The Chinese character for the word "crisis" has been said to include two elements that, individually, represent the terms for danger and opportunity. I don't know whether this is true, but I do know that this saw can be a useful way to assess risky situations like the investment opportunity lurking in Suntech Power (NYSE:STP). To some, it might be considered a dangerous investment; to others, an opportunity. Who's right?

Suntech, a manufacturer of photovoltaic solar cells that's based in China, is now one of the world's largest solar companies and is a serious player in the emerging industry, along with BPSolar (owned by BP (NYSE:BP)), Kyocera (NYSE:KYO), Royal Dutch Shell (NYSE:RDSa), Sharp, and Q-Cells.

That list alone might indicate that Suntech is in dangerous -- and competitive -- waters. Moreover, the waters seem to be getting more dangerous by the day, as solar manufacturers race to lower costs and companies such as SunPower (NASDAQ:SPWR) and Boeing's Spectrolab continue to unveil new methods for improving the efficiency of solar cells.

To a degree, this is true, but the danger to Suntech is far greater than just internal competition. The solar industry, in general, faces a number of other risks.

To begin, the price of silicon -- a major cost in manufacturing conventional solar cells -- remains high and will continue to squeeze industry margins.

Second, part of the industry's impressive growth over the past five years has been because it has benefited from healthy government subsidies. These were needed because even with the great strides the industry has made in terms of lowering costs and improving the amount of electricity each cell produces, it still does not compare favorably with the price of electricity produced by sources such as coal and nuclear power. If subsidies are reduced or eliminated, it would be a serious setback.

Third, the entire solar industry faces a threat in the form of thin-film solar technology, which uses little to no silicon. To the extent that companies such as Energy Conversion Devices' (NASDAQ:ENER) Uni-Solar and others succeed in producing thin-film solar cells on a large scale, they could fundamentally alter the economics of the market.

Or attractive?
As of now, Suntech Power has a reasonable response to most of these risks. Suntech continues to be one of the lowest-cost producers of solar cells; its gross margins compare quite favorably with those of other leading solar companies; and it is profitable.

One of the reasons Suntech should be able to continue to profit and compete favorably is because it has been quite successful in securing long-term contracts for silicon at prices well below the spot rate.

This week, Suntech said it had an agreement with Sunlight Group to purchase $366 million to $670 million in silicon wafers over the next five years. But this is just gravy when compared with the deal it struck this year with MEMC Electronic Materials (NYSE:WFR) to supply it with $5 billion to $6 billion in silicon over the next 10 years.

What these deals mean in more practical terms is that Suntech has now secured close to 70% of its wafer needs from fixed-price contracts.

With regard to government subsidies, while it's possible that solar subsides could disappear, this is unlikely. Alternative energy is now on the radar of government officials around the world, and they are touting it as everything from a solution for energy independence to a valuable weapon in the fight against climate change. It's difficult to see how the incentives for solar would be eliminated.

Even if politicians did muster the will to reduce solar subsidies, Suntech wouldn't be hurt any more than its competitors. In fact, as a lower-cost provider of cells and modules, the company might actually benefit from the removal of subsidies because that would make Suntech's prices that much more attractive when compared with competitors.

The customer base
The threat from thin-film technology is more real, but this is a longer-term challenge. Silicon is where most of the action is today, and among Suntech's more attractive investment features is its growing and diverse customer base. In 2005, 70% of the company's sales came from Europe and 25% from China. In past year, though, the company established a subsidiary in America (Suntech America) as well as one in China (Shenzhen Suntech).

The former is already paying dividends. Last month, Suntech America won a contract to supply SunEdison with $50 million to $90 million in solar modules, and with the state of California alone poised to install 3,000 megawatts of solar by 2020, this number could easily grow much larger.

The company also appears to be holding its own in Europe. In early November, it announced plans to supply one of Spain's largest solar projects with modules totaling an output of 23 megawatts.

As promising as the American and European opportunities are, China could hold even larger potential. The country's growing and almost insatiable demand for energy is well-known. Less well-known is that China has committed itself to meeting 15% of its energy needs from alternative energy by 2020 and is aggressively moving in this direction. (In October, the country announced its intentions to build one of the world's largest solar plants in northwest China.)

Now, not all of this alternative energy will come from solar, but a portion of it will. And as China's largest solar company, Suntech is well-positioned to capitalize on this trend.

The final word
And this brings us back to the Chinese character for crisis. China's demand for energy is so great that it's reaching the crisis stage. To help meet the demand, China is planning to build 600 coal-fired electricity plants in the next few years. This, however, will only exacerbate another very real crisis -- the country's deteriorating environmental situation.

To be sure, there is a lot of danger in both crises for a lot of people but, to the extent that Suntech can help China and its citizens address some of their energy needs and alleviate some harmful emissions, there is also a great deal of opportunity for the company and its investors.

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Fool contributor Jack Uldrich's middle name is not "danger," and that's why he owns stock in Suntech Power. The Fool has a strict disclosure policy.