of PV cell/module/system produced in China are exported to overseas markets

Under pressure from decreasing profit margins, the degree of consolidation is increasing along the value chain

High

Low

1

2

4

3


88

Poly-silicon margins are compressed significantly by oversupply, a factor that will likely contribute to a decrease in gross margins

Source: XYZ

Challenges and Opportunities for Poly-silicon Suppliers

Solar Energy – competition – solar PV – poly-silicon

Competitive Forces Trends Status Opportunities

Threat of new entrants

High entry barriers

High entry barriers due to the high cost for product line construction and economies of scale (initial investment for a 1000-ton-capacity facility exceeds RMB1 billion)

Downstream firms enter the market in order to avoid further dependency on silicon supply

Upstream vertical integration

Semi-conductor polysilicon enter PV polysilicon production

Threat of competitors

Overseas competitors with incumbent advantages

Sophisticated technology ensures high quality production Realized economy of scale with production over 2500 tons Low unit cost: less than US$30/kg, while most Chinese manufacturers’

average cost per unit exceeds US$50/kg China’s polysilicon producers apply less advanced technology which

consumes 2-3 times the energy to produce the same amount of raw material than overseas competitors do

Expand capacity through horizontal integration

Technology improvement

Bargaining power of suppliers

Tight supply on raw materials

The supply of industrial silicon: China’s average annual production of industrial silicon is 700,000 tons, of which two-thirds is exported to overseas markets

Increasing demand from solar energy polysilicon production results in increasing price

Location selection: close to silicon resources

Bargaining power of customers

Excess supply, price erosion

Supply (estimated as around 30%) will result in ASP falling from US$400 (in 2008) to US$150 ( early 2009) per ton

The expected polysilicon price erosion makes cell/module vendors cautious in placing poly/wafer orders and upstream companies can no longer collect cash pre-payment to meet their capex needs

Upstream vertical integration


89

Challenges for ingot/wafer manufacturers include low entry barriers, historical supply shortages, and price erosion

Source: XYZ

Challenges and Opportunities for Domestic Ingot/Wafer Manufacturers

Solar Energy – competition – solar PV – ingot/wafer



Low entry barriers

Low entry barriers result in numerous players and markets with highly dispersed market structures

Intense competition but less sophisticated technology applied Unsteady quality Profit margin will continuously decrease as more and more silicon makers

and cell makers enter the market

Heightened downstream integration,

Realization of advantages in economies of scale/more efficient production

Increasing market concentration

Threat of substitutes

Technique bottleneck: low conversion rate

Thin Film: less dependent on silicon price, with higher cost per unit and less than 10% of the domestic market

Technology innovation Investment in R&D


Shortage of supply

Shortage of supply during 2005-2008 Due to the unsophisticated technology of domestic suppliers, the price and

production of silicon wafers are still highly dependent on overseas suppliers

Downstream integration by silicon makers


Excess supply, price erosion

Rapid increasing capacity compared with steady increasing demand from cell/module makers

Upstream vertical integration (including silicon suppliers) by cell makers


90

Solar Energy – competition – PV cell

Chinese PV cell manufacturers supply over 35% of the world market

Source: XYZ.

Challenges and Opportunities for PV Cell Manufacturers



Few barriers to entry otherthan cost and risk appetite

Higher profit margins attracted some semi-conductor firms to transfer to solar silicon cell production

Decreasing price of polysilicon will continue to reduce the cost and increase the gross margins of silicon-based PV cell makers

Industry shake out and consolidation

Threat of overseascompetitors

Imperative to retain cost advantages

Big firms such as Q-cells use long-term purchasing agreements to ensure the future cost of silicon since they can promise considerably larger acquisitions

The current silicon price is lower than the predicted long-term future price

Leverage low labor costs over foreign competitors

Upstream integration to grasp the profit margin on silicon supply side

Threat of substitutes Technique bottleneck: low transfer rate

Thin Film: less dependent on silicon price, with higher cost per unit, low technology transfer rate as technical bottleneck

Improved transfer rate increasingly makes Thin Film a good alternative to silicon-based techniques

Technology improvement needed to maintain the higher transfer rate advantage over alternative solutions

Thin-film cell maker can take chances to become more competitive


Oversupply dynamic

Oversupply since the 2Q 2008 resulted in the sharply decreasing price of poly-silicon; the current price is lower than the predicted long-term future price

Polysilicon accounts for 70%-80% of the total cost in cell production meaning that its decreasing price effectively cuts down costs

Upstream integration

Technology innovation to continue reducing the average amount of silicon used in cell production


91

China’s production capacity is mainly exported due to the small size of domestic market demand

Solar Energy – competition – PV Module

Source: XYZ.

Challenges and Opportunities for Domestic Module Manufacturers



High entry barriers

High entry barriers due the high cost of product line construction and economies of scale

Less sophisticated technology compared with overseas incumbents

High production costs and low efficiency

Downstream integration initiated by PV cell makers

Threat of substitutes Technique bottleneck: breakthroughs

Recent advanced technology greatly enhanced the Thin Film PV module’s conversion rate (the highest efficiency recorded at 19.5%) and made it more competitive as an alternative solution available for commercialization

The physical characteristics of Thin Film make it more suitable for BIPV installation

Time for entering thin-film module sector with more sophisticated technology


Shortage of supply

Increasing demand for polysilicon due to the release of expanded capacity

Upstream integration by module makers


Excess supply/price erosion

Slower demand predicted compared with 2007-2008, due to policy changes in Spain, a major market

Solar energy sector experienced cuts in subsidies Decreasing module prices due to policy changes in

major markets like Spain No expectation for a “gold rush” in terms of emerging

market demand

TBD


92

With a low concentration rate, China’s solar water heater sector is a highly fragmented market

Solar Energy – competition – solar thermal water heater

Source: XYZ.

