Constrained by the power shortage, domestic polysilicon companies are choosing to relocate to the west

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http://www.c-bm.com/news/2011/8-24/B92746461.shtml What happens when companies that consume a lot of electricity face power restrictions? Many polysilicon manufacturers choose to move to the western regions, where there is an abundance of energy resources. Another major reason that prompted them to leave the prosperous eastern coastal cities and move westward was the lower electricity prices in the western regions. It can resolve the power supply issue once and for all, while also reducing production costs – why not do it? In line with the companies’ strong desire to relocate to the west, the western provinces and regions have opened their arms to welcome those upstream enterprises in the photovoltaic industry, which enjoy the status of \"strategically important emerging industries\", to invest there. A ‘win-win’ drama has recently begun. 　　Shrinking profits Recently, Tan Rongyao, director of the National Electricity Regulatory Commission, said that China will enter a peak electricity consumption period in June, with the largest power shortage across the country reaching around 30 million kilowatts during those peak times. **Shuai Junqing, deputy general manager of the power grid company, predicts that power supply and demand will be tight in 10 provincial-level power grids, including those in Beijing-Tianjin-Hebei, Hebei, Shanghai, Jiangsu, Zhejiang, and other regions. 　　The power rationing crisis in the first half of the year caused significant profit losses for some large electricity consumers. The frequent power cuts that have occurred recently have left them very helpless. 　　Zeng Shaojun, director of the Information Research Department at the New Energy Chamber of the All-China Federation of Industry and Commerce, said that power restrictions have led to reduced profits for many enterprises. Li Xianshou, the CEO of Zhejiang Yuhui Sunshine Energy Co., Ltd., is very troubled by the frequent power cuts in Zhejiang at present. “It was because of the power cuts implemented in Zhejiang Province during the fourth quarter of last year that our profits were reduced by over 100 million yuan. ” 　　It is understood that from the second half of last year to the first half of this year, affected by foreign markets, polysilicon prices soared continuously. Companies are stepping up production at full capacity in an effort to maximize profits. Risen Sun, Jiangxi Sunwoda LDK High-Tech Co., Ltd., and GCL-Poly are regarded as the three major silicon wafer manufacturers in China. In March 2010, Risen Sun invested $99 million in its factory in Jia Shan, Zhejiang, to further expand its silicon wafer production capacity. According to Risen Sun’s plans, the company will achieve a silicon wafer production capacity of 1.9 GW in 2011; its polysilicon production capacity will reach 3,500 tons per year, while the production capacity for solar cells and modules will be 600 megawatts per year respectively. To Li Xianshou’s surprise, the power rationing crisis in Zhejiang since the second half of 2010 disrupted this plan. Since power rationing was implemented across Zhejiang province in the fourth quarter of last year, the company’s production capacity has been significantly affected. Li Xianshou said that power rationing in Zhejiang province in the second half of last year prevented part of the company’s silicon wafer production capacity from operating, resulting in a loss of around 100 million yuan in profits. 　　In 2010, Risen Sun Power’s revenue was $1.206 billion, a 136% increase compared to 2009, while its net profit was $169 million. If, as Li Xianshou suggests, power restrictions result in a 100 million yuan reduction in net profit, then without such restrictions, the company’s net profit could increase by around 9% on top of the 169 million dollar figure. 　　Currently, after a round of adjustments, domestic polysilicon prices have strengthened again recently. Domestic polysilicon spot prices began to recover from their low of 370 yuan per kilogram in June. According to the latest statistics from the Silicon Industry Branch of the China Non-ferrous Metals Industry Association, as of July 27, the mainstream price for polysilicon in the domestic market was between 400 and 470 yuan per kilogram, while the mainstream international price for polysilicon was between 50 and 60 US dollars per kilogram. Industry analysts believe that, driven by the introduction of a unified national benchmark electricity price policy for photovoltaic systems, the markets for downstream battery modules and power plant operations will accelerate their development. This in turn will increase the demand for polysilicon, leading to further rises in its prices. 　　“The power shortage persists. Taking Suzhou, a major hub for the domestic polysilicon industry, as an example, power cuts began there in May; electricity supply was restricted for two days each week on an irregular basis. After entering July, the frequency of such cuts increased significantly, with up to four days of power interruptions per week at times. Affected by severe shortages of water supply and tight supplies of thermal coal, since July the uniformly regulated load across the Southern Power Grid has risen rapidly, reaching a peak of 113.23 million kilowatts, a 10.6% increase on a year-on-year basis. Power rationing during off-peak hours was implemented in Guangdong, Guangxi, Yunnan, and Guizhou. 　　