EDITOR: | June 13th, 2013

China eyes Africa for solar rescue; Costs mount for idled reactors; BHP tipped to push Jansen potash

| June 13, 2013 | No Comments
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The move by the European Union to slap anti-dumping tariffs (climbing from 11.8% to 47.6%) on Chinese solar panels is, if I may resort to a cliché, merely the tip of the iceberg. The solar industry in China is in trouble – and is scouting the world for possible solutions.

That is the significance of a report in China Daily that says Chinese manufacturers are eyeing Africa and its energy needs as one important part of that solution. The newspaper notes that China is supplying the panels to the $140 million solar power station at Garissa, Kenya; it is one of the biggest installations of its type in Africa. It further quotes the company involved, China Jiangxi Corporation for International Economic and Technical Co-operation, saying they see the Kenya project as a springboard to marketing solar projects throughout the rest of Africa.

This move will become even more urgent with the EU tariffs being imposed on Chinese solar panel imports. Suddenly, China is likely to find its solar panel sales in Europe shrinking, so exacerbating a situation where, as described by China Daily, there is a sector “mired in debt and overcapacity”.

The Stanford Graduate School of Business has published in its magazine an examination by Jeffrey Ball of the university’s Steyer-Taylor Centre for Energy Policy and Finance which lays out just how bust the Chinese sector is.

The problems that led to the bankruptcy of the main business unit of Wuxi-based Suntech Power Holdings, the world’s largest solar panel maker, are being replicated throughout the industry, he writes.

“They (the companies) grew too fast, propelled by inefficient environmental subsidies in Europe and the United States and by billions of dollars in backing from governments and banks in Wuxi and across China,” he writes. “The Chinese solar stampede was a mad dash for easy money, and at first seemed unstoppable.”

But when Western governments dialled back their subsidies, suddenly there were a lot of unsold panels. Prices, as a result, fell 40% last year.

Even China’s own largesse was not enough: under the Golden Sun program, Beijing picked up half the costs of developing a solar farm.

Ball points out that, for all the action and publicity, solar in China generates just 0.2% of China’s energy. Even with the ambitious plans for more plants in China, the 2020 market share for solar looks like being just 1.3%.

NUCLEAR ENERGY: Mothballing a nuclear reactor is no cheap thing. The Daily Mainichi newspaper reports that Kyushu Electric Power Co. is continuing to spend around 10 billion yen ($105 million) a year to maintain the idle No. 1 and 2 reactors at the Genkai Nuclear Power Plant in Genkai, Saga Prefecture.

But the appeal of restarting those reactors is evident from the economics: according to Kyushu Electric, the price of thermal power is over 11 yen per kilowatt-hour, while the price of nuclear power is around 7.5 yen per kilowatt-hour. Even adding in the costs to meet new nuclear safety standards, the price of nuclear power would only rise about 1 yen per kilowatt-hour, so it would still be cheaper than thermal power, the newspaper adds.

Then, apart from the higher cost of thermal, Kyushu Electric would also have to bear the cost of decommissioning. Just one reactor taken down will cost it 35.8 billion yen ($403 million) – in Kyushu‘s case, there are two reactors (although No. 1 is by far the older of the two). Of course, bringing these old reactors up to the new safety standards won’t be cheap, either – but the alternative is even more expensive, it seems. And the power utility says it’s already in debt and would need financial assistance (read: government handout) if it was forced to decommission.

POTASH: BHP Billiton is about to pump another $500 million into its Jansen potash project in Saskatchewan, reports The Australian newspaper. This indicates the mining giant is still working towards a full-blown decision to mine, that decision now expected by 2015.

This reverses BHP’s recent stance of holding off making new financial commitments to Jansen as part of its general cost-cutting due to falling commodity prices. The company has so far spent $1.2 billion at Jansen.


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