Challenges and Opportunities in the Solar Water Heater Sector



Low entry barrier

A large number of entrants rushed into the market during the last decades Market leaders can increase their market share and realize economies of scale by horizontal integration

Threat of substitutes

Sophisticated markets of gas/electricity water heater

As the first mover, gas water heaters hold the biggest share of accumulated installed market while electricity water heaters account for 70% of the annual installation in the Chinese market

Compared with solar water heaters, gas/electricity have advantages on unit price and adaptability to weather changes, which make them easier to be applied in most regions of China

Solar water heaters account for less than 10% of market share in China

Bargaining power of consumers

Market to be explored

Aesthetic considerations became an important hurdle; many apartments forbid the installation solar water heaters on their roofs

Supportive policies are called for to get rid of the restriction on installation of solar water heaters in some residential areas


93

While there are few domestic companies active in the BIPV arena, the sector has considerable market potential

BIPV – competition landscape

Source: XYZ.

Challenges and Opportunities in the BIPV Market



High entry barriers

High entry barriers Promising market outlook attracted some construction firms to

enter the market

Threat of overseas competitors

Design sophistication

Most Chinese players are less competitive in aesthetic design Outbound acquisitions or strategic alliances


Dependency on module supply

As PV modules account for over 50% of the total cost for BIPV, the sector is sensitive to any fluctuations in module price trends

Encourage module makers to add new business on BIPV


Policy driven The regulation published by China's Ministry of Finance provides a subsidy for BIPV of 20 RMB (about US$2.90) per watt

The "Measures Regarding Subsidies for Solar BIPV Applications" contain the following provisions:

1. BIPV applications are eligible for the subsidy

2. No single BIPV project should be less than 50KW

3. Monosilicon BIPV modules should have conversion rates higher than 16%, multicrystalline modules need a conversion rate higher than 14% and thin-film BIPV products need to have a conversion rate higher than 6%

4. Preference for products integrated into the building

5. Preference for grid-connectivity


94 94

Major listed poly-silicon suppliers

Solar Energy – competition – companies – Solar PV – poly-Si

Source: Bloomberg; XYZ

Polysilicon Wafer/Ignot PV Cell

32.01PV Module

PV System & Installation

Major Polysilicon Suppliers

Selected International Companies Key Multiples

Company Name

Country Market Cap

Enterprise Value

Revenue Net Income

Price

(Feb 13)

Gross Margin Rate

Price/

Earning

EV/

EBITDA

EV/

EBIT

MEMC ELEC MATER

US 3,194.0 2,124.3 2,004.5 390.3 14.23 50.13 7.95 6.73 2.49

TOKUYAMA CORP

JAPAN 1,563.3 2,047.7 3,378.8 207.6 5.67 32.01 7.89 3.65 6.26

MITSUB MATERIALS

JAPAN 3,317.1 11,442.6 18,235.1 816.2 2.59 14.09 5.44 9.18 13.65

WACKER CHEMIE AG

GERMANY 4,257.8 4,034.2 4,868.4 543.3 81.64 30.47 6.16 2.83 6.43

Average 3,083.0 4,912.2 7,121.7 489.3 26.0 31.7 6.9 5.6 7.2

Median 3,255.5 3,079.2 4,123.6 466.8 10.0 31.2 7.0 5.2 6.3


95

Polysilicon production capacity in China is predicted to reach 60,000 metric tons (MT) in 2010

LDK （江西赛维）6000MT(2009) to 15,000(2010)

LDK （江西赛维）6000MT(2009) to 15,000(2010)

Emei （东汽峨嵋）1500MT(2009)

Emei （东汽峨嵋）1500MT(2009)

Xinguang （新光硅业）6000MT(2010)

Xinguang （新光硅业）6000MT(2010)

Zhongneng （中能光伏）6000MT(2009) to 15,000(2010)

Zhongneng （中能光伏）6000MT(2009) to 15,000(2010)

Shunda （顺大）1,500 (2009)

Shunda （顺大）1,500 (2009)

Tianhe （天和光能）10,000MT(2009)

Tianhe （天和光能）10,000MT(2009)

Shennanbo （深南玻）1500MT(2009) to 5,000(2010)

Shennanbo （深南玻）1500MT(2009) to 5,000(2010)

Mudanjiang （牡丹江）3,000MT(2010)

Mudanjiang （牡丹江）3,000MT(2010)

Jingxin （益阳晶鑫）5,000MT(2010)

Jingxin （益阳晶鑫）5,000MT(2010)

Zhonggui （洛阳中硅）2,000MT(2009)

Zhonggui （洛阳中硅）2,000MT(2009)

Xuntianyu （迅天宇）6000MT(2010)

Xuntianyu （迅天宇）6000MT(2010)

Aixinjia （曲靖爱信多）10 ， 000MT(2010)

Aixinjia （曲靖爱信多）10 ， 000MT(2010)

Asian Silicon2000MT(2010)

Asian Silicon2000MT(2010)

Jinzhou Chem （锦化）1,000MT(2009)

Jinzhou Chem （锦化）1,000MT(2009)

Jinglong （晶龙）5,000MT(2010)

Jinglong （晶龙）5,000MT(2010)

Source: Company websites and news clips; XYZ.

Silicon Suppliers in China

Solar Energy – competition – Solar PV – key players – Poly-Si


96

Comparable listed companies:Wafer/Ingot Suppliers

Solar Energy – competition – Key players – Wafer

Source: Bloomberg; XYZ.

Polysilicon Wafer/Ingot PV

CellPV Module


Major Wafer/Ingot Suppliers

Company Name

Country Market Cap

Enterprise Value

Revenue Net Income

Price

(Feb 13)

Gross Margin Rate

Price/

Earning

EV/

EBITDA

EV/

EBIT

LDK SOLAR CO-ADR

CHINA1,222.7 1,886.4 524.0 144.1 10.81 32.49 3.66 5.31 13.22

SOLARGIGA ENERGY

CHINA 338.2 228.2 131.0 37.7 0.20 31.82 2.35 4.06 N/A

JA SOLAR HOL-ADR

CHINA 505.3 142.4 354.0 52.6 3.01 22.31 68.22 3.29 11.37

Average 688.7 752.3 336.3 78.1 4.7 28.9 24.7 4.2 12.3

Median 505.3 228.2 354.0 52.0 3.0 31.8 3.7 4.1 12.3

Selected Chinese Companies

Note: Fix header to reflect style rules.


