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Sunny Prospects for Mainland Solar Outsourcing to Turkey

Fully operational for just over a year, CSun's dedicated solar panel manufacturing plant in Istanbul has already turned a profit, thanks to local incentives, tariff-free trade, highly-motivated staff and a rapidly growing domestic market.

Photo: Solar flair: CSun’s Turkish production line.
Solar flair: CSun’s Turkish production line.
Photo: Solar flair: CSun’s Turkish production line.
Solar flair: CSun’s Turkish production line.

In a bold move to become a major European (or even global) player, CSun has established a substantial manufacturing facility in Turkey. This is the first such plant to be established by a Chinese-owned solar energy company outside of the mainland.

In just under two years, the US$600 million factory, set near Tuzla on the outskirts of Istanbul, has moved into operating profit. This is against the background of over-production and company failures that is currently characterising many of its competitors back in China.

Moving abroad is said to have reduced transportation costs, outmanoeuvred crippling anti-dumping legislation and taken advantage of the lucrative tax incentives offered by the Turkish government. The plant – the largest of its kind in Turkey – began operating in January 2013, with its official launch taking place four months later. Underlining the significance of the development, the ribbon-cutting ceremony was attended by both the Turkish Minister of Energy (Taner Yildiz), and the Chinese Consul General (Zhang Qingyang).

The move to establish the facility followed an exhaustive feasibility study by Steve Chen, the Chief Executive of CSun, who visited 21 locations throughout the country before settling on Tuzla. Today, the five-storey, 22,000sqm factory employs 500 local workers in a six-day, 24-hour shift pattern. On Sunday, traditionally a family day for Turks, the factory is closed.

Chen, originally from Taiwan, is clearly delighted that his Turkish gamble has paid off. He says: "We chose Turkey because of its buoyant economy, strong GDP, relatively stable political situation and its manufacturing history, notably with regard to cars and textiles.

"I have been truly amazed by the diligence and commitment of our staff. We thought it would take six months to train people to the necessary level, but they were ready in three. They are very competitive. They always say 'let's do more'.

"Personally, I have fallen in love with Turkey. For me, the two greatest surprises are its fresh air and its wonderful food. I feel really at home here. In fact I see myself as a Turk."

CSun's move is a timely one. Despite scepticism about the up-front installation costs of going solar, the industry is growing rapidly, especially in Turkey. Under the terms of Nasdaq-quoted CSun's agreement with the Turkish government, 85% of its products have to be exported. Despite this, it still sees a thriving market inside Turkey in both the residential and commercial sectors.

Its first Photo Voltaic (PV) project completed using locally-produced units saw 66kWp-worth of solar panels installed on to the roof of the Asfa School in the Uskudar district of Istanbul. The scheme is expected to produce 75MWh per year, with 30% of the power generated being used for self-consumption, with the remainder being fed into the local grid.

In line with CSun's determination to source local suppliers, its customers enjoy an unprecedented feed-in tariff of 14 cents (US$ cents) compared with the standard 13.3 cents. Following a regulatory change last October, 26MW of solar power have been added to Turkey's grid from solar adopters.

Photo: CSun’s solar panels in situ.
CSun’s solar panels in situ.
Photo: CSun’s solar panels in situ.
CSun’s solar panels in situ.
CSun's solar panels in situ.
Photo: Steve Chen, CSun’s Chief Executive.
Steve Chen, CSun’s Chief Executive.
Photo: Steve Chen, CSun’s Chief Executive.
Steve Chen, CSun’s Chief Executive.
Steve Chen, CSun's Chief Executive.

Overall, though, calculating whether or not solar energy is cost-effective to install remains a complex and time-consuming issue and one subject to a host of variants. Historically, the actual cost of the panels represents around one-third of the outlay. Customers then need to buy an inverter, mounting hardware and wiring.

Installation labour and the cost of obtaining the necessary permissions then account for between a quarter to a third of the total outlay. Even taking all of this into account, however, the overall cost is around half of what it was in 2008.

According to CSun, its clients will reach the break-even point in around seven or eight years. This compares extremely well with the 22-year payback cycle predicted a decade ago.

Assessing CSun's domestic prospects, Mehmet Aybaş, the company's Assistant Chief Executive, said: "In Turkey, electricity prices are typically rising by around 8% annually. At the same time, around 69% of the country's electricity is generated from natural gas, mainly sourced from Russia.

"Turkey, though, has a wonderfully sunny climate, especially around the Aegean and Mediterranean regions. Going solar, then, makes a huge amount of financial sense and ends our dependency on Russian gas."

Turkey aims to have 100,000MW of installed capacity by 2023, a third of which will be generated using renewable energy sources. Solar energy projects are expected to make up 9,000MW of the total capacity.

Photo: CSun’s Turkish production facility.
CSun’s Turkish production facility.
Photo: CSun’s Turkish production facility.
CSun’s Turkish production facility.

For the coming months, CSun has a number of ambitious plans. This will see its bid to establish an energy investment company, a solar energy farm and a second factory. There is even the possibility of an IPO.

Commenting his long-term vision, Chen said: "Our ambition is to become a global company, with Turkey being the ideal location for us to serve Europe and the Middle East."

George Dearsley, Special Correspondent, Istanbul

Content provided by Picture: HKTDC Research
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