Suntech

Solar’s China problem (and mine)

October 13, 2010

Today I met Terry Wang, the CFO of Trina Solar, a fast-growing company that has come out of nowhere to become a player in the solar power industry. Launched in 1997, Trina Solar is the world’s second-biggest solar power company (behind First Solar), as measured by its market capitalization of about $4.3 billion. Revenues were $301 million in 2007, $831 million in 2008, $845 million in 2009 (a bad year for everyone because of the global recession) and about $700 million for the first six months of 2010.

Terry grew up in China, went to college at Brown and earned an MBA at the University of Wisconsin, after which he took a series of jobs in Silicon Valley. Today, he divides his time between Trina Solar’s headquarters near Shanghai and Fremont, CA. He needs to spend time in this country, he said,  because Trina wants to be part of the growing U.S. solar market and because its shares are traded on the New York Stock Exchange. On a panel I moderated at the Solar Power International conference in Los Angeles, Terry said that Trina Solar will consider setting up a manufacturing plant here if the U.S. market, which doubled in size in 2010, continues to grow.

Terry also acknowledged — not that he had any choice — that Trina Solar has benefited mightily from support from the Chinese government, including a whopping $4.4 billion line of credit from the China Development Bank.

So here’s the question: Should environmentalists, and others who want to see the solar industry thrive, be cheering the success of Trina Solar?

After all, companies like Trina Solar — as well as other big Chinese PV manufacturers, such as Suntech Power and Yingli Solar — are part of the solution to the climate crisis. Every new solar panel generates low-carbon electricity. Low-cost panels made in China lead to wider adoption of the technology.

Trina Solar panels on a roof...in Atlantic City, NJ

Trina Solar, for example,  is a key supplier to Solar City, which is installing panels on 30 Walmart stores. Trina is also a supplier to Standard Solar, whose CEO, Tony Clifford, also spoke on the SPI panel. Trina’s modules could find their way onto a 300-megawatt (i.e., big) solar facility that Standard Solar is developing in Ohio. (It’s essentially replacing a proposed new coal plant which was blocked by environmental opposition.)  If I were to call Tony Clifford, whose firm is based in Rockville, Md., and ask him to put solar on my house in Bethesda (unlikely because we get very little sun), I might wind up with a Trina Solar panel on my roof.

So what’s not to like? Well, there’s the fact that manufacturing jobs in solar (as well as  wind) are growing a lot faster in China than they are in the United States. The United Steelworkers union last month filed a complaint with the Obama administration, charging that China unfairly subsidizes its clean energy industries, in violation of World Trade Organization rules.

More worrisome is the possibility that China’s subsidized solar companies will choke off innovative U.S. competitors. Todd Woody, my former colleague at FORTUNE, had an excellent story today in The New York Times describing how thin-film solar companies like Solyndra, Nanosolar and MiaSole, which raised vast amounts of money from venture capital firms, are now finding that their plans for low-cost solar technology may be undermined by lower-cost competition from China. He reports that a startup called Innovalight abandoned its manufacturing plans altogether, and instead licensed its technology to the Chinese:

“How do you fight against enormous subsidies, low-interest loans, cheap labor and scale and a government strategy to make you No. 1 in solar?” said Conrad Burke, Innovalight’s chief. “Innovation will be the heart of the U.S. strategy, and although it might not create the same scale, we’re exporting well-protected technology to China and creating well-paying jobs here.”

All of this is more complicated than it seems at first glance. On the jobs issue,  Standard Solar will hire more installers if Chinese efficiency (and subsidies) drive down the costs of solar. You can’t outsource the jobs of people who put their boots on the roof. What’s more, the Chinese firm Suntech opened a small manufacturing plant just last week in Goodyear, Arizona. It’s expected to employ 150 people by the end of next year.

And, China isn’t the only country to subsidize its  solar industry. The Japanese, German and Spanish solar industries grew up because those countries created solar-friendly regulatory regimes. Solyndra, one of the company featured today in The Times, got a $535 million loan guarantee from the U.S. government. California and New Jersey subsidize rooftop solar.

I’m not sure what to make of all this. Since I’m not running for office, I’m not particularly concerned if China, rather than the U.S., creates clean-energy manufacturing jobs; it’s still a poor country, after all. If China wants to subsidize solar panels that wind up on Walmart’s roofs, or mine, great.

On the other hand, true competition and innovation in clean-energy requires free trade and fair markets. Innovative U.S. clean tech firms should be able to sell their products in China and protect their intellectual property. Right now they can’t do either. I wish I knew what could be done to remedy that.

Your thoughts?

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Yale’s bet on clean tech

April 1, 2010

Yale_LogoOld Blue is investing in green.

Yale University’s influential $16.3 billion endowment has taken stakes in startup companies aimed at developing clean technologies, Chinese solar and wind turbine manufacturers and in timberland certified as sustainable.

In their most recent annual report [PDF], Yale’s investment managers write:

We are confident that the University stands to benefit enormously from the Endowment’s involvement in green ventures, both as an investor and as a stakeholder in the health of the environment.

Why would anyone other than Yale staff, students and alumni care? Because David Swenssen, the chief investment officer, his staff at the Yale Investments Office and the outside money managers they hire have earned a reputation for shrewd investing during the 25 years that Swensen (a 1980 Yale PH.D.) has been overseeing the endowment.

This report makes clear that Swensen is a believer in green investing, an arena that has a spotty track record at best. That’s significant.