97

Comparable listed companies:PV Cell Manufacturers (non-integrated)

Solar Energy – competition – Key players – PV cell


Wafer/Ignot PV Cell

PV Module


Single/Multi-sector PV Cell Manufacturers

Single-sector PV Cell Manufacturers (only focus on PV cell manufacturing)

Polysilicon

Company Name

Country Market Cap

Enterprise Value

Revenue Net Income

Price

(Feb 13)

Gross Margin Rate

Price/

Earning

EV/

EBITDA

EV/

EBIT

Q-CELLS SE GERMANY 2,636.2 3,030.2 1,105.8 191.1 23.28 N/A 10.39 9.18 29.58

ERSOL SOLAR ENER

GERMANY 1,417.9 1,328.6 206.2 11.2 132.23 N/A 36.68 11.17 21.32

SUNWAYS AG

GERMANY 32.2 44.8 274.9 1.6 2.78 N/A 21.60 3.88 25.24

SUNTECH POWE-ADR

CHINA 1,4732.2 2,727.1 1,348.3 171.3 9.57 20.33 7.14 10.91 24.71

MOTECH INDUSTRIES

TAIWAN 582.4 545.5 458.0 71.8 2.33 18.98 7.59 5.46 24.56

EVERGREEN SOLAR

U.S. 268.7 465.0 112.0 -84.9 1.63 16.87 N/A 15.60 N/A

Average 1,068.4 1,356.9 584.2 60.3 28.6 18.7 16.7 9.4 25.1

Median 1,000.2 937.1 366.4 41.5 6.2 19.0 10.4 10.0 24.7



98 98

Comparable listed companies: PV Cell Manufacturers (non-integrated)

Solar Energy – competition – Key players – PV cell


Wafer/Ignot PV Cell

PV Module


Single/Multi-sector PV Cell Manufacturers

Multi-sector PV Cell Manufacturers (with some core business in other industrial sector such as consumer electrics)

Polysilicon

Company Name

Country Market Cap

Enterprise Value

Revenue Net Income

Price

(Feb 13)

Gross Margin Rate

Price/

Earning

EV/

EBITDA

EV/

EBIT

SHAP CORP JAPAN 8,947.2 13,454.6 37,560.0 1,120.1 8.06 22.09 9.29 4.29 9.89

KYOCERA CORP

JAPAN 12,110.1 1,328.6 14,181.6 1,178.6 63.30 31.51 10.72 5.46 6.95

SANYO ELECTRIC

JAPAN 2,798.4 8,541.8 22,175.4 315.4 1.49 15.82 33.39 7.06 9.94

MITSUB ELEC CORP

JAPAN 9,037.7 13,230.5 44,506.4 1,736.1 4.21 26.98 5.64 4.02 6.34

KANEKA CORP

JAPAN 1,761.7 2,319.6 5,527.5 206.8 5.03 25.24 11.38 6.03 8.59

Average 6,242.2 8,999.4 24,354.4 812.1 13.9 22.9 17.3 5.7 8.6

Median 5,872.8 8,541.8 22,175.4 717.8 4.6 23.7 11.1 5.7 9.2



99

Comparable listed companies:PV Cell Manufacturers (Integrated)

Solar Energy – competition – Solar PV – key players – PV cell


Wafer/Ignot PV Cell

PV Module


PV Cell Manufacturers

Polysilicon

Company Name

Country Market Cap

Enterprise Value

Revenue Net Income

Price

(Feb 13)

Gross Margin Rate

Price/

Earning

EV/

EBITDA

EV/

EBIT

SOLARWORLD AG

GERMANY 2,485.5 2,336.4 887.8 145.8 22.25 N/A 18.89 5.52 12.13

RENEWABLE ENERGY NORWAY

NORWAY 5,300.7 5,718.5 970.4 194.8 10.72 N/A 15.29 11.84 21.74

Average 3,893.1 4,027.4 929.1 170.3 16.5 N/A 17.1 8.7 16.9

Median 3,893.1 4,027.4 929.1 170.3 16.5 N/A 17.1 8.7 16.9



100

Comparable listed companies:Thin Film PV Cell Manufacturers

Solar Energy – competition – Solar PV – key players – Thin Film PV cell


Wafer/Ignot PV Cell

PV Module


Thin Film PV Cell Manufacturers

Polysilicon

Company Name

Country Market Cap

Enterprise Value

Revenue Net Income

Price

(Feb 13)

Gross Margin Rate

Price/

Earning

EV/

EBITDA

EV/

EBIT

FIRST SOLAR INC

U.S. 11,908.9 11,361.2 504.0 158.4 146.86 49.88 43.32 23.94 45.73

RENESOLA

LTD-ADR

CHINA 245.6 N/A N/A N/A 3.62 N/A N/A N/A N/A

Average 6,077.2 11,361.2 504.0 158.4 75.2 49.9 43.3 23.9 45.7

Median 6,077.2 11,361.2 504.0 158.4 75.2 49.9 43.3 23.9 45.7



101

Comparable listed companies:PV Cell Module Manufacturers


Solar Energy – competition – Solar PV – key players – PV Module

Wafer/Ignot PV Cell PV Module


PV Cell Module Manufacturers

Policilicon

Company Name

Country Market Cap

Enterprise Value

Revenue Net Income

Price

(Feb 13)

