Whether viewed as a new market opportunity, an eminent threat to suppliers or a collaboration possibility, the country is definitely in the spotlight for solar energy.
The Clean Energy Expo Asia, one of the side conferences, focused on solar power commercialization and technology on the opening day held on Tuesday, November 1. These questions were raised during the three and a half hours of hefty photovoltaics (PV) discussions.
Frank Haugwitz, a PV expert based in China with China Renewable Energy Information presented on Chinas future PV market development at the seminar. Amidst arguments that a domestic PV economy may possibly hinder developments in the sector, China seems to be a clear forerunner, with a steady plan on the direction it wants to take.
The country has a target of 15 percent renewable energy supply by 2020 and has no feed-in tariff (FIT) system. According to Haugwitz, the mandated market share or MMS requires the local power utilities to have three and eight percent non-hydro renewables by 2010 and 2020 respectively. And the choice of renewable energy to fit this requirement seems to be clearly solar power.
Haugwitz, when questioned by pv magazine, stated that there are a few reasons why FITs are not yet all the rage in China, despite the buzz on the production side. The high generation cost of PV is still far from being acceptable in China, he stated. Besides the contribution of solar to the overall energy mix is also insignificant.
Haugwitz also mentioned to the audience that determining the acceptable FIT level is difficult in such a massive country. He added: The Chinese PV industry is still mainly private and not state owned. So, the state does not see a need for subsidies for private multinational corporations. With the difficulty of fixing the FITs, the government is not willing to adjust the rates every six months or so. That is why they prefer to use tenders.
The advantages of the Chinese PV industry, according to the China based PV expert is that there is national, provincial and local government support for the sector. Low operational costs of approximately 0.3 to 9.5 euro cents per kilowatt hour for labor, rent, storehouses and other resources are big pros for China.
He explained that the Chinese are willing to operate on low margins, have a 24/7/365 working style at all management levels, and have developed a good quality consciousness. Joachim Luther, head of the Solar Energy Research Institute of Singapore (SERIS) asserted: China PV operations are first class. They use the best equipment out there. They will be a technology competitor in the industry. On the other hand, there is no overproduction in China compared to Chinas demand.
Furthermore, Haugwitz highlighted that the Chinese government also favors a controlled market development, which uses tenders over other market control forms, which works for them.
The tender process is apparently believed to be a proven tool to determine any future FITs. That is the guiding principle in China, Haugwitz stressed. The present domestic strategies include full vertical integration across the supply chain, further expansion and the idea of a domestic PV market, as Haugwitzs presentation showed.
Haugwitz also stated that there is unlimited access to finance and funding. Richard Finlayson, Head of Asia Asset Finance & Leasing Group, Deutsche Bank mentioned that in China, the solar sector is dealing with the top five IPPS or independent power producers as well as banks, so there is a substantial amount of equity.
He asserted that in terms of investments, there are plenty in China. Banks have switched to being rather careful where they now put their money, especially analyzing the track records of companies and countries. They look at political stability now as well as the social implications as well, after the collapse of some solar markets in Europe.
Additionally, he said that China is still at a relatively early stage: domestic banks play a bigger role than international banks in markets like China and India, where it is more difficult for the international banks to understand the market and take that investment risk.
This then keeps the entire market, from investments to suppliers, domestic, does it not? Can foreign solar power houses then expect to see the Chinese market open up to them in terms of providing a production platform?
I see India as a possibility, concluded chief operation officer John Andersen Jr. China, I am not too clear how accessible it will be. Certain markets close themselves out with domestic policy jurisdictions. If you want to be a domestic player, then there is the risk of getting sub-scaled. Germany and Italy for example, have played in a very open way and China cannot develop solar markets without being open.
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: firstname.lastname@example.org.