IBC Solar (China)’s Sebastian Trimpl believes that China’s solar industry has more potential than any other country in the world. However, in order to access it, it is essential to address the policy and grid issues.
As has been widely reported, in 2011, 2.89 gigawatts (GW) of new photovoltaic capacity was added to China’s grid, thus bringing cumulative capacity to just over three GW. This year, most are in agreement that between four and five GW will be installed, while by 2020, there is a 45 GW pipeline in the planning.
Trimpl added that China is "significantly different" from other solar markets, due to its focus on large-scale projects. Currently, he said average project sizes are 10 megawatts (MW). However, this is expected to grow to 50 MW in the future. Meanwhile, small-scale and rooftop projects are projected to remain a niche market.
In his presentation, Tairan Guo, VP of BaySolar expanded by saying that under the Golden Sun Program, brought into play in 2009, one GW of projects are expected to be installed in 2012. However, the government is planning to end it this April.
In his keynote address, Peter Xie from GCL Energy spoke of China’s high solar irradiation. Tibet and the western regions of China are said to hold the best development potential, particularly for large-scale plants. However, as Trimpl pointed out to the packed audience, while there is high electricity yield in these areas, grid structure is poor. Consequently, how to use the electricity produced needs to be considered, and not simply how to generate as much energy as possible. This, he said, is also a big problem in Germany, particularly in light of the bigger projects.
Xie went on to speak of China’s solar cost advantage, and rapidly falling costs. Already, he said, system costs in the country have "dramatically" decreased, from US$2.37 per Watt (/W) in the third quarter (Q3) of 2011, to between $1.74 to $1.90/W in Q1 2012. Average selling prices (ASP) for photovoltaic modules have also fallen to $0.81/W in Q1 2012. Meanwhile, for a typical solar system of 20 MW, installation costs are around US$1.95/W.
He explained that land, development and interconnection costs are minimal in comparison to, for example, the U.S. As such, average development costs are around $0.23/W, interconnection costs $0.32/W, module costs $0.81/W and balance of system costs $0.32/W. According to Xie, GCL expects to be installing large-scale projects in China at grid party in 2014. The company has a global photovoltaic pipeline of three GW this year.
Both policies and grid connection were identified as the main challenges to photovoltaic development in China, despite the implementation of the feed-in tariff (FIT) last July. These, Trimpl said, are "key" to its further development, as is project financing. Construction problems were also identified, due to the inexperience of installers, as was dust and, specifically, how the modules can be effectively cleaned. He added that in terms of quality, standards for solar systems are lacking on a global level. Component testing is also important.
Sebastian Meyer, director of research and advisory at Azur International, went on to say that as soon as the domestic photovoltaic market becomes meaningful, it will face management issues. For example, it is expected that module companies will need to establish regional assembly operations, since many local subsidy programs favor locally-produced components.
Meyer further compared the development of China’s solar sector to its wind industry, in his presentation. Until now, wind has dominated, but he said that there is "growing clarity" regarding the economics of solar in China. Looking ahead, he believes that interconnection queues and curtailment will occur as the country’s wind and solar pipelines intersect: wind has currently installed 65 GW compared to solar’s 2.89 GW; in the future, 350 GW of wind and 45 GW of photovoltaics is expected to be added to the grid.
He went on to say that compared to wind, solar is faster to implement, and requires less heavy equipment. Overall, he believes that solar is likely to see a domestic market birth similar to wind’s development between 2005 and 2010.
Meyer concluded by stating that the "popular strategy" by companies of expanding downstream into project development is "risky" due to the dominance of the "Big 5" energy companies.
Watch out for more China solar news this week from Solarcon and Asia Solar.