Kroon Hall, a LEED platinum building at Yale

Kroon Hall, a LEED platinum building at Yale

So where is Yale putting its money? It’s hard to know, because the endowment doesn’t provide a full accounting of its investments or even a list of its outside money managers. While Swensen is best known for his pioneering approach to portfolio management (he’s the author of a book called Pioneering Portfolio Management), he also adds value by selecting and collaborating with outside managers and doesn’t want to share his best ideas. Still, there are some illustrative examples of Yale’s holdings in this 36-page report, which explores not just green investing but sustainability on campus and endowed support for environmental studies. (Yale’s renowened School of Forestry and Environmental Studies was founded in 1900 by Gifford Pinchot, the first chief of the U.S. Forest Service.)

As part of its venture capital portfolio, the report says, Yale has more than $100 million (as of June 30, 2009) invested in more than 70 clean tech startups. Two promising companies are highlighted: Silver Spring Networks, a Silicon Valley-based firm that enables development of the smart grid, and Mascoma, a cellulosic ethanol startup based in Lebanon, New Hampshire. [click to continue…]

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Abu Dhabi’s amazing clean energy bet

January 18, 2009

Strange, isn’t it, that the biggest, most ambitious, most expensive clean energy project in the world, a zero-carbon, zero-waste new city called Masdar City, is going up in the oil-rich Abu Dhabi? Then again, maybe it’s not so strange.

There are good reasons why the royal family that runs Abu Dhabi, the largest of the seven emirates that make up the United Arab Emirates, and home to an estimated 9.2% (!) of the world’s proven oil reserves, is so committed to solar energy, zero waste, super-efficient buildings, sustainable materials, personalized electric transport and other clean tech innovations:

1. They know that energy is the biggest business in the world.
2. They know oil supplies are limited.
3. They understand the threat of climate change.
4. They have more money than they can spend.
5. And they run the country without opposition, so if they want to get something bold and risky done, like building a new city for 50,000 people, they get it done. There are no NIMBY (not-in-my-backyard) problems at Masdar, although that’s also because there are no backyards anywhere near Masdar. It’s being built in a desert, outside the city of Abu Dhabi.

I’ve been reading and writing about Masdar for a year or so, and today I finally had a chance to see it. This week, I’m visiting Abu Dhabi for the World Future Energy Summit, a meeting of about 15,000 people to discuss clean energy. The conference is attracting business people and political leaders from around the world. (Speakers include Tony Blair, Lord Nicholas Stern, Nobel prize winner Dr. Rajendra Pachauri and Susan Hockfield, the president of MIT.) Disclosure: The Masdar Iniative, the parent company of Masdar City, paid my expenses to attend.

Today, Masdar took about 50 reporters on a tour of Masdar City, which is still in its early stages. Currently under construction are a headquarters building, and a couple of buildings that will be part of the Masdar Institute, a research-oriented graduate school being developed in cooperation with MIT. The institute is expected to open later this year, with about 250 faculty and staff and about 150 students. Because Masdar wants to attract top students from around the world, those admitted will get free tuition. There’s lots more about the city at the Masdar website.

The most impressive thing we saw today was a solar energy power plant, consisting of an array of solar photovoltaic panels, spread across a 55-acre site. When construction is completed in March, the solar facility will have 87,777 panels and be able to generate 10 megawatts of electricity—making it the largest solar power plant in the Middle East and North Africa. That’s still not very big. By comparison, a typical coal plant can generate about 700 megawatts.

The solar plant is being designed and built by an Abu Dhabi-based startup called Enviromena Power Systems, whose CEO, Sami Khoreibi, told me that he started the company explicitly to take advantage of opportunities being created by Masdar. “We hope to use this project as a launching pad,” Khoreibi said, noting that the abundant sunshine in the Middle East make it a perfect site for solar power. The 10Mw plant cost about 185 million dirhams, the local currency, or about $50 million dollars.

Interestingly, Masdar has been conducting field tests since 2007 of solar photovoltaic panels—33 systems from 15 countries. The purpose is to measure their performance against cost under challenging, real-world conditions. (Summers here feature sweltering heat.) “We’re testing and constantly analyzing the data, and using it for our procurement process,” said Dr. Samir Tabu Zaid, a Masdar executive who responsible for solar. Here he is, snapped with my iPhone:

The test results won’t be made public, Zaid said, because some companies that supplied panels did not want to be measured against their peers. He wouldn’t even say which companies were competing, although he said they come from the U.S. China, Japan, Taiwan, Spanish and Germany, among other places.

But we know that two companies did very well because their panels were chosen for the first 10MW solar plant. One is Suntech, the big Chinese company that makes conventional silicon crystalline solar panels, and the other is First Solar, a U.S. manufacturer that makes thin film solar in, among other places, Toledo, Ohio. The Walton family of Wal-Mart fame were among the early investors in First Solar. Each is supplying 5 MW of solar. Eventually, solar photovoltaic power is expected to deliver about 80% of the electricity to Masdar. The city will need 200 to 250 MW.

First Solar isn’t the only U.S. company that wants to profit from Masdar. Applied Materials, of Santa Clara, CA, is supplying machinery for a solar PV manufacturing plant that Masdar is building in Germany. CH2MHill, the Colorado-based U.S. construction and engineering firm, is project manager for Masdar City. CH2MHill’s CEO, Ralph Peterson, is speaking here. (He’s also agreed to speak at FORTUNE’s Brainstorm Green conference.)

A big question: Will the Masdar Initiative make money, and, if so, how? If the city is a success, it will attract businesses and other tenants, but the upfront costs – an estimated $22 billion – don’t justify Masdar purely as a real estate development. Longer term, the hope of Abu Dhabi and Masdar is to invent, develop and export clean technology. As Khaled Awad, director of property development at Masdar, put it today: “This city is supposed to be a destination for innovation.” Query why this can’t be happening in Silicon Valley or Washington, D.C., but in a flat world, we’ll all benefit from the work unfolding here.

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