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Chinese company hopes for solar power profit

A Chinese company headquartered in a remote part of the country is betting on solar power as a profit center.
To accompany feature Energy-China-Solar
A worker assembles a solar panel at SunOasis headquarters in Urumqi, China.Emma Graham-harrison / Reuters
/ Source: Reuters

Fairy lights twinkle beside a miniature tank and helicopter at SunOasis headquarters, as manager Zhang Xihai explains how his technology is making life easier for soldiers guarding the country’s isolated border posts.

The model also features a cosy-looking nomadic tent home, nodding-donkey oil pumps and irrigation systems -- all powered by solar panels -- showing the extent of the five-year-old firm’s ambition.

China is trying to expand the portion of energy it gets from renewable sources to tackle a growing dependence on imported oil and the dangerous smog from coal-burning power stations and stoves that blankets many of its cities.

SunOasis is already riding the wave of government investment, although high costs of solar generated power mean it cannot dream for now of competing in conventional markets -- hence the emphasis on isolated or pioneering buyers for its products.

Borders in remote and restive Xinjiang province, where the company is headquartered, connect China to conflict-torn Afghanistan and a series of central Asian nations.

Because they are key to national security, Beijing is prepared to splash out to help keep soldiers warm and happy.

“Border regions used to have to use kerosene for heating and other power needs, but it is costly and hard to get supplies, particularly in winter when roads are icy or blocked by snow,” said Zhang.

The firm, which is also supplying solar power for the 2008 Beijing Olympic Games, chalked up $25 million in sales last year, and made a $2.5 million profit.

Local clout, export punch
Foreign environmentalists are excited by China’s rapid economic growth, seeing in the country’s vast appetite for power the possibility of manufacturing solar panels on a scale that might finally make them able to compete with coal or hydropower.

At present, thermal power stations generate electricity at a cost of 0.3-0.4 yuan per kilowatt-hour (kWh) and hydropower costs just 0.1-0.2 yuan/kWh. SunOasis’ solar power at 2 yuan/kWh was up to 20 times that cost, said Zhang.

So government subsidies that are part of a program to develop the vast and impoverished Western regions of China were one reason the firm chose to put its headquarters in Xinjiang -- together with the blazing desert sunshine.

The company has had two visits from President Hu Jintao, and one from Premier Wen Jiabao, a sign of government favor.

But Beijing’s support can’t boost balance books, and Zhang said fewer government orders would limit sales growth this year, making the firm more dependent on foreign expansion.

“The company is oriented outwards; 80 percent of raw materials come from abroad and 80 percent of output goes abroad, mostly to Germany,” Zhang shouted over the clatter of workers assembling 25-watt boxes designed to light isolated rural homes.

The firm has been in talks with BP for three years over a deal it hopes to seal before the end of 2005, although Zhang declined to reveal any details.

Project with Shell
SunOasis has also bid for international aid contracts, turning some of the country’s poorest people into customers -- it is currently working with Shell to bring light to nearly 80,000 peasant families.

Its humble water heaters are scattered across Urumqi’s rooftops and it even makes solar-powered bug killers.

But charity doesn’t start at home, and part of the reason for the company’s impressive profit growth is to be found in a rigorous stick-and-carrot incentive scheme.

Pay is tied to how fast the workers can churn out boxes or panels, with the most productive workers able to earn twice as much as their slower colleagues and among the candidates each year for new jobs are former workers who have been sacked.

“The least productive worker in each team is let go each year,” said one manager who did not want to give her name. “They can reapply for recruitment if they want.”