Photovoltaic Industry in China

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Production rose from just 3 MW in 2001 to 1070 MW in 2007 and for 2008 the estimates vary between 2.3 and 2.9 GW

For 2009, capacity increases to 8.9 GW have been announced, whereas the figure stands at 12.3 GW for 2010.

The production of solar cells and the announcements of planned new production capacities in the People’s Republic of China have sky-rocketed since 2001. Production rose from just 3 MW in 2001 to 1070 MW in 2007 and for 2008 the estimates vary between 2.3 and 2.9 GW. For 2009, capacity increases to 8.9 GW have been announced, whereas the figure stands at 12.3 GW for 2010. In parallel, China is aiming to build up its own polysilicon production capacity.

The numbers given for 2007 production capacity vary quite significantly from 1,225 to 4,550 and 8,900. The same is true for the 2010 figures: 29,050 to 84,500. However, despite the discrepancies, it is clear that there is a strong drive for building up its own silicon feedstock supply industry. This development has to be seen in the light of the PRC’s strategy to diversify its energy supply system and overcome the existing energy shortage.

Why is this of particular interest? During the China Development Forum 2003, it was highlighted that China’s primary energy demand will reach 2.3 billion toe in 2020 or 253% of the 2000 consumption if business-as-usual (BAU) occurs. Under such a scenario the electricity demand would be 4,200 TWh by 2020.

This development presents a reason to press for additional Government policies supporting the introduction of energy efficiency measures and renewable energy sources. With the proposed measures, fossil energy demand would still grow, though considerably slower than in the case of BAU. The Standing Committee of the National People’s Congress of China endorsed the Renewable Energy Law on 28 February 2005. At the same time as the law was passed, the Chinese Government set a target for renewable energy to contribute 10% of the country’s gross energy consumption by 2020, a huge increase from the current 1%. The Renewable Energy Law went into effect on 1 January 2006, but no specific rate was set for electricity from Photovoltaic installations.

The 2006 Report on the Development of the Photovoltaic Industry in China, by the National Development and Reform Commission (NDRC), the Global Environment Facility (GEF) and World Bank (WB), estimates a market of 130 MW in 2010. The report states that the imbalance between solar cell production and domestic market development impedes not only the sustainable development of energy sources in China, but also the healthy development of the PV industry.

In the National Outlines for Medium and Long-term Planning for Scientific and Technological Development (2006-2020), solar energy is listed as a priority theme. New and renewable energy technologies: to develop lowcost, large-scale renewable energy development and utilization technologies, large-scale wind power generation equipment; to develop technology of Photovoltaic cells with high cost-effect ratio and its utilisation; to develop solar power generation technology and study integration of solar powered buildings; to develop technologies of fuel cells, hydropower, biomass energy, hydrogen energy, geothermal energy, ocean energy, biogas, etc.

Also the National Medium-and-Long Term Renewable Energy Development Plan has listed solar Photovoltaic power generation as an important developing point. Within the National Basic Research Programme of China, the so-called 973 Programme, there is an additional topic on “Basic research of mass hydrogen production using solar energy”. With the support from national ministries and commissions, the top efficiency of China’s current lab PV cell is 21%, commercialised PV components and normal commercialized cells respectively have an efficiency of 14 – 15% and 10 – 13%. China has reduced the production cost of solar PV cells and the price of solar cells has gradually declined from the 40 RMB/Wp (4.40 €/Wp) in 2000. In July 2009, the National Energy Administration (NEA) has set a subsidized price for solar power at 1.09 RMB/kWh (0.112 €/kWh).

It should be noted, that so far this is for a single project in Gansu, Dunhuang and serves as a reference. However, according to the Energy Research Institute under the National Development and Reform Commission, this is not sufficient for Chinese companies to be profitable yet. At the moment, the companies need between 1.3 and 1.5 RMB/kWh (0.134 and 0.155 €/kWh) to become profitable. Therefore, the Institute is calling on the Government to adjust the prices to accelerate the domestic market growth.

When the electricity generation cost with solar PV systems declines to some 1 RMB/kWh (0.103 €/kWh) in 2010/11, this will be within the cost price of routine power generation. In 21 July 2009 a joint notice was release by the Ministry of Finance, Ministry of Science and Technology and the National Energy Administration announcing subsidies for PV demonstration projects in the following two to three years through a programme called “Golden Sun”. The Government will subsidize 50% of total investment in PV power generation systems and power transmission facilities in on-grid projects, and 70% for independent projects, according to the notice. The available budget should allow about 500 MW of PV installations.

A new plan to foster the development of “new energy” sources, including wind, solar and nuclear is expected to be published by the end of this year. According to statements of senior Government officials published in various Chinese media, investment in new energy under this Energy Revitalization Plan will reach more than RMB 3 trillion (€ 309 billion) and investments in smart-grids will exceed RMB 4 trillion (€ 436 billion) by the next decade.

PV Resources and Utilisation

The PRC’s continental solar power potential is estimated at 1,680 billion toe (equivalent to 19,536,000 TWh) per year. One percent of China’s continental area, with 15% transformation efficiency, could supply 29,304 TWh of solar energy. That is 189% of the world-wide electricity consumption in 2001. The Standing Committee of the National People’s Congress of China endorsed the Renewable Energy Law on 28 February 2005. Although the Renewable Energy Law went into effect on 1 January 2006, the impact on Photovoltaic installations in China is however still limited, due to the fact that no tariff has yet been set for PV. The main features of the Law are listed below:

Energy Authorities of the State Council are responsible for implementing and managing renewable The Government budget establishes a renewable energy development fund to support R&D and resource assessment;
The Government encourages and supports various types of grid-connected renewable energy power generation;
Grid enterprises shall purchase the power produced with renewable energy within the coverage of their power grid, and provide grid-connection service;
The grid-connection price of renewable energy power generation shall be determined by the price authorities, and the excess shall be shared in the power selling price within the coverage of the grid;
The Law became effective in January 2006.

