x Abu Dhabi, UAESaturday 22 July 2017

Solar sector looks to Saudi plan

Huge investments in solar energy by emerging nations such as Saudi Arabia could spell the end of a crisis of overcapacity in the panel-making industry, according to one of the biggest producers of solar panels.

Huge investments in solar energy by emerging nations such as Saudi Arabia could spell the end of a crisis of overcapacity in the panel-making industry, according to one of the biggest producers of solar panels.

The kingdom announced plans to produce one third of its electricity from the sun within 20 years.

"The question is, how quickly will new and sustainable markets in the solar space develop in order for there to be growth in the sector, and for the capacity in the sector to be profitably deployed?" said Christopher Burghardt, a managing director at First Solar.

China's entry into the solar panel market has led to a large oversupply and tumbling prices. New markets have become critical for companies hoping to avoid being swept away by consolidation in the industry.

Like many of its competitors, First Solar, based in the United States, has been writing its earnings statements with red ink of late, and its first-quarter results revealed a net loss of US$449 million (Dh1.64 billion).

First Solar has responded to the slump by reducing production and by broadening its offerings. Rather than simply supplying solar panels, it is seeking to differentiate itself from low-cost Chinese producers by becoming a designer, builder and operator of solar plants. It is even helping its clients to arrange financing.

"We have repositioned ourselves as a systems provider in the solar space," said Mr Burghardt.

The strategy is built on the assumption that large-scale solar plants operated by utilities will, in the long run, win out over the rooftop applications owned by private households.

Germany, the leader in solar deployment, has relied on rooftop solar equipment, financed by subsidising electricity rates. The US and growth markets such as China are banking on utility-scale plants to achieve growth.

Saudi Arabia, which this month announced plans to generate 40 gigawatts of its electricity from solar power by 2032, will equally be looking at large solar plants to achieve its ambitious targets. First Solar's business model of providing complete plants and a comprehensive service will suit the Saudi market, said Mr Burghardt.

He says that the kingdom will play a part in his company's business activities in the coming years and will quickly become an important market for panel producers. The first tenders for plants could be issued within 12 months.

Saudi Arabia's decision to develop its solar resource is driven by the need to provide electricity to an increasingly urbanised society without eating into its fossil-fuel reserves, which provide the bulk of its wealth.

Another pressing issue for the country's policymakers is creating jobs for a growing population, and one of the requirements for solar players looking to win business there could be to relocate some of their production capacity.

Mr Burghardt said that First Solar was open to that idea, if the conditions were right, but that collaboration might not include production of panels.

fneuhof@thenational.ae

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