Dirty Solar In China?

The Washington Post published an article today that looks at the environmental fallout of the production of polysilicon, the key input for the production of photovoltaic solar panels. The article focuses on the Luoyang Zhonggui High-Technology Co. (洛阳中硅高科技有限公司) in Henan province.

There is an obvious profit motive for taking shortcuts:

"With the price of polysilicon soaring from $20 per kilogram to $300 per kilogram in the past five years, Chinese companies are eager to fill the gap.

In China, polysilicon plants are the new dot-coms. Flush with venture capital and with generous grants and low-interest loans from a central government touting its efforts to seek clean energy alternatives, more than 20 Chinese companies are starting polysilicon manufacturing plants. The combined capacity of these new factories is estimated at 80,000 to 100,000 tons -- more than double the 40,000 tons produced in the entire world today...

if environmental protection technology is used, the cost to produce one ton is approximately $84,500. But Chinese companies are making it at $21,000 to $56,000a ton."

But the waste generated in the production--silicon tetrachloride-- is toxic:

"In sharp contrast to the gleaming white buildings in Zhonggui's new gated complex in Gaolong, the situation in the villages surrounding it is bleak.

About nine months ago, residents of Li's village, which begins about 50 yards from the plant, noticed that their crops were wilting under a dusting of white powder. Sometimes, there was a hazy cloud up to three feet high near the dumping site; one person tending crops there fainted, several villagers said. Small rocks began to accumulate in kettles used for boiling faucet water.

Each night, villagers said, the factory's chimneys released a loud whoosh of acrid air that stung their eyes and made it hard to breath. "It's poison air. Sometimes it gets so bad you can't sit outside. You have to close all the doors and windows," said Qiao Shi Peng, 28, a truck driver who said he worries about his 1-year-old son's health.

The villagers said most obvious evidence of the pollution is the dumping, up to 10 times a day, of the liquid waste into what was formerly a grassy field. Eventually, the whole area turned white, like snow."

The article specifically mentions Suntech Power (NYSE:STP) as one of the customers of Luoyang Zhonggui. This expose could be very bad news for Suntech, not because the Chinese government will shut down the supplier, but because a very material amount of Suntech's business is derived from sales of solar panels in Germany and Spain. Both Germany and Spain provide generous government subsidies for alternative energy, and both countries have very large environmental, or "green" movements. Suntech also has a small but growing US business, primarily in California, and residents of San Francisco might be interested to know that Suntech is the supplier of 3,000 solar modules at the San Francisco International Airport.  

I think those groups will begin to demand that government subsidies only be spent with companies that can prove a safe and environmentally clean supply chain. Good luck then to Suntech and to all the other Chinese polysilicon and photovoltaic panel manufacturers, most of whom also have a heavy reliance on European subsidies, and are hoping for US subsidies in the next iteration of a US energy bill. Several are public in the US, including but not limited to LDK Solar (NYSE:LDK), Solarfun (NASD:SOLF), Trina Solar (NYSE:TSL), JA Solar (NASD:JASO) and Yingli (NYSE:YGE). All of these companies live and die by overseas markets--solar power is a tiny fraction of the overall energy plans of the Chinese government. All of them may have perfectly clean and safe manufacturing processes and supply chains, but now they may be forced to prove it, possibly raising costs for them as their margins are already being pressured. 

Don't get me wrong, the development of alternative energy is vital. But people should be making decisions based on an awareness of all the costs involved.

Comments

[Gen Kanai]

Ugly stuff. As rich Americans can boast about their clean-tech solar panels, the reality is more hazardous waste in China.