IKEA Leads New China Solar Charge 宜家引领新的中国太阳能发电

By newsdoug on June 14, 2012

I haven’t written for a while about the embattled solar sector, but a press release about a new solar plan by Swedish furniture giant IKEA caught my attention and looks worth a mention as a possible new bright spot for this otherwise struggling industry. In fact, I was originally going to just ignore the announcement, which will see IKEA install solar panels at its China locations to supply 10-15 of the power needs for its stores and 100 percent of needs for its distribution centers. (company announcement) After all, such installations are insignificant in terms of sales for big solar panel makers, and are largely a public relations exercise for companies that want to show off their green credentials. But then I got to thinking and asked myself: What would happen if suddenly all major companies in China started taking similar initiatives, especially massive state-run firms, from banks to steelmakers and phone companies, which collectively make up one of the nation’s biggest energy consumers. In any other market this kind of massive adoption of a new, uneconomical form of energy like solar would never happen, as such energy is more expensive than traditional power sources and would also require companies to set up new divisions to operate their power generation. But this isn’t any other country. This is China, a place where major companies — both state-run and private — are always keen to follow the latest directives from Beijing to please central government leaders promoting their latest economic priorities. That said, I could easily see a large number of companies soon following with moves similar to IKEA’s, setting up a patchwork of solar power generation stations at their various major facilities throughout the country to curry favor with a central government that has already indicated it wants to help a promising but struggling homegrown sector that now makes more than half of the world’s solar cells. Those who follow the industry know that same sector has been struggling for more than a year now due to a global supply glut that has sent prices tumbling, sending all manufacturers into the red and some now tottering on the brink of insolvency. US anti-dumping tariffs against Chinese manufacturers and the potential for similar tariffs in Europe have further hurt the sector, with little relief in sight. China, which itself derives very little power from solar, has previously said it wants to significantly boost its solar power capacity but has yet to announce many major new projects to achieve that target. (previous post) Pressuring major companies to install their own solar capacity, especially heavy users like Baosteel (Shanghai: 600019), could help Beijing more quickly reach its objectives by not only promoting the solar sector, but also taking pressure over its over-burdened power grid. Accordingly, I wouldn’t be surprised to see more companies making similar announcements to IKEA’s in the months ahead, perhaps providing some much needed relief to panel makers, especially the stronger ones.

Bottom line: Major companies in China could soon embark on a solar spending spree to achieve Beijing’s objective of producing more solar energy, providing some relief to the embattled sector.

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