Defective Panels Threatening Profit at China Solar Farms: Energy

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

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

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

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

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

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

‘Unwise to Panic’

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

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

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

Developer Concerns

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

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

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

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

‘Boosting Quality’

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

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

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

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

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

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

To contact Bloomberg News staff for this story:
Feifei Shen in Beijing at
fshen11@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Iain Wilson, Will Wade

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