Government policies help photovoltaic market kickoff in China

BEIJING, CHINA: CCID Consulting, China’s leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong, released its article on China’s photovoltaic market.

Affected by the financial crisis in 2008, the global economy continues to be sluggish. In particular, Europe, the biggest photovoltaic market in the world, has been hardest hit by the crisis. To address difficulties, various European countries have reduced their subsidies to photovoltaic power generation or even abolished some of their photovoltaic investment plans.

As the biggest photovoltaic cell producer in the world, China basically relies on exports to consume its production capacity. The ‘sudden market cooling’ abroad has struck a heavy blow to China’s photovoltaic industry. Statistics show that due to a sharp drop in foreign orders in 2008, China now has a photovoltaic cell production overcapacity of at least 1000MW.

Fig. 1 China’s Solar Cell Output, 2005-2008Source: CCID Consulting, January 2009.

The financial crisis has also forced China to have new thought on the development of the photovoltaic industry. Currently, China imports raw materials for the photovoltaic industry overseas and then exports photovoltaic products overseas.

This has been a major factor which restricts the development of China’s photovoltaic industry and deprives it of the ability to withstand market risks. In the first half of 2009, the government successively promulgated various policies to stimulate the kickoff of China’s photovoltaic market.

On March 23, 2009, the Ministry of Finance in conjunction with the Ministry of Housing and Urban-Rural Development released The Interim Administrative Measures for Fiscal Subsidy Funds to Support the Application of Solar Photovoltaic Buildings and The Implementation Opinions on Speeding up the Application of Solar Photovoltaic Buildings to support demonstration projects for solar photovoltaic buildings.

The government has also implemented the Solar Roof Program to promote the integrated application of solar photovoltaic buildings in cities and give fixed-amount subsidies to photovoltaic utilization in buildings in rural and remote regions. In 2009, the subsidy rate is, in principle, set to be 20 Yuan/Wp.

While the Solar Roof Program makes no subsidies for photovoltaic power generation, the forthcoming Golden Sun Project will once again show the government’s determination to greatly push forward China’s photovoltaic market.

The core part of the Golden Sun Project lies in that it will offer central fiscal subsidies to support the kickoff of China’s photovoltaic market, planning to implement 500MW photovoltaic power generation demonstration projects around the country in the next two to three years.

In addition, the New Energy Industry Revitalization Plan soon to be released is likely to raise the previous 1.6GW photovoltaic target for 2020 to 20GW, 12.5 times the originally planned figure.

Fig. 2 China’s Installed Solar Cell Capacity, 2005-2008Source: CCID Consulting, January 2009

Guided by the government policies, several large-scale grid-connected power plant projects were approved between the end of 2008 and the first half of 2009. These include the 1GW Photovoltaic Power Plant Project in Qaidam and the 200MW Photovoltaic Power Plant Project in Golmud, Qinghai Province, and the 500MW Photovoltaic Power Plant Project in Wuzhong, Ningxia Autonomous Region.

Currently, the government has only approved three photovoltaic power plant projects, including the 1MW Project in Chongming Island, Shanghai, the 255KW Project in Erdos, Inner Mongolia and the 100MW Project in Dunhuang, Gansu Province. The newly-started projects still awaits government approval.

However, the implementation of these large-scale photovoltaic grid-connected power plant projects shows that the government policies for photovoltaic subsidies have produced results in driving forward China’s photovoltaic market.

It is very likely that “an enclosure movement” similar to the one in the early period of wind power generation will occur in China, thus playing a great role in stimulating the recovery of the whole photovoltaic industry and the kickoff of the domestic market.

TableSource: Sorted out by CCID Consulting, June 2009

As the “enclosure movement” is in full swing, irregular competitions have also surfaced. For example, during the tendering process of the 10MW Power Generation Project in Dunhuang, Gansu, the concerned company and the solar cell supplier jointly offered an ultra low price of 0.69 Yuan/KWh in order to win the bid. It is understood that the lowest cost abroad currently only reaches $0.22/KWh.

Though a big drop in the price of polycrystalline silicon materials used in photovoltaic cells lowers cell cost, it falls short of the 0.69 Yuan/KWh. This fully runs against the inherent development pattern of the photovoltaic industry and does not match with the current situation of the industry.

This is very detrimental to the healthy development of the photovoltaic industry. To safeguard the healthy development of China’s photovoltaic industry, it is still necessary to segment the subsidy policies for the industry.

It is essential to stand at the industrial height to ensure the interests of photovoltaic enterprises and the enthusiasm of industry participants and suit the development pattern of the industry and the market.

In a word, stimulated by the relevant national photovoltaic policies, China’s photovoltaic market is now showing explosive growth, thus helping to the healthy development of the industry and the further optimization of China’s energy structure.