Gross Margin Rate

Price/

Earning

EV/

EBITDA

EV/

EBIT

SUNTECH POWE-ADR

CHINA 1,473.2 2,727.1 1,348.3 171.3 9.57 20.33 7.14 10.91 24.71

TRINA

SOLAR-ADR

CHINA 242.1 541.7 301.8 35.7 8.23 22.41 2.69 4.57 7.79

SOLARFUN POW-ADR

CHINA 251.3 528.9 328.3 20.3 4.67 16.61 7.51 14.63 17.21

CANADIAN

SOLAR I

CHINA 181.0 263.5 302.8 -0.2 5.08 7.85 2.70 3.75 10.23

CHINA

SUNERG-ADR

CHINA 96.5 209.7 234.9 -4.9 2.44 7.67 61.00 13.64 26.16

YINGLI

GREEN-ADR

CHINA N/A N/A 1,107.1 100.0 N/A 21.58 N/A 5.66 8.23

Average 448.6 854.2 603.9 53.7 6.0 16.1 16.2 8.9 15.7

Median 241.1 528.9 315.6 28.0 5.1 18.5 7.1 8.3 13.7



102

Sichuan Chuantou Energy Company Limited mainly focuses on electricity and solar energy

Sichuan Chuantou Energy Co. Ltd

Company historySichuan Chuantou was previously known as Sichuan Emei Ferroalloy

(Group) Holdings Ltd

Company LeadershipChairman: Mr. Huang Shunfu; CFO: Amy Yi Zhang

Company OwnershipListed on Shanghai Stock Exchange in 1993

Revenue– 2007: RMB363 million

By business segment: – Electricity : RMB252 million – Solar PV: RMB91 million – Other production and services: RMB20 million

Growth– Net Revenue (2006-2007): 8.1%

Company Profile Financial Overview

Source: Sichuan Chuantou Energy Company Limited, Corporate Website.

.

Primary Product and Service Lines– Developing, managing and providing hydroelectricity and investing in

electrical power– Other activities include provision of repair services and car

transportation– The group also develops automatic transport systems and provides

Internet information servicing of communication items including software, photoelectron and microelectronics

Company Geographical PresenceThe company operates mainly in Sichuan province

Principal shareholdersSichuan Province Investment Group Limited

Business Overview Shareholder Structure

Solar PV – competition – key players profile – Poly-Si supplier


103

Leshan Electric Power Company Limited is China’s first electricity shareholding enterprise

Leshan Electric Power Co.,Ltd

Company historyFounded in 1988, Leshan Electric Power Co.,Ltd., which was

established by Leshan Ministry of Finance and nine electric power companies, is China’s first electricity shareholding enterprise

Company LeadershipChairman: Mr. Liao Zhengquan; Chief Accountant: Sun Zhiyuan

Company OwnershipListed on Shanghai Stock Exchange in 1993

Revenue2007: RMB660 million By business segment: – Electricity : RMB473 million – Water supply: RMB41 million – Gas: RMB97 million– Coal: RMB19 million– Hotel services: RMB25 million– Others: RMB6 million

GrowthNet Revenue CAGR (2006-2007): 11.5%


Source: Leshan Electric Power Co.,Ltd , Corporate Website.

103

.

Primary Product and Service Lines– The development, supply and management of electric power– Production and supply of coal gas, communication equipment and

electrical transmission equipment – Hotel services, supply of tap water and development of real estate

Company Geographical PresenceThe business mainly operates in Sichuan province

Principal shareholders– Leshan Assets Operation Co.,Ltd– Sichuan Electricity Power Co.,Ltd– Meishan Assets Operation Co.,Ltd


Solar PV – competition – key players profile – Poly-Si supplier


104

Suntech Power is a worldwide leader in the design and manufacture of innovative solar energy solutions

Suntech Power Holdings

Company historyFounded in 2001, Suntech is one of the largest solar module providers

worldwide

Company LeadershipCEO: Dr. Zhengrong Shi (also Chairman), CFO: Amy Yi Zhang

Company OwnershipListed on the New York Stock Exchange (NYSE: STP)

Revenue2007:US$1,348 million

By business segment: – PV modules :US$1,332 million – PV cells: US$13 million – PV system integration: US$3 million

GrowthNet Revenue CAGR (2006-2007): 125%


Source: Suntech Power, Corporate Website.

104

.

Primary Product and Service Lines– Suntech designs, develops, manufactures, and markets various

photovoltaic (PV) cells and modules to provide electric power for residential, commercial, industrial, and public utility applications worldwide

– It offers various monocrystalline and multicrystalline silicon PV cells, PV modules and a range of BIPV products and systems

– Suntech is the second largest PV cell manufacturer globally, with over 500MW annual capacity

Company Geographical Presence– The company has five production Sites in Wuxi, Luoyang, Qinghai

Nagano, Japan, and Shanghai (under construction).

Principal Shareholders– Directors and executive officers– D&M Technologies Limited– FMR LLC– As of March 25, 2008, approximately 65.5% of the ordinary shares

were held in the U.S.


By geographical segment:– Europe: US$1,196 million– U.S.: US$87million– China: US$26 million– South Africa: US$1 million– Japan: US$8 million– Others:US$30 million

Solar PV – competition – key players profile – PV cell and module manufacturer


105

China Sunergy is a pure-play cell manufacturer

China Sunergy Co., Ltd

Company historyCommencing business operations in August 2004, China Sunergy is a

leading manufacturer of solar cell products in China as measured by production capacity. It is also a pure-play cell manufacturer focusing on the highest value segment of the solar value chain

Company LeadershipCEO: Dr. Allen Wang, Chairman: Mr. Tingxiu Lu, CFO: Mr. Kenneth

Luk

Company OwnershipListed on the Nasdaq Stock Market (NASDAQ: CSUN)

Net Revenue2008:US$350.9 million

By business segment: – solar cells :US$333.4 million – modules: US$10.9 million – cells processed : US$2.8 million– Others: US$3.8 million



Source: China Sunergy, Corporate Website.

