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Understanding China as a PV market: an interview with Chris Brown of Asia Cleantech Gateway

Chris Brown
Chris Brown

Chris Brown serves as general manager for North America for Asia Cleantech Gateway, which specializes in assisting low carbon energy technology companies in both the Asia Pacific region and the West to share commercial opportunities and engage successfully with each other.

Chris has worked in China energy policy analysis and consulting for over ten years in the US government, for private companies and independently. Most recently, he has been a consultant for Itochu as they have entered the North American solar industry and has worked with Applied Materials to expand their China photovoltaic sector business. Chris has managed China energy research projects at the Gerson Lehrman Group and Ergo Advisors. He was also a senior China energy research analyst for the CENTRA consulting company.

Chris was a China political analyst and Mandarin linguist at the US Department of Defense from 1998 to 2004. While in that position, he co-authored a National Intelligence Estimate (NIE), briefed the highest levels of U.S. Department of Defense leadership on China policy issues, and has written extensively on China’s emerging world power status.


Solar Server: First off, let's deal with the elephant in the room. What are your thoughts on the developing trade case that SolarWorld has petitioned for? What are your expectations for how the Chinese PV industry and government will respond, and what you think this will mean for the PV industry?

Chris Brown: First off, I think it is a lot more complicated. I think that treating this as a trade dispute purely between China and the U.S. is not only bad for the industry as a whole, but also not accurate in the sense that you have installers in the U.S. who are against the suit and who are going to suffer from it.

I think that the industry is more of a cohesive whole, and I think that any sort of trade dispute does nothing but hurt everybody.

When I see that the case against China seems to revolve mostly around the issue of government subsidies and whether these companies are being artificially propped up by government help, frankly, I don't get that. But it is going to boil down to what the trade law says.

My bottom line is basically that I don't think it is good because the solar industry is so internationally interconnected. I think SolarWorld and the six other filers are shooting the solar industry in the foot - we are shooting ourselves in the foot.


Solar Server: China has been viewed in global solar trade media primarily as a location for manufacturing. Can you give our readers a little background on the development of China's domestic PV and CSP markets?

Chris Brown: China has always wanted to be more than just a cheap manufacturing center. When you look at the evolution of China as a PV center, you have to go back and look at some of the policies that they have put in place to back up the technology as well.

For example, the 863 program, which was known more formally as the State High-Tech Development Plan, that pumped three billion dollars into... a lot of cleantech received that money between 2001 and 2005. And the 973 program, also known as the national basic research program, which focused more on the fundamental research. China has never been content in only being a center for cheap manufacturing.

You've got programs like those two where tons of money got pumped in to try to reach a higher level of technology, and be cutting-edge. And at the same time I think they are very serious about trying to develop to their own internal markets. They ultimately want to be consumers of their PV modules. I think the best examples are in 2009 the rooftop program and the Golden Sun program. Rooftop is for smaller distributed projects and Golden Sun is for utility-level projects.

It's funny about CSP. I have a good friend who is in Beijing, who swears that China is very serious about CSP. I don't see it. I remember when eSolar was going to set up that CSP plant in Yulin in Shaanxi Province, I had high hopes, and it seemed like it was going to go ahead, and it died in the water.

I'm more skeptical about utility-level CSP plants, I think that PV plants are more likely, like First Solar's in Inner Mongolia. I've heard a lot of detractors who say that as long as coal is as cheap as it is, China is never going to be serious about its own PV and CSP plants. I think that they are serious. I think the problem is more in implementation.

Like for example, the wind industry is a good example of lessons learned. To look at how we are going to go forward with solar, especially PV, but also CSP. Look at wind - there is money behind wind, but then there are problems with transmission infrastructure, you have problems with grid expertise, and there is just a lot of mismanagement down to the local level. I think that China's domestic solar market will develop in a very piecemeal, spotty way.

Some provinces, for a collection of factors, will succeed in developing utility-level plants. Others won't for reasons ranging from corruption to lack of technical expertise.

I think that the will is there and the money is clearly being set aside and pumped down through the NDRC in Beijing down to the provinces and the municipalities, but how that money gets translated into grid-connected electricity, I think will be very dependent upon the specific municipalities and regions.


Solar Server: How do the particular characteristics of China's culture, government and utility industry shape the current state and future of these markets?

Chris Brown: China's energy policy is always going to be driven by energy security, it is always going to be driven by politics. It is always going to be political considerations. China feels deeply uncomfortable having to rely so much on imports for energy.

I think the main drive is energy independence. And also pollution, but only when pollution becomes a health issue and leads to stability issues. I think a unique thing about China, is how, with such a centralized political system, it is very dictated by that central need for energy independence.

