New Chinese players enter solar despite oversupply fears

The solar downturn in recent weeks hasn't dissuaded Chinese companies with track records in other tech fields from announcing new solar power plants and production facilities this week.

Lead-acid battery maker Guangdong Cheshing Champion Electronic has unveiled its plans to invest RMB 220 million ($32.2 million) to grow its business along the vertical solar chain.

The Guangdong, China-based company plans to spend RMB 170 million to build a 5-megawatt solar power plant in the north-central Shaanxi province town of Yulin. Cheshing also announced plans for a 20 MW capacity manufacturing line for amorphous silicon solar cells expected to go into production in a year.

A number of new players have entered the solar market in China in the last couple years, adding significantly to the oversupply of silicon, cells and panels projected for this year (see China solar market in late 2009 spells glut). Some analysts are wary that the promised supplies will materialize, as some firms are already folding (see Bankruptcies start to plague Chinese solar) and others can't find buyers for products (see Bad news from Q-Cells spreads through solar supply chain).

But there could be a growing market for the products in China. Earlier this week, China Technology Development Group (Nasdaq: CTDC) and Qinghai New Energy said they plan to build a 1 gigawatt solar farm in China, which is the largest announced solar farm to-date.

Construction is expected to begin this year on the first phase, which is planned to be a $150 million, 30 MW solar plant using crystalline silicon and thin film in the Qaidam Basin.

Formerly a network security company, China Technology entered the solar market in 2007 by forming a strategic partnership with New York's Terra Solar Global, a manufacturer of thin-film photovoltaic systems and turnkey facilities (see China Technology Development goes solar) and buying all of the solar energy assets and business of Shenzhen Soyin Electrical Appliance Industrial (see China Tech buying Soyin solar assets).

The financial case could be there for Cheshing Champion's new ventures in solar.

Its solar power plant is expected to be connected to the grid and qualify for government subsidies that could cover the project's cost in six years. Cheshing said it will cost RMB 2.8 to produce a kilowatt-hour. The government subsidy pays RMB 4 per kWh.

The company says it generated RMB 60 million in profit in 2008, up nearly 16 percent from 2007. Cheshing plans for the new production line to generate annual revenue of RMB 600 million. Cheshing is building the facility on a 12,000 square-meter, RMB 4.8 million parcel of land.