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Primary Product and Service Lines– China Sunergy Co., Ltd., together with its subsidiaries, engages in

the design, development, manufacture, and marketing of solar cells in China and overseas

– It manufactures solar cells from silicon wafers utilizing crystalline silicon solar cell technology to convert sunlight directly into electricity through a process known as the photovoltaic effect

Company Geographical Presence– Head office: Nanjing, China– Branch: Munich, Germany

Principal Shareholders– All directors and executive officers– Elite Shine Group Limited– Smooth King Investments Limited– Brightest Power Holdings Limited– Exuberance Investment Limited– PraxCapital Fund II, L.P.– Luck Great Investments Limited


By Related Party& Non related party:– Third Parties: US$297.3 million– Related Parties: US$53.6million



106

Trina Solar Limited is an internationally recognized manufacturer of mono and multicrystalline PV modules

Trina Solar Limited

Company history– Established in 1997, Trina Solar is committed to improving the

competitiveness and efficiency of solar energy and developing a sustainable PV industry

Company Leadership– CEO: Jifan Gao (also Chairman), CFO: Terry Wang

Company Ownership– Listed on the New York Stock Exchange

Net Revenue– 2008: US$831.9 million– 2007: US$301.8 millionBy geographical segment in 2007: – Europe: US$291.3 million– China: US$6.4 million– Mongolia: US$1.5 million– Others: US$2.6 million

Growth– Net Revenue CAGR (2007-2008): 175.6%


Source: Trina Solar Limited, Corporate Website.

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Primary Product and Service Lines– Trina Solar Limited, through its subsidiary, Changzhou Trina Solar

Energy Co., Ltd., engages in the manufacture and sale of solar power products primarily in China. The company manufactures ingots, wafers, and solar cells for use in its solar module production, provides silicon wafers to toll manufacturers and purchases solar cells from toll manufacturers

– Trina Solar Limited sells its products to distributors, wholesalers, and PV system integrators

Company Geographical Presence– Trina Solar's increasingly global presence includes offices in China,

Germany, Spain and the U.S.

Principal shareholders– Topower International Limited– South Great Investment Limited– Divine Land International Investment– Sino Base Investment Co., Ltd– Perseverance International Invetment Limited– Changzhou Tianhe Investment Co., Ltd– Changzhou Wujin Nanfang Bearing Co., Ltd– Wai Tat (Hong Kong) Limited– Sino Super Investment Limited– Sun Era Industries Limited




107

Solarfun Power is founded on a strong tradition in electronic manufacturing

Solarfun Power Holding

Company historyEstablished by leading electricity meter manufacturer Lingyang

Electronics in August 2004, Solarfun Power is a leading global manufacturer of photovoltaic (PV) cells and modules

Company LeadershipCEO: Dr. Sven M. Hansen, Chairman: Mr. Yonghua Lu, CFO: Ms. Amy

Liu

Company OwnershipListed on the Nasdaq Stock Market (NASDAQ: SOLF)

Net Revenue2008: US$725.4 million

By business segment: – Photovoltaic modules:US$678 million – Photovoltaic cells: US$37 million – PV cells processing: US$0.4 million– Raw materials:US$10 million



Source: Solarfun Power, Corporate Website.

107

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Primary Product and Service Lines– Solarfun Power Holdings Co., Ltd., through its subsidiaries, engages

in the development, manufacture, and sale of photovoltaic (PV) cells and PV modules

– It offers monocrystalline and multicrystalline silicon cells and modules, monocrystalline ingots, and raw materials

– The company sells its products directly and through third party distributors to solar power system integrators and distributors

Company Geographical PresenceSolarfun Power Holdings operates primarily in China, Germany, Spain,

and Italy

Principal shareholders– Lingyang Electronics– Citigroup Venture Capital– Hony Capital– Legend Capital – Good Energies




108

Yingli Green Energy is one of the leading vertically-integrated PV product manufacturers in China

Yingli Green Energy Holding

Company historyFounded in 1998, Yingli, through its principal operating subsidiary in China, Baoding Tianwei Yingli New Energy Resources Co., Ltd., designs, manufactures and sells PV modules and designs, assembles, sells and installs PV systems that are connected to electricity transmission grids or those that operate on a stand-alone basis

Company LeadershipCEO: Mr. Liansheng Miao (also Chairman), CFO: Mr. Zongwei Li

Company OwnershipListed on the New York Stock Exchange

Net Revenue2007: US$556.5 million

By business segment: – PV modules : US$550.5 million – PV system: US$0.3 million– Other: US$5.7 million

GrowthNet Revenue CAGR (2006-2007): -66.1%


Source: Yingli Green Energy, Corporate Website.

108

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Primary Product and Service Lines– Yingli Green Energy Holding Company Limited and its subsidiaries

engage in the design, development, marketing, manufacturing, installation, and sale of photovoltaic (PV) products

– Its products include PV modules, integrated PV systems, multicrystalline polysilicon ingots and wafers, and PV cells

– The company sells its PV modules under the Yingli brand name primarily to installers, PV system integrators, property developers, distributors, and other value-added resellers

Company Geographical PresencePrincipally in China, as well as in Europe, particularly the U.K. and

Germany

Principal Shareholders– Public shareholders– Financial investors and other Shareholders– Yingli Power Holding Company Limited (British Virgin Island)


By geographical segment:– Europe: US$520.2million– U.S.: US$5 million– China: US$8.4 million– HK: US$14.2 million– Others:US$ 8.7 million



109

Canadian Solar is a major manufacturer of solar components

Canadian Solar

Company History– Founded in Canada in 2001, Canadian Solar Inc. is a vertically-

integrated manufacturer of silicon, ingots, wafers, cells, solar modules (panels) and custom-designed solar power applications

Company Leadership– CEO: Shawn (Xiaohua) Qu (also Chairman), CFO: Arthur Chien

Company Ownership– Listed on the Nasdaq Stock Market (NASDAQ: CSIQ)

Net Revenue2008: US$303 million

Growth– Net Revenue CAGR (2007-2008): 344%


Source: Canadian solar, Corporate Website.