Two, I think there is a thing with China that's unique, that's really a challenge, in dealing with the complexity of state vs. party officials. The number of officials that you have to deal with to get through a project I think is unique.

China has evolved beyond being a classical communist system, but it's left with the complexity of the bureaus. It is extremely complex and kind of a weird hybrid of capitalist and communist, and it just makes it a headache for western companies to try to maneuver.

I talked with these people at Duke Energy who were dealing with a project in China. They said it took them a while, and took partnering with a Chinese company who helped them figure out that they needed to pay equal attention to party officials, government officials and the actual leadership of the companies they are dealing with.

And so I think China is unusually complex and complicated in terms of the relationships that you have to manage when you are working with the Chinese.


Solar Server: What are the greatest barriers to PV and CSP market development in China?

Chris Brown: I think that is exactly what I was talking about, I think that this disjointed messiness and complexity politically means that something like the nationwide feed-in tariff was announced in August, I disagree with a lot of analysts that are saying immediately that this is great news.

I'm not necessarily pessimistic, but I think that when a policy like that is announced at the Beijing level, it is such a long way for it to translate down to the local areas, it can get diverted and messed up in so many ways before it actually leads to projects that supply grid-connected electricity. One of the big obstacles is just that complex, mixed-up policy implementation.

Another thing that makes me pessimistic about announcements like the feed-in tariff is infrastructure. I'm very concerned about the infrastructure. A lot of this is learning from the wind industry. Wind kind of went through a similar thing, where you heard all these stories about these wind projects where the turbines were never connected to the grid.

China, like most places, varies a lot region to region, but my big concern is that I don't see the infrastructure support. I think they are a long way from having the grid support for big solar projects in most of China.

Transmission and infrastructure, and then the complexity of political disjointedness - I'd say these are the two biggest obstacles.


Solar Server: Can you talk about the challenges to getting accurate information out of China regarding policy and market developments?

Chris Brown: I did my Master's Degree in China on migration issues, so I've dealt with Chinese statistics for a long time, and when I was in government, dealing with open-source Chinese numbers versus other sources… the numbers proved to be moving targets, and I tend to look at it very big picture. I'm very interested in the 863 program as a whole. I don't quite trust the numbers.

Just this morning I was reading about how China's NEA has said for the twelfth five-year plan they are adjusting the goals for solar capacity. It changes so often, that I tend to take the numbers with not only a huge grain of salt, but to treat the numbers as ballpark figures, and then look at the programs as a whole. I don't trust numbers.

In my company, Asia Cleantech Gateway, we are coming up with a price list. But I think that there is a secrecy, I think there is a knee-jerk reaction of numbers are secret, even when they aren't secret. I think that spills over into companies, I think they hold price info more closely, than their counterparts in the U.S. would. I think it is their knee-jerk reaction, or fall-back position to be very secretive about numbers.


Solar Server: Is there anything else that we didn't cover that you think is important for our readers to know about China?

Chris Brown: I think the main point is that China should be treated more like a continent. I can't stress enough how China should be broken down and analyzed as separate markets, as opposed to one cohesive market. Not only province by province, or even municipality by municipality. But even looking at utility companies, which are such huge players, and when you look at deals throughout the country, to look at the track records of municipalities and provincial governments, and also pay close attention to the utilities. I think they are very significant.

Just this morning I was reading that Solarbuzz has put out a report about the non-residential PV market in China.

The report notes that projects in the project pipeline are located in 29 provinces, with Qinghai, Gansu, Ningxia and Inner Mongolia as leading provinces in MW terms.

Then I was reading more about Qinghai. How odd, Qinghai is a very poor province out in the northwest. Why would they be leading? Why would there be so many projects there? But then I looked into it, and they've got their own Qinghai 930 program that adds subsidies on top of the feed-in tariffs that are coming down from the center. Another way that you need to treat the different provinces as separate solar markets, is because the provinces have their own subsidies that are so significant.

I recall that Solarbuzz is talking about how many of the new utility-level solar projects are in the northwest provinces, and they initially were saying, and they stressed that it is because there is so much sunlight up there.

It's really because of their policies, the provincial policies, and sometimes the provincial leadership. Some provincial and municipal leaders are just more aggressive for whatever reason in pushing solar and other provinces aren't.

I can't stress enough what an analytical puzzle China is and how it needs to be treated as separate markets.


Solar Server: What do you think of the Solarbuzz predictions for the Chinese PV market?

Chris Brown: I like those predictions, I think that once again, how smoothly the electricity gets connected to the grid is an issue. I think that so many places in China just don't have the expertise, they don't have the engineers that have the experience of maintaining these systems, of maintaining the mechanics of getting that electricity on the grid and flowing smoothly.

I believe those numbers, I would just say that how smoothly that runs is debatable.

Conducted by Solar Server International Correspondent Christian Roselund