Last month, China announced the results of a tender for building and operating its first commercial solar power station.
Beijing decided that the preferential tariff at which the winning consortium would sell solar power to the grid would also be applied to other projects in the pipeline, rather than on a case by case basis. Which makes it much easier for potential and existing solar energy companies to plot their returns and profits.
This may seem a small step but it is very significant move towards transforming China into a meaningful market for solar energy. And that is most seriously what China wants to do.
The country is already the world’s largest producer of solar cells. But more than 90% of the output by LDK Solar, Yingli, ReneSolar, Suntech and China’s many other manufacturers is exported to markets such as Germany, Spain, the US and Japan.
Beijing has given clear indications that it intends to ramp up the use of solar power over the next few years.
Officials at the National Development and Reform Commission (NDRC) said the official target for total installed capacity by the end of 2011 was recently raised 15-fold to 2GW, and the target for 2020 was upped from 1.8GW to 20GW. Big figures and they can only achieved only with subsidies.
This year, the government announced a scheme under which solar systems larger than 50kw installed on roofs will receive a subsidy of RMB20 ($3) per watt. (This is very much in line with the line being taken by other countries.)
Governments around the world have committed over $512 billion of the global economic stimulus outlined so far to green projects, with 22% to be spent in 2009
China Guangdong Nuclear Power Holdings, LDK Solar, one of the country’s largest solar cell producers, and Enfinity, a Belgian company, will build and operate a solar power station with an initial capacity of 10MW in Dunhuang in the dry north-west, whose abundant sunshine and deserts make it China’s prime location for solar power generation.
The Financial Times reports that SDIC Huajing Power Holding, a Shenzhen-listed group, said another project on the same scale, also in Dunhuang, had been ap proved, as the National Energy Administration had decided to use the RMB1.09 per kwh awarded to the consortium as a benchmark tariff.
To get this into perspective note that most authorities agree that profitability starts at RMB1.3-RMB1.5 per kwh. Still, the decision to use the Dunhuang tariff as a benchmark is seen as a positive sign.
The industry expects that a fixed feed-in tariff will follow soon which will make all future planning, much, much easier. It is a given that if forward planning on a major scale can be achieved the cost per kwh will drop. And possibly drop dramatically.