2010-06-29 09:59

European nations are likely to reduce stimulus spending in solar energy due to belt tightening. For example, Spain, Italy, Greece and Portugal are mulling spending cuts and may reduce or even eliminate solar subsidies, which could dent Chinese suppliers for several quarters, said industry analysts.

Coupled with the euro depreciation, this could mean a weaker industry outlook throughout this year and into 2011. The current situation will likely effect demand since all Chinese suppliers are significantly exposed to European markets.

To hedge the risks of a volatile exchange rate, some suppliers chose forward exchange settlements and financial derivatives, by which an agreement on future exchange rates was signed to offset price fluctuations, according to some industry players.

"Exchange losses are really not my top concern right now," said Wang Xinghua, chairman of ET Solar, a Jiangsu-based solar energy equipment maker. "Finding new clients and new orders for next year is our priority," he added.

The company lost 10 percent in profit as the euro dived as much as 20 percent but its revenue soared almost 80 percent, partly offsetting the losses, according to Wang.

Despite the exchange losses, solar cell suppliers are rather bullish on the market outlook.

ET Solar expanded its production capacity to 600 megawatts (mW) this year from 150 mW in 2009, partly driven by its ambition to explore emerging markets, such as the US.

The installed capacity in the US will double this year and solar energy markets in Asia as well as in Australia are also likely to take off, industry analysts estimate.

Yingli Solar said its exports to the US will triple to 100 mW this year and it is also optimistic about other fast-growing markets including Australia, the Czech Republic and Poland.

"Chinese PV makers are starting to face intensifying competition from foreign rivals who are gradually recovering from the economic downturn, forcing them to explore domestic markets while diversifying overseas," said Jiang Qian, chief industry analyst with China Investment Consulting.