First Solar's Chinese Lesson: Always Get a Local Partner

First Solar (FLSR) had scored the ultimate deal last year when it signed an agreement with the Chinese government to build the world's largest solar-power plant, a $6 billion phased-project that would eventually provide electricity to 3 million homes. Now, two months after construction was supposed to begin, this 'done deal' has been opened up to a competitive bidding process. It's a development that will pit First Solar against its Chinese counterparts -- not exactly the position an American company wants to be in.

First Solar's mistake was failing to partner with a Chinese company from the get-go. A Chinese partner may seem unnecessary for First Solar. After all, the Arizona-based company is the largest thin film photovoltaic module maker in the world. It has expanded into solar farms and has secured a slew of projects in the U.S. in an effort to balance out its Europe-heavy portfolio. It has the experience and scalability to take on this project alone.

But it's no secret that China is a country where protectionist sentiment runs deep. The lucrative solar plant deal angered the Chinese solar industry, which is clamoring to take advantage of the government's investment in clean tech; its generous subsidies and an energy portfolio standard that aims to generate one-fifth of its power from renewable sources by 2020.

The fervor and competitive among Chinese companies to secure deals is potent. The country's effort to double its solar power capacity attracted project bids from 50 companies that submitted 135 offers to build and operate plants in six provinces, according to a recent Bloomberg report.

A growing number of clean tech U.S. and European companies have pursued Chinese partners to ensure their projects survive, as Earth2Tech also noted. EnerDel1's joint venture with Chinese auto parts supplier Wanxiang to manufacture lithium ion batteries is just one example.

Chinese companies have learned that the same strategy is useful on U.S. soil. California-based Coda Automotive partnered with China's Lishen Power to form Lio Energy Systems, which would operate a proposed lithium ion battery facility in Ohio.

More recently, Chinese turbine makers made a concession -- by agreeing to buy steel from U.S. producers -- to save a $1.5 billion Texas wind farm project. The project drew the ire of U.S. lawmakers and domestic companies last October when a Chinese turbine company struck a deal to be the exclusive supplier. The American private equity firm leading the project has said it would seek tax credits and support from the federal stimulus package, which critics argue will subsidize Chinese jobs.

Photo from First Solar