First Solar has something the Chinese want, and it plans to offer it up for free as part of a deal to build a 2-gigawatt solar farm in Ordos, Inner Mongolia.
The company's CEO, Michael Ahearn, said in an interview that he will be dispatching a team to China to work with one or a couple of Chinese construction companies that will effectively teach the Chinese companies how to go big with solar.
"We will bring people over in order to transfer our knowledge related to the design and engineering of the plant. It's an IP transfer in that regard," Ahearn said. "By the time we step back, they will be using designs and methodologies and components that are consistent with well designed solar plants."
The expertise Tempe, Ariz.-based First Solar promises to bring is crucial for a country that has grand ambitions to become one of the world's largest solar energy producers but lacks experience in building solar farms.
China is home to a bevy of solar panel and other components makers that have largely exported their goods to Europe, where hefty government incentives in recent years have turned countries such as Germany and Spain into the two top markets in the world.
China could become the next big market if the government does a good job of planning and executing policies that would subsidize the installation and generation of renewable energy, including solar and wind.
Since the beginning of this year, the government has announced plans to help pay for half or more of the costs of building solar power projects throughout the country (see Chinese Gov't Will Pay to Install 500MW Solar).
The government is still finalizing details of some of the policies, though it already accepted a batch of applications from developers back in May (see Suntech Vies for Big Share of China Subsidy Program). China also plans to announce a feed-in tariff to set pricing for solar electricity. The tariff would be higher than the price for conventional power and enable solar farm operators to make a profit.
Earlier this week, First Solar announced it signed a preliminary agreement with the Chinese government to build the solar farm after hosting a visit from a delegation of Chinese government officials. First Solar started pursuing opportunities to build power plants in May this year, said CEO Michael Ahearn in an interview. After meeting with many politicians and businesses, First Solar found that Chinese officials are interested in its learning about technical know how.
Many industry analysts and non-Chinese solar companies have regarded those policies as a means to rescue Chinese solar companies that have seen revenue and profit declines amid a global economic downturn.
Certainly, Chinese companies such as Sunctech Power, Yingli Green Energy, LDK Solar, JA Solar and ReneSola have announced preliminary deals they have signed with regional governments, investors or power plant operators to build large-scale projects with hundreds of megawatts each.
Some of these companies have little or no experience in building solar power plants. China is home to less than 100 megawatts of solar energy generation capacity, compared with a few gigawatts installed in Spain in 2008 alone.
First Solar isn't a long-time power plant builder either. It completed a 10-megawatt solar farm for Sempra Energy Generation in Arizona last year.
The company, which is primarily a solar panel maker, bought Turner Renewable Energy for $34.3 million in stock and cash in 2007 in order to learn how to engineer and build solar farms. It has lined up gigawatts of projects in the United States and Canada, but a big portion came from its purchase of unfinished projects from OptiSolar for $400 million earlier this year.
Last month, First Solar said it also had signed a deal to sell electricity from a yet-to-be built, 550-megawatt power plant to Southern California Edison.
China also wants something else from First Solar: solar panel factories. The factories would not only provide jobs, but they also would train the Chinese employees how to develop and produce a type of solar technology that isn't common among Chinese manufacturers today.
While most of the solar panels on the market today use silicon as the key ingredient for converting sunlight into electricity, First Solar uses cadmium and tellurium instead. The company is one of the largest solar panel makers in the world and has factories in the United States, Germany and Malaysia. It recently committed to building a factory in France.
The vast majority of Chinese solar companies work on products using silicon. Historically, buyers in Europe, the largest solar market, also have viewed Chinese solar energy products as less technically advanced or durable.
"There are low-cost Chinese manufacturers using traditional polysilicon. Companies going there have to be able to compete on cost, and perhaps offer something in the way of technologies to set themselves apart," Ahearn said.
A statement issued by a Chinese official about the First Solar deal said as much: "Discussions with First Solar about building a factory in China demonstrate to investors in China that they can confidently invest in the most advanced technologies available," said Cao Zhichen, vice mayor of Ordos.
The memorandum of understanding signed by First Solar and the Chinese government calls for the solar company to consider building one or more solar panel factories.
Ahearn said the MOU allows the company to build the first phase of the project without building a factory in China. The first phase involves erecting a 30-megawatt array of solar panels, and construction is set to start by June 1 next year.
"We will want to build a factory there because it's low cost, and it will be close to the market," Ahearn said. "A lot of innovations will happen, and we want to be close to the innovations."
First Solar plans to start scouting for potential factory sites in the next few months, but Ahearn said it's too soon to say how soon a factory might begin to materialize, particularly since the company hasn't build a manufacturing plant in China before.
Image via First Solar.