109

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Primary Product and Service Lines– Products include a range of standard solar modules built to general

specifications for use in various residential, commercial, and industrial solar power generation systems

– Specialty solar modules and products consist of customized modules that customers incorporate into their own products, such as solar-powered bus stop lighting, and complete specialty products such as solar-powered car battery chargers

Company Geographical Presence– Canadian Solar has successfully established seven wholly-owned

manufacturing subsidiaries in China manufacturing ingots, wafers, solar cells and solar modules

Principal Shareholders– All directors and Executive Officers as a Group– Columbia Wanger Asset Management, L.P


By geographical segment:– Europe: US$287million– Asia: US$13 million– US: US$3 million



110

ReneSola, Ltd operates upstream in the value chain, focusing on manufacturing wafers

ReneSola, Ltd

Company historyFounded in 2003 and based in Jiashan, China, the company is a leading manufacturer of wafers and one of the fastest growing companies in the photovoltaic (PV) industry

Company LeadershipCEO: Xianshou Li, Chairman: Martin Bloom, CFO: Charles Xiaoshu Bai

Company Ownership– Listed on the New York Stock Exchange (NYSE: SOL)– Listed on the New York Stock Exchange (Ticker: SOLA.L)

Revenue– 2008: US$670.4 million– 2007: US$249.9 million

By business segment in 2007: – Product Sales: US$231.2 million – Processing Service: US$18.7 million

Growth– Net Revenue CAGR (2007-2008): 169.3%


Source: ReneSola, Ltd, Corporate Website.

110

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Primary Product and Service Lines– ReneSola, Ltd., along with its subsidiaries, engages in the

development, manufacture, and sale of solar wafers and related products in China

– It offers silicon ingots and solar wafers, which are processed from silicon raw materials, including reclaimable silicon raw materials, in the form of partially-processed and broken wafers, broken solar cells, pot scrap, silicon powder, ingot tops and tails, and other off-cuts

Company Geographical PresenceSubsidiaries across China, the U.S. and Malaysia

Principal Shareholders– Directors and Executive Officers– Ruixin Holdings LTD– Yuncai Holdings LTD


By geographic segments:– China: US$155 million– Rest of Asia: US$87million– U.S.: US$7 million– Others:US$0.9 million



111

Shenzhen Topray Solar Co., Ltd. is a PV cell, module and solar related consumer products manufacturer

Shenzhen Topray Sola Co., Ltd.

Company historyFounded in 2002, Shenzhen Topray Solar Co., Ltd. is a manufacturer of solar cells, solar panels, solar chargers, solar lights, solar gardening products and solar power systems

Company LeadershipGeneral Manager: Ms. Li Fenli, CFO: Ms. Zhang Hongying

Company OwnershipListed on the Shenzhen Stock Exchange (002218)

Net Revenue2008: RMB 294.8 million

By business segment: – Solar cells: RMB 17.5 million– Solar power applications/solar power systems: RMB 11.8 million

– Others: RMB 29.3 million



Source: Shenzhen Topray Solar, Corporate Website.

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Primary Products and Service Lines– Over 95% of Shenzhen Topray Solar’s output is exported and its

current annual production capacity is up to three megawatts, making it one of the world's highest volume producers

– It is the only company in China that has the ability to produce amorphous silicon solar cells with 50MW capacity, and mono-crystalline & poly-crystalline solar cells with 30MW capacity

Company Geographical Presence– Head office: Shenzhen, China– Branch: Kampala, Uganda; Sichuan, China

Principal Shareholders– Public shareholders– Shenzhen AoXin Investment and Development Limited– Shenzhen He Rui Yuan Investment and Development Limited




112

Solar Energy – competition– CSP

Selected International CSP Companies

CSP will become increasingly attractive to new entrants as prices fall as a result of technology innovation and economies of scale

Source: CGGC; company annual reports and websites.



Selected Companies:Boeing, Chicago, IL3M Co. SiemensLuz/SolelAlanod

LuzAccionaAbengoa SolarCarrizo EnergyBrightSource

Sunray EnergyFlorida Power &

LightAccionaArizona PublicAbengoa SolarBrightSource

Southern California Edison

Nevada Power Co.Sierra Pacific Power Co.Pacific Gas & Electric Co. Florida Power & LightSan Diego Gas & Electric


Status Trends Opportunities

There has been a proliferation of new entrants up and down the value chain ranging from technology innovators looking to change the economics of CSP to investors and IPPs looking to gain first mover advantages by trying up sites

The largest owners of wind power plants globally are emerging as significant players in the CSP sector

Wind power plants invest in the CSP sector

113

There are a wide range of domestic and foreign actors involved in solar thermal, CSP and BIPV


Source: Company websites; XYZ.

Ecoo Solar Hi-min Solar Linuo Paradigma Solar Engergy Huayang Solar

Solar Thermal Water Heater (SWH)


Building Integrated PV (BIPV)

Selected SWH, CSP and BIPV Companies

Solar Energy - competition – companies

Xinjiang Sun Oasis eSolar Edison Acciona Abengoa

Suntech Power Holdings Co., Ltd.

Giant Vigo Johanna Solar Technology

GmbH Phoenix Solar AG

114

Contents


Segment Definition

Market Context






114


115

Financing alternatives for solar energy are becoming plentiful as the industry matures and price points become lower

Financial Investment Overview

Solar PV and solar thermal have access to various sources of capital while the lack of capital is still a barrier to entry for CSP

Investors will look to see that operational, financial and strategic milestones have been met and will pay premiums for demonstrated high revenue mix and growth, expansion, profit margin uplift, long-term contracts, production volume, sustainability of feedstock, and realistic strategies to reach grid parity

Investors seek vertical integration for several reasons:

– Multiple products allow for multiple margin opportunities in the form of differentiated technology, cost-saving, and system integration

– Protection against over- and undersupply choke points as industry evolves

– Maximize overall system design to assemble the right products in the design for each installation

There are venture capital firms, private equity concerns and IPO markets, as well as government renewable energy funds and subsidy activities, investing in the solar sector

Solar Energy – financial investment – overview

Source: XYZ.