According to China Southern Power Grid, the current peak-shifting load capacity of the company has reached 11.2 million kilowatts. It is expected that in the third quarter of this year, there will be a shortage of both electricity supply and demand; the maximum shortfall in electricity supply across the entire network could reach 12 million kilowatts, resulting in an overall electricity shortage of over 8%, with some areas facing shortages of more than 20%. If coal reserves and water supply fall short of expectations, the power shortage could worsen further. 　　“\"Power rationing\" seems to have become a crisis that polysilicon companies in the east must face. At this time, those areas in the west that can supply electricity freely became an irresistible temptation for polysilicon companies. The relatively low electricity prices in the west are also an important factor attracting companies to invest there. 　　Yuhui Sunshine has hundreds of single-crystal and polycrystalline furnaces in total. Li Xianshou said that the total electricity consumption of our silicon wafer factory amounts to 500 million kWh per year. At the current local industrial electricity rate of 1 yuan per kWh, our electricity costs amount to 500 million yuan. The electricity price for industrial use in the western region might be half as low as that in Zhejiang. 　　It is understood that the current average electricity price for online use in Sichuan is 0.3937 yuan per kilowatt-hour, while more competitive prices can be found in Ningxia at around 0.27 yuan, in western Inner Mongolia at around 0.28 yuan, and in Qinghai at 0.29 yuan. The prices are well below the 1 yuan per kilowatt-hour in the eastern coastal cities. Based on the power consumption of Risen Sun, the difference in electricity costs between the eastern and western regions exceeds 300 million yuan. 　　Head to the West At present, polysilicon manufacturers in the eastern region have begun to consider moving westward, with some of the new production capacities being located in the western region from the start. Meanwhile, the local authorities in the western region have set ambitious plans to develop and strengthen the photovoltaic industry. 　　It is understood that Yuhui Sunshine is planning to transfer some of its silicon wafer production capacity to Sichuan in order to avoid further power shortages. According to Li Xianshou, the company is prepared to gradually relocate one of the six silicon wafer factories to regions such as Sichuan, where electricity costs are lower and power shortages are less common. However, it is not yet certain whether all of the silicon wafer production capacity will be moved to the west in the future. For new production capacity, various companies simply invest substantial funds in the western regions to build factories there. 　　Shaanxi Non-ferrous Metals Holding Group Co., Ltd. recently signed a cooperation agreement with Yulin City ** to invest 21 billion yuan in Jiaxian County, Yulin, to build a new polysilicon production facility with an annual output of 24,000 tons. Construction of this project is scheduled to begin in August, with completion and operation set for 2013; upon completion, it is expected to generate an annual output value of 10.2 billion yuan. The project adopts the world’s advanced fourth-generation improved Siemens process for polysilicon production, introduces sophisticated foreign equipment, and builds a complete polysilicon production line that includes processes such as hydrogen production, synthesis, distillation, and reduction. 　　In addition, Zhongxing Energy Co., Ltd. also plans to invest in Inner Mongolia Autonomous Region to build a polysilicon purification plant with a capacity of 15,000 tons, with a total investment of 10 billion yuan; the construction will take place in three phases. 　　The local authorities in the western provinces have shown great enthusiasm for enterprises’ investment intentions. 　　Zhao Shuanglian, deputy head of the Inner Mongolia Autonomous Region, said that polysilicon projects are technology-intensive industries, and Inner Mongolia will provide strong support for their development. According to the plan, during the 12th Five-Year Plan period, Inner Mongolia is set to become the largest solar cell production base in China. 　　It is reported that in recent years, various regions in Inner Mongolia have successively utilized solar energy resources to develop the photovoltaic industries based on monocrystalline and polycrystalline silicon. Regions in Inner Mongolia such as Hohhot, Baotou, Alxa, and Xilin Gol have taken advantage of their abundant solar energy resources and silicon mineral resources to initiate the construction of solar-grade polysilicon projects. They are making efforts to develop the industries related to solar-grade silicon and photovoltaic power generation, thus forming a photovoltaic manufacturing cluster centered around polysilicon materials, with silicon wafer production enterprises playing a supporting role in this ecosystem. 　　Polysilicon companies in the eastern region have begun to plan to relocate to the west. The reason that pushed them to leave the prosperous eastern coastal cities and head west was the frequent power shortages in the east as well as the high electricity prices there. Meanwhile, the western provinces and regions have opened their arms to welcome photovoltaic companies to invest there.