With five public entities having committed RMB1.25 billion into a project to produce copper, indium, gallium, selenide solar modules five years ago, the joint venture has been abandoned at an estimated impairment cost of RMB1.42 billion.

The waning prospects for thin-film copper, indium, gallium, selenide (CIGS) solar modules have been spelled out by a Chinese utility as it explained why a costly joint venture set up five years ago to manufacture the technology was being abandoned.

The Shanghai Electric company owned by the city authorities sank RMB250 million (US$39.4 million) into the establishment of Chongqing Shenhua Thin Film Solar Technology Co Ltd in January 2017 in a bid to commercialize the technology.

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Work was started on a 306MW CIGS cell production line in the intervening period, Shanghai Electric told the Hong Kong Stock Exchange on Friday, but the project never entered commercial operation and has now been abandoned, leaving the utility on the hook for up to RMB300 million, depending on how much Chongqing Shenhua can repay its five backers.

Explaining why the project had been abandoned, Shanghai Electric said crystalline silicon had come to dominate solar manufacturing in the past five years and had secured rapid cost reductions “while, for the CIGS thin film photovoltaic products, the R&D strength is weak, the product conversion efficiency is slow to improve, and the industrial chain is not yet mature.” The company continued: “If the [CIGS manufacturing] project is put into production, the revenue and cost of Chongqing Shenhua will be inverted, resulting in [a] huge amount of loss.”

The advantages of “CIGS batteries” in building-integrated PV were outweighed by the complexities of the construction industry, the utility added, referring to a sector of the Chinese economy which is suffering high-profile turmoil at the moment due to high levels of indebtedness.

Shanghai Electric invested its initial RMB250 million for a 20% stake in the ill-fated venture, which is now preparing for impairment losses of an estimated RMB1.42 billion (US$224 million) on equipment including that 306MW cell line.

China Energy Conservation and Emission Reduction Co Ltd was the majority investor in a thin-film venture backed by public bodies, with its RMB675 million (US$106 million) securing a 54% stake. Shenzhen Laibao High-tech Co Ltd and the National Institute of Clean and Low Carbon Energy each contributed RMB125 million for 10% holdings and the Chongqing Liangjiang New Area Strategic Emerging Industry Equity Investment Fund Partnership held 6% of the stock after a RMB75 million (US$11.8 million) investment.