[Newsmaker] Is the sun setting on the solar dream of the heir of Hanhwa?

Kim Dong-kwan, the eldest son and apparent heir to Hanwha Group Chairman Kim Seung-youn, has proven himself by taking the helm of the group’s solar business in 2011 and turning it into the world’s 6th largest player in the solar industry. solar energy. , Hanwha Q Cells.

Ready to succeed his father to lead the country’s seventh largest conglomerate, the 38-year-old now oversees Hanwha Solutions, launched last year after the merger of Hanwha Q Cells and two other Hanwha companies, and is also the spearheading the group’s foray into the future. growth areas such as hydrogen energy, air mobility and aerospace.

But back at Q Cells where he started, the young leader’s legacy faces growing doubts, as he sinks deeper into the losses.

In the second quarter of this year, Hanwha Solutions’ solar business division posted an operating loss of 64.6 billion won ($ 56.3 million) after losing 14.9 billion won in the previous quarter.

The deterioration is due to rising global prices for polysilicon, the most important raw material for solar cells. In June, the United States banned the import of polysilicon linked to forced labor into Xinjiang, China, where the ethnic Uyghur minority is said to be forced into polysilicon production and where nearly half of the world’s polysilicon supplies are concentrated. .

The US sanction has sparked a global race to source polysilicon from elsewhere, and the price of polysilicon per kilogram peaked at $ 28 in June, quadrupling from $ 7 a year ago.

On a July 29 conference call, an official at Hanwha Q Cells predicted improved profitability as the drop in the price of the wafer, a component that makes a solar cell, would offset some of the price pressure. polysilicon. Still, the company would remain in the red even if the amount of the loss declined, the official said.

Reflecting a negative outlook, local brokerage firms reduced the Hanwha Solution target price, traded on Kospi. Hana Financial Investment settled it at 45,000 won per share for 50,000 won.

Kim saw this day coming. He knew the company could no longer survive the fierce competition against cheap Chinese solar products and did not want the fate of the company to be dictated by fluctuations in polysilicon prices.

In an effort to find sources of income other than photovoltaic cells and modules, the company is developing a next-generation solar cell called a tandem cell that it aims to bring to market by 2023.

Also, instead of just selling the equipment, the company is exploring a new business model: designing, building and managing a solar power plant and selling the entire plant later at a higher price.

Kim’s latest push to revamp Hanwha Q Cells’ business portfolio from hardware – manufacturing solar cells and modules – into a software-oriented portfolio involves a virtual power plant.

Last August, it acquired the US energy software company Geli to promote the virtual power plant industry.

In Germany, where Hanwha Q Cells is the leading player, controlling 11.5% of the country’s solar panel market, the company is exploring a business based on the power of its brand.

Since last year, Hanwha Q Cells started building solar panels on the roofs of German homes for free. Subscribers can buy the solar electric panels, paying less than what they paid for the electric utilities, saving them money and helping to fight climate change.

In exchange, Hanwha Q Cells would own the solar panels and generate a profit by selling the remaining electricity in addition to the subscription fees. Grouped together, the subscribers would themselves form a giant, self-sufficient power plant. Using Geli’s software, Hanwha Q Cells would stabilize the intermittency of solar energy and balance electricity supply and demand between households.

“Imagine having an entire state as a subscriber to our Virtual Power Plant service. Hanwha Q Cells has a competitive advantage through its brand power, ”said a company official.

However, experts cast a question mark over Hanwha Q Cells’ virtual power plant activity because it is not well received by the authorities.

According to Yuanta Securities analyst Hwang Kyu-won, the activity of virtual power plants risks undermining the interests of giant utilities and discouraging them from investing in infrastructure, which would ultimately destabilize a country’s power grid. region.

“A few years ago, California banned the installation of free residential solar panels on rooftops due to frequent blackouts. Households formed a virtual power plant and stopped buying electricity from utility companies. In response, utility companies have stopped modernizing and deploying networks. Households isolated themselves and eventually suffered power outages. California revised related laws and made homeowners spend their own money on rooftop solar panels, ”Hwang said.

“Installing a network per kilometer costs around 2 billion won. If households source their own electricity, then who in the world will make the investments? ”

In the case of Korea, electricity cannot be bought and sold between households. Instead, all electricity trade must go through Korea Electric Power Corp., making the country ineligible for virtual power plant activities.

By Kim Byung-wook ([email protected])

About Lois Mendez

Lois Mendez

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