Cleantech Strategy: How to Deal With China

As the American cleantech industry takes off in the form of solar technologies, electric cars and the smart grid, China once again looms as both a big opportunity and obstacle to fair trade. Case in point: the Obama administration said Friday it would investigate allegations that China has unfairly subsidized its homegrown cleantech companies and might file a complaint against China through the World Trade Organization.

The announcement came a day after the conclusion of the 3-day Solar Power International (SPI) in Los Angeles, the largest solar trade show in the U.S., where executives debated whether China plays it fair in the solar arena. An exchange I listened to during a panel at the show between two solar panel makers, Dan Shugar, CEO of Solaria in California, and Terry Wang, chief financial officer of Trina Solar in China, exemplifies this divide:


“The concern I have is the China Development Bank has put forth at least $20 billion, and another $10 billion has come from local development banks. This is a staggering amount of money. The basic covenant at the World Trade Organization is that a country can stimulate a sector provided that the country is open to imports of other goods. China needs to open its market to other foreign suppliers.”


“China Development Bank is still a commercial bank. The strategy is they support some of the Chinese manufacturers so they can go out to the international market for capacity expansion and project development. But it’s just a long-term credit facility. We need justifiable projects to get through the committees to get approval. Yesterday I heard installers complaining that it takes a long time for them to get loans from banks. The requirements are strict. If they become more friendly and relaxed, then you can compete with China and other parts of the world.”

There is no doubt that the U.S. companies want a stake in the untapped Chinese market and defend the growing market in its home turf. Here is our 4 step-plan of attack plan:

1. If you can’t fight ’em . . . : There is truth to what Wang said about freeing up the flow of loans. The U.S. banking industry almost collapsed because of its high-risk bets on the housing market, so it’s no secret that lining up financing for factories or projects has been tough for solar companies. The federal government has stepped in to play banker, via the stimulus package, and it should continue this role.

The solar trade group the Solar Energy Industries Association is keen on getting Congress to extend a federal program that provides cash rebates for solar energy equipment installations, whether they are small rooftop systems or large power plants. The federal loan guarantee program also makes it easier for companies, particularly startups, to borrow hefty sums (see poster child Solyndra and BrightSource Energy, which is holding a ground-breaking ceremony for its 392-megawatt power plant in Ivanpah, Calif., within two weeks).

2. Craft the right sales pitch: Here is something I often hear from solar companies: Solar energy is cleaner than coal and natural gas and sunlight is free and by the way there is this thing called global warming. This is the wrong pitch as far as getting lawmakers’ attention, according to Republican political advisor Mary Matalin and her Democratic counterpart and husband James Carville. The duo spoke at the SPI and said legislators and their aides may not be as familiar with solar as you think they do.

Plus, solar also is up against well-funded lobbying efforts by fossil fuel industries. “People think it’s a cool niche thing to do (like) some hippies on the mountain top with a magnifying glass …,” said Carville, who has installed solar at home.

With Republicans likely set to take seats away from Democrats during this upcoming November election, solar energy advocates will have to learn Republican speak: “They want to hear that solar is in the position to become the fastest growing and sustainable energy. It will pay for itself, and my future bill will be predicable and less. The concept is music to the ears of conservatives.”

3. Create a to-do list: Many solar companies, particularly the startups, are unsure about how to tackle the Chinese market, particularly since China already is home to the largest solar panel makers in the world. Turning to investors with experience in China, applying for patent protection in China before launching local partnership talks and forging relationships with certain Chinese universities are some of the key steps to take, as we outlined in our report, “Carving a Path to Greentech in China” (subscription required). Universities such as Tsinghua in Beijing often advise the government on policy.

4. Line up local partners: Given China’s aim to promote its domestic industry and market, U.S. companies need to find Chinese partners who can help them set up base. If you are a large company like First Solar (s FSLR), you can offer to build a factory in China in exchange for better opportunities to sell your products there. You also need to look for Chinese companies that want to expand into your territory: Q-Cells of Germany created a joint venture with LDK Solar of China last year to work on energy generation projects in Europe and China.

American companies that long have a manufacturing operation in China also can make a good partner. Power-One of California began making power-supply equipment in China eight years ago and then entered the inverter market. It just bought a Silicon Valley software startup, Fat Spaniel Technologies, to boost its power plant monitoring and control offerings. Power-One is eager to expand its reach in solar.

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