Tuesday, March 28, 2006

Solar power can make you very, very rich

Australian environmentalists have been claiming for years that the Australian Government’s failure to support solar power research and development (and, more particularly, its commercialisation and adoption) has led to commercial solar opportunities moving overseas, with Australia missing out on being part of a large and profitable industry. The argument is that Australia is particuarly well-placed to be leading the solar industry, with bounteous sunshine, plenty of remote locations (where solar power would be the cheapest source of electricity) and undisputed research expertise in this area.

I have to admit I’ve thought of these claims largely as green rhetoric: ‘you won’t listen to our environmental concerns so we’ll throw in a line about money and hopefully you’ll listen to that’. But as of last weekend, I’m much more convinced.

On the plane back from Thailand on the weekend I flicked through Forbes Asia. The cover story was ‘The World’s Richest People’. The first person featured was the richest man in China, Zhengrong Shi. What I read astounded me.

First, he’s an Australian citizen. Second, he has made his fortune in less than five years. Third, it’s from solar cells. Fourth, he developed his expertise at the University of New South Wales (where I’m studying economics) – the photovoltaics lab there is an absolute world leader in the technology and has been for years.

His story is remarkable and suggests to me exactly what the greens have been saying - that Australia is not converting its research expertise into the commercial opportunities because of a lack of government vision and support. Check this out:

Shi grew up in Jiangsu Province, on an island in the Yangtze River, and received a master’s degree in laser physics before leaving home for Australia in 1988. There he studied under Martin Green, whose laboratory at the University of New South Wales set a string of efficiency records for solar cells, raising the amount of sunlight energy that can be converted into electricity from 18% in 1983 to 24% in 2004. For the moment that attainment is a phenomenon of the lab only; commercial cells typically deliver 16% to 17%.

In 1995, three years after finishing his Ph.D., Shi went to Pacific Solar, a joint venture between the university and an Australian utility, Pacific Power, that specialized in a new variety of lower-cost photovoltaics called thin-film solar cells. Shi became an Australian citizen but was lured back to his homeland in 2001 by $6 million in seed capital offered by the city of Wuxi, 80 miles northeast of Shanghai.
Shi’s company Suntech Power, listed on the New York Stock Exchange, has a market value of US$5.5 billion, with revenues of US$226 million last year. Shi predicts that sales will triple in the next three years and puts the company’s success down to “being in a good industry”:

Worldwide demand for solar cells has been growing 30% a year for the past three years, and the good times will likely continue. Solarbuzz, a research firm in San Francisco, predicts that the industry’s sales will climb from $10 billion this year to $19 billion in 2010.

It’s also partly Shi’s Australian-gained expertise in cutting edge technologies that allow production at lower costs and higher sunlight-conversion efficiencies than competitors.

Annual revenues of $226 million less than 5 years after starting with just $6 million seed capital, some Australian expertise and some Chinese entrepreneurial spirit? It makes you wonder: just what share of the global solar industry pie is Australia missing out on?


Vincenze said...

Enlightening post.

I have being reading up on the whole energy/peak oil/solar debate over the past few weeks and the echoes have been of general support for renewable energy, but not without an annoying distraction from "sounds eco-friendly" biofuel.

I haven't heard a peep from those actually involved in solar power technology... and now I see why.

I was surprised by potential of this industry; money may inevitably be the driving force towards renewable energy.


Rob Dawg said...

Getting rich in solar cell production may also have something to do with Chinese manufacturing plants using western technology. $5.5b in market cap and $226m in sales is not extreme in the a growth industry. Letting the Chinese use their energy to build 'our' solar cells and sell them to us at artifically low exchange prices is a great deal. Poor Shell Solar in my town (Camarillo, CA) where they certainly pay many times more for the same amount of energy at market rates to build their solar cells. Good news is we are only one paradigm away from either an efficiency or manufacturing cost advance that makes solar photovoltaics fully competitive. California Gov. Arnold S. pushes the "million solar roofs initiative" but a few percent more in conversion efficiency or a 40% drop in manufacturing costs per watt would have 10 million roofs sprout PV panels.

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