China Ramps Up the Renewable Energy Rhetoric: 5Fold Increase in Solar By 2020

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11:59:58 am on May 5, 2009

China is making bold predictions about its renewable energy ambitions over the next decade.  Alison posted an article about their wind energy ambitions earlier today and  there is another article discussing their solar ambitions, saying they will smash their 2020 estimates for solar capacity.

In the article, a researcher for the National Development Reform Commission (the economic planning ministry) says China is set to smash its target for a roll out of solar power by more than 5 fold and possibly 10 fold by 2020.  He cited an international aspiration to get 1% of electricity from solar which means a target of 40K MW for China, but indicated that target was a bit unrealistic.  The NDRC originally estimated 1,800 MW by 2020, but are now increasing that estimate to 10K – 20K MW.  To put that number in perspective and the magnitude of the opportunity for China solar companies, the country had an installed capacity of less than 100MW or just .01 percent of total energy capacity.

The government is expected to announce an economic stimulus package for renewable energy within the next few months. 

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The recent announcement by the Chinese Ministry of Finance on China’s Solar Subsidy program has propelled the upward movement of the stock price of a lot of the Chinese solar companies. Primary Global Research’s (PGR) network of industry experts think that the market seems to have over-reacted to the news of the solar subsidy in China.

The Ministry has allocated about 1% of the national GDP to the national renewable energy program. Of this money, about 40-50% goes to wind projects, a small percentage to biomass and the rest to PV. The provincial governments are in the process of making applications to get funding allocation to promote renewable energy projects within their respective provinces. Thus far there has been no announcement from the federal government on how much funding will be allocated to the various provinces.

The cost of PV in China is about 40-42 RMB per installed watt. The federal government has announced a rebate of up to 20 RMB per watt, which will, at best, take care of 50% of the cost of installation. The remainder of the rebate (most likely in the form of a feed-in-tariff) will have to come from the provincial governments to make solar projects viable. Obviously different provinces will have varying feed-in-tariffs depending on allocation from the federal government. And while there is no clear feed in tariff from the provincial governments, growth will be slow in the short term.

Additionally, PGR’s experts report that the process to procure funding and rebates will likely mimic that in the Chinese wind industry, in complexity, procedure and, therefore, bureaucracy. Smaller PV projects in China can get approved for funding by the provincial governments, but larger projects will require federal approval, adding an additional and significant layer of bureaucracy. Rebates and feed-in-tariffs will then be granted on a case-by-case basis.

While there is no denying that China will be a big market for renewable energy over time, PGR’s PV experts in China believe that there will be probably be only 30-50 MW of PV installations in China this year.

Ishita Manjrekar
Senior Analyst, Energy & Industrials Vertical Manager
Primary Global Research

 
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