China, the world's biggest electricity consumer, is figuring out how to capture a larger share of the solar-energy market without losing money.
The government will spend at least a year studying Europe's system of paying above-market prices for solar power before deciding if there's a better way to spur clean-energy plants across China, said Wu Dacheng, an adviser to national power regulators. The delay has stalled projects planned on Chinese soil by developers such as First Solar Inc. of the U.S.
Europe, which attracted more than $65 billion in solar plant investment in 2010, is providing lessons for China. Germany, the largest panel market, together with Spain and France carried out four unscheduled subsidy cuts in 2010, trying to slow a torrent of projects by developers and speculators.
China's wait-and-see strategy on projects is part of a broader industrial plan to take a leading global role in harnessing energy from the sun. China is first focusing state support on its own equipment manufacturers. That helps them gain market share and cut prices, lowering the eventual cost of a nationwide solar construction program China plans for itself.
Polysilicon to Panels
The government's China Development Bank alone approved more than 126 billion yuan ($19 billion) in credit facilities in the second half of last year for makers of everything from the raw material of polysilicon to the finished solar panel, including Baoding-based Yingli Green Energy Holding Co., according to Bloomberg New Energy Finance.
Chinese solar equipment makers outperformed most U.S. and European competitors in stock markets in the last 12 months. The top three, led by LDK Solar Co., gained about 57 percent on average in the period, compared with 50 percent for the top three based in the U.S. and 6 percent for the Europeans.
China this year will increase its share of the global solar photovoltaic panel market by about 10 percentage points and for the first time supply a majority of the devices that turn sunlight into power, according to London-based Bloomberg New Energy Finance. In contrast, China bought less than 3 percent of the 18.5 gigawatts in estimated worldwide panel sales for its domestic projects.
No Copy
As panel prices drop, China plans to boost its own solar power installations by more than 60-fold to 20 gigawatts, or the equivalent of about 18 new nuclear plants, by 2020 from 2009. A nationwide subsidy or auction program is needed, though not a direct copy of the European or U.S. model, which is based on tax breaks, Wu said.
China is concerned that Europe's subsidized rates, or feed- in tariffs, were so large that governments had to slash them earlier than planned to not strain government finances, Wu said. Spain alone spent 5.3 billion euros ($7.3 billion) subsidizing renewable power generation last year.
Several demonstration projects in China weren't developed because companies were deterred by the absence of a subsidized power purchase price, Wu said.
Dashed Hopes
Arizona-based First Solar, the largest maker of thin-film solar modules, agreed in 2009 to set up a 2,000-megawatt plant in China, billed as the world's biggest. On Jan. 5, it settled instead for a 30-megawatt plant in Ordos and to take state-owned China Guangdong Nuclear Solar Energy Development Co. as a partner. First Solar said it may expand the project in stages until it reaches the original size proposed.
China began offering subsidies in 2009 to a limited number of solar power projects using bidding rounds. However, in November the government canceled 39 solar projects under the program, known as Golden Sun, citing "inability to implement." State-owned Huanghe Hydropower Development Co. also canceled a 5-megawatt project in Geermu, Qinghai province.
A second round of bids for 280 megawatts in solar concessions was held on Aug. 10 and a third one for 500 megawatts is due in 2011.
Premium Prices
China's regulator, the National Energy Administration, hasn't started studying the solar premium prices yet, said Ren Dongming, deputy director of the Centre for Renewable Energy Development. The Centre, which is administered by the National Development and Reform Commission, had previously participated in drafting wind-energy prices.
China is currently applying the model used to determine wind tariffs for solar projects. The country has issued six national tenders for wind projects to set different levels of tariffs depending on wind resource levels.
