China Unveils Golden Sun Initiative to Subsidize Large-Scale Solar Power Installations

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Researched by Industrial Info Resources (Sugar Land, Texas)--In a bid to achieving its ambitious target of having 2,000 megawatts (MW) of installed solar power generation capacity by 2011, China's Ministry of Finance recently unveiled the "Golden Sun" initiative, under which the government proposes to offer subsidies of 50% during the next two to three years on large-scale solar power projects with a minimum capacity of 500 MW. Although a budget for the program has not yet been disclosed, analysts estimate that the scheme will cost the country between $1.6 billion and $2.1 billion. The program will be funded through the $30 billion green technology stimulus plan announced by the Chinese government last month.

The subsidies offered will cover 50% of the construction costs of the projects, including connection to the grid and development of associated transmission and distribution systems. Solar power projects in remote areas that are not connected to the grid will be eligible for subsidies of 70%. Grid operators will also be required to purchase surplus power at rates on par with power generated from coal-fired plants. The government will also provide support in the form of interest and financial aid for industrialization of key technologies such as grid-connected operations and silicon purification, as well as other base capability projects. Each province will also be permitted to undertake demonstrative photovoltaic projects with a total capacity of 20 MW. Each of these smaller projects should have a minimum capacity of 300 kW and should be completed within a year.

Announcement of the "Golden Sun" scheme was widely anticipated, following recent announcements made by domestic solar panel manufacturing firms pertaining to new projects in the country. Earlier this month, solar-wafer manufacturing firm ReneSola Limited (NYSE:SOL) (Jiashan, China) entered into a preliminary agreement with the city of Yancheng for the development of a 500-MW on-grid solar power project, comprising ground-mounted systems and 10 MW of rooftop installations to be developed over a period of six years.

Suntech Power Holdings Company Limited (NYSE:STP) (Jiangsu, China) recently announced plans to develop four solar power projects in China with a combined capacity of 1,800 MW. These include three on-grid solar power projects of 500 MW each in Qinghai province, in Shizuishan city in the Ningxia Autonomous Region and in Panzhihua city in the Sichuan province. The fourth project is a 300-MW solar power plant to be set up in the Shaanxi province. The Panzhihua project is estimated to cost $1 billion. The Qinghai project is scheduled for construction between 2010 and 2012 and will also include a silicon manufacturing facility.

In May this year, Suntech announced plans to develop a 1.5-MW grid-connected rooftop solar installation system in Huaian city in the Jiangsu province. The project, to be the largest of its kind in the province, will be developed over an area of 19,000 square meters. The rooftop panels will be set up over a factory and warehouse buildings owned by the state-owned Jiangsu Guoxin Group. The project will benefit from the subsidies offered by the provincial government of Jiangsu, which aims to increase the capacity of rooftop installations from the present level of 10 MW to 40 MW by 2010, and further to 180 MW by 2011.

Earlier this month, Suntech secured a loan of $50 million from International Finance Corporation (Washington, D.C.), part of the World Bank, to be used toward the development of the firm's patent-pending Pluto technology. The technology, developed in collaboration with Australia's University of New South Wales, is aimed at increasing the surface area of photovoltaic cells exposed to the sun, which in turn is estimated to increase power output by 12% compared to conventional cells.

Although China is the global leader in the manufacture of solar panels, most of the products are exported to the U.S. and Europe. Only 2% of the photovoltaic cells and panels manufactured in the country were used for domestic consumption in 2008. The recently announced subsidies are in sync with the government's "Buy Chinese" policy aimed at sourcing goods manufactured locally. However, this has led to concerns that international solar firms such as Mitsubishi Corporation (OTC:MSBHY) (Tokyo, Japan) and Sharp Corporation (OTC:SHCAY) (Osaka, Japan) could be discouraged from participating in new projects in the country.

Last year, China set a target of achieving 140 MW of installed solar capacity by 2011. This target was revised in June this year, in line with the government's long-term strategy of increasing total installed solar capacity to 9,000 MW by 2020. The government also proposed providing subsidies of $0.16 per kilowatt-hour (kWh) for solar power plants. In March this year, China launched an alternative incentive plan offering cash grants of $2.90 per watt of power generated from small-size solar installations with a minimum capacity of 50 kilowatts (kW). China's clean technology market is estimated to reach a value of $186 billion by 2010, and rise to more than $500 billion by 2020.

However, there are concerns in some quarters that the subsidies offered under the Golden Sun initiative may not be adequate to entice solar panel manufacturers. According to Li Junfeng, Deputy Director of Energy Research Institute (Beijing), a subsidy of between $0.19 and $0.22 per kWh would be required to enable manufacturers to post profits. Analysts are also skeptical about the country's ability to ramp up its solar power capacity from the current level of just over 100 MW to more than several gigawatts in a few years.

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