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Industry Expert: Solar Power Boom Set To Continue

2016-01-24 · New York

Tong Xingxue, the former Chairman, President and Chief Executive of LDK Solar Energy, said in an interview prior to a Cheung Kong Graduate School of Business Knowledge Series Roundtable discussion that the booming solar power industry is poised for even greater growth, helped by falling costs, growing innovation and surging investment.

 

Tong Xingxue (right), the former Chairman, President and Chief Executive of LDK Solar Energy speaks at a CKGSB Knowledge Series Roundtable discussion in New York on January 21.

 

A CKGSB alum of the EMBA’s 14th intake, also known as Sam, Mr. Tong added ahead of the session “Solar Power’s Future in the US and China”, held at CKGSB’s New York offices on January 21, that he expects China this year will retain its status as the world’s largest market for solar panel investment amid the government’s push for a cleaner environment and a global boom in renewable energy sources.

 

“The world is at a turning point now in the [solar power] industry because of many new technological advances and rising business investment,” Mr. Tong said. “We have new expectations for a boom, because we are at a point where you can compete in short term with conventional power, if you choose the correct way.”

 

Mr. Tong’s Roundtable session appearance kicked off CKGSB’s 2016 slate of Knowledge Series events. The aim of the series of lectures and discussions on various topics is to disseminate cutting-edge knowledge and perspectives related to China and promote in-depth dialogue in Chinese, Asian and global academic and business circles.

 

Rising orders

 

Mr. Tong’s talk before an invitation-only audience in midtown Manhattan came as orders for solar installations in China, the world’s leader in coal consumption and greenhouse gas emissions, rise in inverse proportion to the drop in demand for coal, according to figures released by the International Energy Agency. China is expected to generate 200 gigawatts of solar by 2020. A gigawatt — a billion watts — is roughly the amount of energy needed to power 700,000 typical US households. China also expects to double its wind-power capacity to nearly 350 gigawatts over the next decade, more than any other country.

 

China led the world in renewable energy production in 2013, mainly from hydroelectric and wind power. In 2014, China led the world in production and use of solar photovoltaic power.

Production of solar cells in China has expanded 100-fold since 2005. China has pledged to cap carbon dioxide emissions by increasing the use of non-fossil fuel such as wind and solar, with CO2 emissions expected to peak by 2030.

 

“The smog problems, pollution and also the control of fossil fuel, or coal, to protect the environment are growth dynamics [for the industry] in China,” said Mr. Tong, who now works as an industry consultant after stepping down as LDK Solar President and CEO in November.

 

Orders for solar installations also are up sharply in other developing economies and the US. India recently unveiled plans to install 175 gigawatts of renewable energy by 2022, and African nations have committed to adding 300 gigawatts of clean-energy capacity by 2030.

 

Historic opportunity

 

Mr. Tong said the opportunity to be part of China’s solar industry as the sustainable-energy movement gathered momentum drew him away from his role as the Asia-Pacific General Manager of GT Solar (US) to join LDK in early 2007 as President and CEO in charge of business management. Mr. Tong also formerly held the titles of Chief Business Officer of Canadian Solar Inc., General Manager of Yingli Group, and Vice General Manager of Yingli New Energy Co.

 

“This is a historic opportunity for investment,” Mr. Tong said of the solar industry overall, showing a slide that depicted how solar is poised to be an important touch point for global technological innovation because of its decreasing costs. The industry’s evolution has paved the way for what Mr. Tong called the integration of a new business model that will “create a competitive generation” of entrepreneurs in the solar market.

 

“People were learning for the past 10 years,” Mr. Tong said. “People were learning how to make the product. And now it’s time to consider how to make the product a different way. Now it is time to learn how to manage solar systems to be more efficient.”

 

Photovoltaic systems use solar panels, either on rooftops or in ground-mounted solar farms, converting sunlight directly into electric power. Concentrated solar power plants use solar thermal energy to make steam that is converted into electricity by a turbine.

 

The efficiency of solar panels is a major issue in the sustainable energy conversation. Currently, modules tend to vary between 13 and 20 percent efficiency, but efficiencies of up to 40 percent are possible, depending on which materials are used. The challenge of making higher efficiency materials cost-effective on a large scale also is a significant issue.

 

“Normally, if you use silicon-based solar cells to make modules, you can reach 18 to 20 percent efficiency,” Mr. Tong said. “If you use other technologies, you can maybe reach 30 percent or more efficiency. However, this will be a much, much higher cost. The performance and value cannot match for industrial applications. With higher efficiency models, you will get less profit. Higher efficiency is not so commercialized.”

 

Cost-effective

 

But while higher efficiency materials may not be cost-effective for use in a mass-market context such as a housing subdivision, creating products with 30 to 40 percent efficiency is plausible in a specialized use such as in equipment for the aerospace industry, Mr. Tong said.

 

Although strong subsidy support for solar energy enterprises has created opportunities in developing countries, that landscape is on the brink of change, Mr. Tong said. First, government subsidies generally are gradually decreasing. At the same time, the industry’s growing popularity is seen as indicating that a time could come when companies begin detaching from government support.

 

“China decreased subsidies this year and subsidies will be decreased periodically year by year,” Mr. Tong said. “Solar is becoming more and more suitable for developing countries where either they are short of power or care more about environmental issues.”

 

A veteran of the global photovoltaic industry who has also served as Vice President of the China Photovoltaic Industry Association and Vice President of the Silicon Industry Branch of the China Non-Ferrous Metals Industry Association, Mr. Tong attributed the worldwide solar boom partly to improved technology, making solar energy more competitive with a glut of fossil fuels in many regions, including the US.

 

US tax credits

 

Installations of solar panels and wind turbines soared in 2015 as utility companies went on a worldwide building spree, taking advantage of dropping prices for clean technology as well as an improving regulatory and investment climate. The US Congress approved an extension of tax credits for renewables as part of a $1.14 trillion budget deal.

 

Under Mr. Tong, LDK developed into a leading maker of photovoltaic products used by solar panel makers, including solar cells, wafers and modules. In June 2007, it went public with a listing on the New York Stock Exchange. By 2011, sales had reached 32.5 billion yuan and employment at the company totaled 27,000 in peak periods.

 

In his introductory remarks, CKGSB’s Henry Cao, Professor of Finance and Chair of the Finance Department, pointed out that Mr. Tong is a CKGSB alum. Mr. Tong enrolled in the school’s Beijing EMBA program in 2009. He also received a diploma in industrial economic management from China’s Renmin University in 1988 and a diploma in English from Hebei University in 1998.

 

“Mr. Tong is very well-known in China and has made outstanding contributions to the solar industry,” Prof. Cao said. “He has keen insights on the solar industry.”