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USA Today, China Pushes Solar, Wind Development

Commodities / Renewable Energy Nov 17, 2009 - 05:07 PM GMT

By: Trader_Mark

Commodities

Best Financial Markets Analysis ArticleJust something to keep your eye on as your politicians promise you that the US will be the world leader in green tech jobs.  In fact they will have to layer countless more debt on your children and grandchildren for temporary "green jobs" jobs, to make this mirage come true - for a while.  Most likely this promise will come next spring as the next massive stimulus is pumped to the masses to create "green jobs" retrofitting buildings and such.  


Meanwhile, ask where the production is and what work we will be left with after we borrow money from China to create temporary jobs.  [Nov 2, 2009: Lack of Green Energy Manufacturing Capability in US Means 84% of Stimulus Goes to Foreign Firms]

Remember, Japan and Germany are a decade ahead of us as we decided daytrading homes was the real way to prosperity as a nation... and China is subsidizing every form of green energy.

  1. [Aug 25, 2009: UK Telegraph - China Powers Ahead as it Seizes the Green Energy Crown from Europe
  2. [Aug 28, 2008: China to Subsidize Wind Turbines
  3. [Jun 19, 2009: Reuters - Incentives Add Shine to China's Solar Drive]  
Just today I saw two separate Chinese firms (both of which we've owned in the past) pledging to build plants in the US as "political" cover... Suntech Power (STP) in solar and A-Power Energy (APWR) in wind.

  • Gov. Jan Brewer on Monday announced plans for a Chinese-owned solar panel maker to build its U.S. headquarters and a manufacturing plant in the Phoenix area, propelling one of the nation's sunniest states toward a bigger global presence in the renewable energy industry.  Suntech Power Holdings Co. said it expects to start building photovoltaic panels at the facility by the third quarter of 2010. The company, which has more than 9,000 employees, expects to eventually employ 250 or more people at the plant.
By doing so, they can clap their hands that they are creating jobs (hundreds!) in the US - collect money from the federal government (which in reality is their own government's money, just passing through the US government after we borrow it) while 99% of the production is back in the home country.  But hey we get some assembly jobs here, and some great photo opportunities for some governors.

  • With the capacity to make 30 megawatts of solar panels per year, the Arizona facility would represent about 3 percent of Suntech's total production, Bachman said.
If you are not familiar with the solar industry in China - there are literally over 100 firms there.  Suntech is their largest fish, but again its 3% of ONE company's production; i.e. equivalent to 1/10th of one of Suntech's countless smaller competitors.  But again, a wonderful photo opportunity... to be frank it is a genius move by the Chinese; sort of a Trojan Horse strategy.  And they will get tax handouts to boot; brilliant.  Key word below "appear".

  • "They want to appear to be manufacturing here domestically so when the solar market takes off in the U.S., they have room to stand on and say, 'We are producing jobs here and we want to be able to sell our panels here as well,'" Bachman said.
As for US solar companies?  Last I checked our best firm (we only have a handful), First Solar (FSLR) was moving as much production as possible to Malaysia.

Now in the wind space, A-Power, which was the source of the controversial story I highlighted above in early November, has decided it would make for good press to build a plant in the US too.  It is nice that Chinese companies are offering some scraps to the Americans...

  • China's A-Power Energy Generation Systems (APWR) has signed a cooperation agreement with equity firm U.S. Renewable Energy Group (US-REG) to build a plant in the United States to supply wind energy turbines to renewable energy projects in North and South America.
  • The joint announcement in Washington late on Monday came three weeks after A-Power said it planned a $1.5 billion wind farm project in West Texas along with U.S. companies. 
  • It will employ about 1,000 workers and create additional jobs during construction, the companies said.
Convenient timing; I'm sure "central command" back in Beijing did not like the backlash to the New York Times story and A-Power got some "assistance" from their government in making this decision. ;)  So all in all 1250 jobs and I'm sure grand promises of many more to come (ahem).  If you divide those 1250 jobs times all the tax handouts from US federal government I am sure it will be akin to the cost per job "created or saved" from the current stimulus - perhaps $1-$2M a head?

I actually thought about 2 years ago the one thing the US could grow dramatically in the manufacturing base is the production of wind turbines (for domestic usage) since they are so heavy, transporting them across oceans would be cost prohibitive, but ... I guess that thesis was wrong.

Meanwhile a lack of any sort of long term industrial policy continues to make the US look the fool... but it would be "socialist" to plan out 10 years in America.  That's best left to Germans.  Or those "backwards" French who long ago had the majority of their energy usage based on nuclear.  Dogma baby.

