First Solar Inc., which installed a 1-megawatt solar photovoltaic array (above) at Intel Corp. in Folsom, Calif., has run into problems with a deal it made with China.
(Ken James/Bloomberg News)
US firm’s landmark solar deal with China loses steam
One year later, many doubt pact will be completed
First Solar Inc., which installed a 1-megawatt solar photovoltaic array (above) at Intel Corp. in Folsom, Calif., has run into problems with a deal it made with China.
(Ken James/Bloomberg News)
BEIJING — With great fanfare, an Arizona-based energy company signed a preliminary agreement with China last fall to build the world’s largest solar power plant in the Mongolian desert.
The deal was hailed as the first major example of the United States and China cooperating on a big-ticket energy project, and the largest move made by an American company into Asia’s fast-growing alternative energy market.
The agreement became a centerpiece achievement of President Obama’s visit to China last November.
But nearly a year later, the deal has not been completed and there is growing skepticism as to whether it will happen.
Chinese competitors in the solar business have complained openly about the American company, First Solar, getting such a lucrative contract. A planned June 1 date to break ground was missed.
And government officials from the Chinese region of Inner Mongolia, where the plant would be built, say they plan to open the project to competitive bidding.
Many solar industry insiders now say the deal — outlined in a “memorandum of understanding’’ — was mainly a showpiece for Chinese officials to demonstrate support for one of Obama’s signature initiatives, strategic energy cooperation.
What happened to the Mongolian solar farm project reads like a cautionary tale on the pitfalls facing American firms trying to enter the Chinese market, particularly in a sector such as alternative energy where there are many indigenous competitors.
It also underscores what American business executives here say is a lack of reciprocity in access to China’s markets.
About the same time First Solar was signing its preliminary agreement for the Mongolian project, China was making an aggressive push into the American alternative energy market.
A Chinese consortium invested $1.5 billion in a 36,000-acre wind farm in West Texas, with all the wind turbines to be made in China.
Murray King, managing director for greater China for APCO Worldwide, a business advisory firm, said it was not unusual for Chinese leaders to race through with signing ceremonies for major business deals around the time of high-level foreign visits — and to have many of the deals never go through.
A memorandum of understanding in China “is a first date,’’ King said. “And not all first dates lead to marriage.’’
In the case of First Solar, it signed a “partnership agreement’’ with the City of Ordos on Sept. 8, 2009, to build a massive 2,000-megawatt solar farm in phases over several years. The plant, when complete, would provide power for as many as 3 million households.
On Nov. 18, First Solar’s president, Bruce Sohn, and the mayor of Ordos, Yun Guangzhong, signed a separate framework agreement, in the presence of top Chinese leaders and US Energy Secretary Steven Chu.
The 11-year-old company is the world’s largest maker of thin-film photovoltaic modules and has been expanding into constructing solar farms. The signing was part of the summit between Obama and Chinese President Hu Jintao.
“First Solar’s inability to move forward with this [agreement] doesn’t make China look too good, especially as they claim to ‘open market access’ to Western companies,’’ said Andy Klump, managing director of Clean Energy Associates, a solar advisory firm.
“Typically, there’s always a big bang and a lot of press when these agreements are signed, but they often don’t come to fruition,’’ Klump said.
© Copyright 2010 Globe Newspaper Company.
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