116

Solar PV and solar thermal have access to various sources of capital, unlike the CSP sector

Solar PV Solar Thermal CSP

Use of Proceeds

R&D Capacity expansion

Value chain consolidation

Application R&D Production facility

R&D Production facility

Project sourcing

Funding Size/Stage

US$5 million-10 million

US$30 million US$100 million-300 million

Growing stage

US$5 million-10 million

US$100 million

Early Early Early

Opportunity

Seek technology leadership in Thin Film

Thin Film Production capacity critical to success

Turn key

Capitalized on vertical integration

BIPV tax and fiscal incentives

Project developer

Improve efficiency

Reduce operation costs

Licensing

Achieve econo-mies of scale

Project develop-ment

Tax and fiscal incentive

Acquire technology/solution

Connect with grid

Leverage scale

Turn key OEM

Out-bound

Gov’t projects

Funding Source

Active Investors

Government

Renewable Energy Fund

China Development Bank



Renew-able Energy Fund

Financial IPO CDH, Tsing, GS

Industrial Suntech LDK, Yingli Suntech, Yingli

Himin Himin, Solar Rain

Himin

Financial Investment in Solar

Solar Energy – financial investment

Source: XYZ.


117

Greentech companies need to achieve certain milestones before they can achieve an initial public offering (IPO)

Source: Clean Tech Overview, Morgan Stanley, July 21, 2008.

Valuation Versus Key Milestones

Investors will pay premiums for

Revenue growth

Revenue diversification

Long-term contracts

Production capacity

Gross margins

Grid parity

Global expansion

Sustainability of material resources



118

The recent wave of interest in renewable energy offers Chinese solar companies access to capital

China Clean Tech’s Access to Capital

Source: Clean Tech Overview, Morgan Stanley, July 21, 2008.


Please double check the charts, the data on the “Clean Tech Venture Investments in China” looks old since it refers 2007 as an estimate. Meaning a forecast. Which means this data has been generated 2006 the lastest.

Re “Capital Raised in Primary Market” Q2’06 indicated a “0” as for its statistic. Although it would most probably mean that it is less than a million but some might think of it as plainly zero. To avoid confusion, it would be best if we would indicate the actual capital raised such as “0.45” and the like so that we are clear about the data.


119

Recent solar M&A has exhibited vertical integration across the value chain to drive overall costs down and to increase scale

Source: Clean Tech Overview, Morgan Stanley, July 21, 2008, XYZ.

Solar Market Consolidation Themes


Thin Film

Equipment Silicon Feedstock Solar Cells Solar ModulesIngots & WafersSystem Intergration/ Installation/ Services


120

We have identified a number of key financial investors that are active in the sector

Solar Energy – financial investment – financial investors profile

Source: XYZ.

House Business Description Sample Investments Comments

Tsing Capital

Industry focus: Cleantech Typical investment size: US$1 million-5 million

Beijing Giant Hemu Technology Beijing PowerU Technology Co., Ltd. China Sunergy Environmental Services Group Fujian Haiyuan Automatic

Equipments Co., Ltd. LDK Solar Co., Ltd. Shenzhen Dongjiang ET Solar Green Bio

Tsing Capital is the first cleantech venture capital management firm in China

The company manages the China Environment Fund

In September 2008, the company invested in wind power equipment accessories manufacturer Wuxi Qiaolian Wind Power Technology Co., Ltd.

Shenzhen Capital Group

(SCGC)

SCGC is a balanced fund manager with an equal focus on expansion along with funding of early and seed stage companies

Industry focus: Primarily hi-tech, but also service and logistics industries

Geographic focus: Shenzhen and Greater China

Jinkosolar Holding Company Ltd. Shenzhen HJ Technology Co., Ltd. Kingsun Photoelectricity Co., Ltd. Beijing Shenwu Thermal Energy

Technology Mingyang Electric Jiangsu Highstar Battery

Manufacturing Co., Ltd .

SCGC is one of China’s largest PE firms SCGC is a state-controlled PE Shareholders include the state-owned

Assets Supervision and Administration Commission of Shenzhen Municipal Government and other state-owned entities

In October 2008, the company invested in silicon wafer manufacturer Jinkosolar Holding Company Ltd.

Milestone Capital

SCGC is a balanced fund manager with an equal focus on expansion along with funding of early and seed stage companies

Instead of focusing on any particular industry, Milestone Capital’s investment team looks for companies with sound financial and operating track records that have already established leading positions in their respective market segments

Typical investment size: US$ 10 million-100 million

Trina Solar Ltd. China Bio Solutions Group Ltd. VisionChina Media Inc. Focus Media Holding Ltd. Dehaier Medical Systems Ltd. Kingsun Photoelectricity Co., Ltd.

The company invests in a limited number of portfolio companies where it can dedicate significant resources to each investment

The company wants to play an active role and work closely with the management of its portfolio companies


121

Source: XYZ.



NewMargin Venture

Industry focus: broader IT, sustainable growth technology, healthcare and high margin manufacturing

Geographic focus: China

Goldwind Science & Technology Co., Ltd.

Zhenghe Bioenergy EcoGreen Fine Chemicals Group Ltd. Shenzhen Dongjiang Environmental

Company Ltd.

NewMargin currently has about US$520 million under management

The company is seeking to invest in companies that will be future technology leaders and dominate China’s economy in the 21st century

The company is one of China's oldest domestic venture capital companies

CDH Investment

Deal size typically US$700,000-900,000 Industry focus: environmental protection,

pharmaceuticals, telecommunications, optical-mechanical-electrical integration, new materials and energy, etc.