Anyhow back to the Chinese... via USA Today:

  • China leads the world in making solar cells, the key component in solar panels, many of which are exported to the U.S.  But China is setting itself up to do more than just manufacture components for renewable energy, such as wind and solar. It's also spending heavily to build its own domestic market as it attempts to battle its greenhouse gas emissions, electrify its nation of 1.3 billion people and curb its massive pollution problem.
  • The buildup of a huge market in China for renewable energy is luring global manufacturers and research teams to China, energy executives say. (hmmm, I thought that was supposed to be happening here instead) 
  • That's causing concern in some corners that China – not the U.S. – will emerge as the hub of the new industries, leaving the U.S. as dependent on foreign nations for solar panels, wind turbines and other green-energy equipment and technology as it is on the Mideast for oil.  (why not? dependence on others has been working like a charm the past quarter century.  Anyhow my politicians promise me that this will not, and can not happen.  I believe "drill baby drill!" is the way forward to new industries, right?)
  • "The Chinese government has recognized that these industries are the 21st century's industries of importance, and it wants to be the Silicon Valley of renewables," says Alan Salzman, CEO of U.S.-based VantagePoint Venture Partners, which specializes in clean energy and clean tech investments.  (all government is evil, says right here in my dogma book - this obviously will fail as all things in China have the past 15 years... err)  He says the U.S. hasn't been as clear or as determined as China, a stance echoed by Energy Secretary Steven Chu in testimony before a Senate committee last month.
  • China doesn't look like a poster child for green energy. More than 70% of its energy comes from coal, which produces more carbon than other fuels. Pollution is rampant. But industries and economies have been transformed before, and new leaders have emerged, says venture capitalist Salzman.
  • While China spends about $9 billion a month on clean energy development, the U.S. "has fallen behind," Chu said. (however, Chu happily noted the U.S. leads the world in financial oligopoly support as well as "financial innovation" - ok I made that up)  He noted that the world's largest turbine-making company is headquartered in Denmark, that 99% of batteries for America's hybrid cars are made in Japan and that the U.S. has lost most of its solar cell manufacturing industry.
  • China's government has set ambitious targets for renewable energy, which is scheduled to account for 15% of its fuel by 2020.  The U.S. has no national target.   (and that pretty much sums it up - to have a target would have half the country screaming socialism - remember, in our current climate John F Kennedy is a socialist for daring to ask the country to put a person on a moon in a decade.  It's just turned plain silly at this point.)
  • By 2013, China is expected to become the world's biggest producer of wind energy, the council estimates. Recently, it eclipsed everyone in wind-turbine-making capacity, up from "nothing" five years ago, says Steve Sawyer, the trade group's secretary general.
  • China is muscling up on solar, too. Within five years, it's expected to be the No. 1 solar market.
  • One big reason China can move so fast? Once its central government decides on a policy, it can execute quickly through the nation's handful of state-owned utilities, Chan says. In the U.S., there are thousands of electric utilities and a barrage of regulatory and environmental hurdles to starting new projects. 
  • "China is pushing harder on solar now than anywhere in the world," says Mark Pinto, chief technology officer for the U.S.-based Applied Materials. "In China, nothing is too fast. They've got the land, the need and fast decision-making."
Again, ask yourself where all these jobs will be coming from in the next decade... where is the R&D going? This is what people do not get - we are in a global competition.  The blurb below is exactly what should strike the gut to those who believe in fanciful tales from our politicians.  Our green jobs will be to "install" foreign manufactured green products,  with some cursory foreign plants employing a tiny portion of Americans as eye candy.  I suppose our oligarchs can help in the financing because that's about the last piece we are going to have left.
  • Applied Materials is the biggest maker of equipment to make solar panels. Last month, it opened the world's largest solar research facility – in China.
  • "If the manufacturers are in China, that's where we need to go," Pinto says
Feel free to extrapolate from there.  Again, the dogma tells us in 10-15 years a plethora of new US jobs will be created as the Chinese buy American "stuff".  Solar panels? Wind turbines?  Well there has to be something they will need from us.  Keep the dream alive I suppose... I'll just keep talking to the wall while being called nasty names like "European".  Better yet, I'll cloak myself in the soothing words of our political class.  Words fix everything...  much better than any sort of long term planning or vision, any form of national framework to nurture business - especially the small / medium kind who do not have the lobbyists behind them.  Rather than long term planning, let us expect year after year of shotgun solutions (more stimuli!) printing more and more money (or borrowing) as "solutions".  Looking forward to it myself.

  • Pinto and others say China sits on the cusp of an opportunity it may not have had before.  China's companies have historically been successful because of their low-cost manufacturing of existing technology rather than from innovation of new technologies.  "This time, China has gotten in on the ground floor," Applied Materials' Pinto says.

By Trader Mark

http://www.fundmymutualfund.com

Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.

See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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