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Suntech Stresses R&D

China’s solar giant shifts its strategy.
April 9, 2010

The solar industry is entering a new era in which investment in R&D–and the new technologies it produces–will be crucial for solar companies to survive, says Stuart Wenham, the chief technology officer of Suntech Power Holdings, based in Wuxi, China, one of the largest solar panel manufacturers in the world. But don’t expect radical changes to solar panels, at least for the next several years, he says. The best new technologies will be those that can easily be integrated into existing production lines and work with existing suppliers.

Building solar: An array of solar panels serves as the façade of Suntech Power Holdings’s headquarters in Wuxi, China.

The solar-power market is undergoing radical reorganization. Countries such as Germany and Spain are scaling back solar incentives even as other countries, such as the United States and China, are implementing new ones. In the next few years, the United States and China are expected to become the largest markets for solar panels. Suntech, for one, is well positioned for the new markets, as one of few Chinese companies that have established themselves in the U.S., says Sam Jaffe, an analyst with IDC Energy Insights, in Framingham, MA. The solar market, which has been doubling every couple of years, exists today almost completely as a result of government incentives such as “feed-in tariffs” that guarantee that solar power can be sold for high prices. These incentives, put in place during the past decade, caused demand to ramp up quickly, too fast for suppliers of the high-grade silicon needed for most solar panels to keep up. But now a big increase in the number of silicon suppliers, paired with the economic downturn, has helped balance supply and demand.

“The industry was getting into a situation two years ago that was getting to be a little unhealthy,” Wenham says. “The demand was so much higher than the supply that it was possible for people to enter the industry, and enter manufacturing, without even having a decent product. Whatever product they could produce they could sell at a significant profit, even if it was a poor-quality product.”

Now, however, even if the solar market were to double this year and next, the silicon suppliers would have no trouble keeping up, which will help keep prices for solar panels relatively low, Wenham says. In that scenario, only the companies with the best technology will be able to sell their products at prices that are high enough to make a decent profit. “Those that don’t have good technology will probably end up being bought up by companies that do,” he says.

Suntech has invested about 5 percent of its revenues in R&D and employs 350 full-time researchers. The emphasis, however, is on near-term technology–changes to crystalline silicon solar cells rather than entirely new types of cells, says Zhengrong Shi, Suntech’s CEO. For example, its next generation of solar panels can be made on the same equipment used to make the company’s conventional solar panels. It is also making smaller investments in more advanced technologies that could become important 20 or more years from now, Wenham says.

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