Geography: Beijing/Guangdong

Himin Solar Energy Group Meihua Monosodium Glutamate Group

Co., Ltd. Meng Niu Dairy Li Ning Focus Media Sina Air Media

Focuses on industries that have been promoted by the Chinese government

All investments require a rate of return greater than 30% and yearly dividends need to be greater than 16%

Provides growth capital to companies that have strong business fundamentals, favourable growth prospects and viable exits via listings or trade sales in 1-2 years

New Horizon Fund

Industry focus: chemicals, energy, multimedia, high-tech, consumer products, and auto components


Goldwind Science & Technology Co., Ltd.

Yingli Solar

The company’s investment holding period is 2-5 years

The company’s two limited partners are Tamasek Holdings Private Limited and SBI Holdings Inc.

TDF Capital

Typical investment size: US$ 3 million-10 million Investment focus: new energy and Greentech,

technology, telecoms, healthcare, consumer Geographic focus: Greater China

Universtar Science & Technology Zhong Hang (Baoding) Huiteng

Windpower Equipment Co., Ltd. Hefei Sungrow Power Supply Ltd.

Although primarily an early to expansion stage investor in the consumer, media and technology sectors, the company has also begun investing in the new energy and greentech industries



122

Source: XYZ.



Qiming Venture Partners

Industry focus: Clean technology, media and Internet information, technology, healthcare, and consumer and retail


LP Amina The company has origins and expertise in making IT-related investments

Although the company has made only one cleantech investment thus far, it views the industry as having strong potential

Over US$500 million under management

GSR Ventures

Industry focus: Semiconductors, Internet, wireless, new media and green technology


LatticePower Corporation Sierra Solar Power Sinowyde Energy

Technologies Corporation Times Energy Corporation

The company’s expertise is in Internet and telecommunications sector investment

However, the company has been broadening its focus to invest in greentech

In January 2009, the company announced that it had raised US$ 383million for a new fund to focus on investing in Chinese technology companies

Blackstone Group

Deal size generally ranges from US$50 million -$5 billion

Industry focus: Cleantech, manufacturing, chemicals, transportation, communications, insurance, lodging, entertainment

Geographic focus: U.S., Europe and Asia -Pacific

Coskata Inc. Sithe Global Power

In mid-2008, Blackstone Group formed Blackstone Cleantech Venture Partners indicating Blackstone Group’s growing focus towards cleantech investment

Also in mid 2008, Blackstone Group announced a partnership with Windland Energieerzeugungs GmbH to develop and construct a 400MW offshore wind farm in Germany

Draper Fisher Jurvetson

Industry focus: diversified including energy/greentech, life sciences, consumer apps, media, enterprise applications, hardware, mobile, and nanotechnology

Geographic focus: Mainly U.S., Canada, China, and India

Jing-Jin Electric Prudent Energy Nottingham International SolarCity GreenFuel Technologies BioFuelBox

Draper Fisher Jurvetson has been investing in cleantech since 2001

In 2007, the company was involved in 11 cleantech deals with a total investment of over US$40 million



123


Source: XYZ.


Warburg Pincus

Deal size range from US$10million-$1billion Industry focus: financial services, healthcare,

consumer and industrial, media and business services, information and communication technology, energy and real estate

Geographic: Global

Conergy Wind GmbH Competitive Power Ventures

Holdings

PwC is the PE fund’s tax advisor Invested more than US$29 billion in more than

600 companies in 30 countries around the world Has been in Asia for more than a decade and has

invested more than US$2 billion in the region As a foreign PE house, it prefers to invest in

companies with a high return (usually above 20% to 30%) in short term (usually three years) and a clear path to exit (i.e., through IPO)

Intel Capital

Intel's global investment organization makes equity investments in innovative technology start-ups and companies worldwide

Industry focus: cleantech, information technology, semiconductor manufacturing

Trony Solar Holdings Co., Ltd.

NP Holdings Ltd.

In April 2008, Intel established the US$500 million Intel Capital China Technology Fund II

In Oct. 2008, the company made its first investment in China’s cleanteach industry by investing US$20 million in Trony Solar Holdings Co., Ltd., a leading Chinese thin-film solar energy and solution provider

Over the past 10 years, Intel Capital has invested in more than 80 companies across mainland China and Hong Kong

In 2007, Intel Capital invested about US$639 million in 166 deals with approximately 37 percent of funds invested outside the United States

New World Strategic

Investment Ltd

Industry focus: any Geographic focus: China and Asia Other investment criteria: companies are 1-3 years

old before their listing

Biomax Environment Holdings Ltd.

Renhe Commercial Holdings Co., Ltd.

In Dec. 2008, the company’s Managing Director Adrian Cheng said the company is seeking to explore investments in the alternative energy territory

Based in Hong Kong, the company is a wholly-owned subsidiary and the strategic investment arm of conglomerate New World Group



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We’ve identify three potential business and funding models to promote solar energy development in China

Financial Investment Implications

Solar power – financial investment – implications

124

Licensing Model

Project Developer

Integrated Power Company

Business Model

Sell equipment and license technology to developers of solar projects

Provides revenue and profits in a similar way to manufacturing of industrial equipment

Use technology as a “currency” to invest in solar projects

Developer of solar projects Provides revenue and profits through

a developer fee, service and O&M contracts, and associated tax credits or incentives

Develop projects and establish the company as an integrated energy concern

Provides revenue and profits through the sale of electricity to power and utility entities and through any associated tax credit or fiscal incentives

Funding Sources

Venture Capital Private Equity IPO China Renewable Energy Fund

Provincial/Municipal/Government Growing stage venture funds Private equity funding Project Financing IPO

Utility company Joint Venture Private equity funds IPO

Risks

Strong balance sheet requirement to offer O&M contracts

Least overall business risk Potential for sales to be less

Strong balance sheet requirements Sell-down timing uncertainty

Greatest level of business risk Least diversified revenue stream

What the Market Needs

Best of breed technologies

Development and operation of projects

FUNDIG


fact book prepared as context for the key findings of the renewable energy sector team the china...

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