During the China Renewable Energy Development Strategy Workshop 2005, Wang Sicheng, from the National Development and Reform Commission’s Energy Institute, presented the “Strategic Status of Photovoltaics in China”. The national target for the accumulated capacity of PV systems set in the Eleventh Five-Year Plan (2006 – 2010) was 500 MW in 2010. The predictions of the PV Market in China for 2020 were rather optimistic. The accumulated installed capacity was given as 30 GW and included 12 GW in the frame of the Chinese Large-Scale PV Development Plan, a project which was scheduled to start in 2010. However, due to the fact that at that time this plan did not receive official consideration the actual growth of PV installations was far below the required figures.

Therefore, the 2007 China Solar PV Report authored by the China Renewable Energy Industry Association, Greenpeac

e China, European PV Industry Association, and WWF, reduced the market predictions to 300 MW cumulative installed capacity in 2010. For 2020, two scenarios are given. The low target scenario predicts 1.8 GW, in line with the old Government policy, whereas a high target of 10 GW would be possible if strong support mechanisms were to be introduced.

In May 2009, SEMI’s PV Group published a White Paper entitled “China’s Solar Future”. China faces a rapidly increasing demand for energy, and the country is building a massive PV industry, representing all facets of the supply chain, from polysilicon feedstock, ingots and wafers to cells and modules. The report recommends an accelerated adoption of PV generated electric power in China to reach global average level of PV power generation by 2014.

The main policy recommendations of the report are:
Establish clear targets for PV installation. Adjust current national targets and achieve global average level by the year 2014, including adjustment of the 2010 target from 300 MW to 745 MW and the 2020 target from 1.8 GW to 28 GW.
Enact clear and easy-to-administer PV incentive policies that are suitable for China’s unique situations, using both market and legal mechanisms to encourage private investment in PV. Maintain the current rural electrification effort but priority should be given to grid-connected large scale power plants and building integrated systems.

Immediately implement a Government financed direct investment subsidy model at central and local levels, and effectively implement feed-in tariff programmes stipulated in the Renewable Energy Law. The White Paper also points out that despite the economic and social benefits of increasing solar power demand, China’s lack of PV demand might threaten Government solar incentives in other countries. Policy-makers in Europe, US and elsewhere may view China as the primary beneficiary of domestic economic policies that encourage PV demand, while China itself is not contributing to global fossil fuel reduction.

On 1 November 2006 a new law on energy-efficient construction, in order to promote the use of solar power to supply hot water and generate electricity, took effect in the city of Shenzhen. Projects which are unable to use solar power will require special permission from the Government otherwise they cannot be put on the market. By 2010, the Shenzhen Construction Bureau expects that 50% of the new buildings will install solar water heating systems and 20% of new buildings will use Photovoltaic electricity generation systems.

China’s RMB 4 trillion stimulus package included RMB 210 billion (€ 21.6 billion) for green energy programmes as announced in early March 2009. On 23 March 2009 the Chinese Ministry of Finance and Ministry of Housing and Urban-Rural Development [Mof 2009] announced a solar subsidy programme which immediately went into effect. It was suggested that 70% of the budget would be handled by the Provincial Finance Ministries. For 2009 the subsidy will be 20 RMB/Wp (2.06 €/Wp) for BIPV and 15 RMB/Wp (1.46 €/Wp) for roof top applications. The document neither mentions a cap on individual installations nor a cap for the total market. The subsidy will be paid as a 70% down payment and 30% after the final acceptance of the project. Eligible are all systems >50kW which have module efficiencies of >14% (polycrystalline modules), >16% (monocrystalline modules), or >6% (thin-film). Applications for grants apparently have to be made from 15 May to 30 August.

However, public comments from an official of the National Development and Reform Commission (NDR) indicate that issues like grid connection are not yet discussed sufficiently. One of the reasons is that none of the Ministries which announced the subsidy has jurisdiction over the grid. In addition to the solar subsidy programme which was announced on 23 March 2009 by the Chinese Ministry of Finance and Ministry of Housing and Urban-Rural Development, Mof announced another support programme – the Golden Sun Programme – for pilot cities to support the use of renewable energies in buildings on 21 July 2009.

In April 2009, JLM Pacific Epoch reported that according to China Business News the Jiangsu Province plans to release a new plan to promote solar power applications soon. According to the plan, Jiangsu intends to reach building and rooftop installations of 10 MW in 2009; 50 MW including 40 MW of rooftop projects in 2010; and 200 MW including 180 MW of rooftop projects in 2011. The plan also mentions the possibility of establishing funds to provide project construction subsidies and risk guarantees, an executive of Jiangsu’s PV Industry Association stated. The plan stipulates further allocations of quotas to local companies.

A number of large scale Photovoltaic projects, ranging up to 1 GW were announced in the course of the last 18 months in China. How many of them will actually be realised to create a local market for solar Photovoltaic electricity systems, still has to be seen. With all these measures a doubling or even tripling of the market seems possible in 2009, as a starting point for the development of a GW size market from 2012 on. China is now aiming for 2 GW total installed solar capacity in 2011. In July 2009 the new Chinese energy stimulus plan revised the 2020 targets for installed solar capacity to 20 GW).

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