PV In China To Reach US Levels

Falling module and balance of system (BOS) prices have significantly improved photovoltaic (PV) project internal rates of return (IRR) and led to an explosion in project development activities in China. According to the recently released Solarbuzz China Deal Tracker report, the non-residential PV project pipeline in China grew to 16 GW at the end of October. Solarbuzz has identified 1,104 non-residential projects in China that are installed, being installed, or in development. Projects in the pipeline are located in 29 Chinese provinces. Qinghai, Gansu, Ningxia, and Inner Mongolia are the leading provinces in megawatt terms, followed by Sichuan, Jiangsu, Shandong, Shaanxi, Tibet and Anhui. These 10 provinces represent 86% of the total pipeline.

According to the report, 195 projects, with a total capacity of over 1.8 GW, will be installed within 2011. That installed capacity in China will closely match the installed capacity in the US this year. Stimulated by the Qinghai 930 program as well as unified national feed-in tariff (FIT) policy, 54% of the capacity in megawatt terms will be located in the northwest region. The top seven project developer groups account for nearly 1 GW of PV demand in 2011, including state-owned enterprises China Power Investment Corporation, China Guodian Corporation, China Huadian Corporation, China Guangdong Nuclear Power Holding Corporation, and China Energy Conservation & Environmental Protection Group. The CHINT Group is the only private enterprise among the top seven developers.

"China's FIT rates"”1.15 CNY/kWh in 2011 and 1.0 CNY/kWh for 2012"”used to be considered so low that project development activities have been mostly limited to high solar radiation regions such as Golmud," said Ray Lian, Analyst at Solarbuzz. "However, system prices fell so fast in 2011 that project profitability has been improved to reasonable levels in other locations."

"Projects entitled to the Golden Sun and Solar Rooftop programs will enjoy the highest IRRs in Q4'11 and 1H'12," added Lian. "With at least 8 CNY/Wp rebate to system cost approaching 12 CNY/Wp, owners of these projects will not leave money on the table. As a result, the market share of the building-mount segment in China will show a significant increase over the next several quarters."

In the current project pipeline, building-mount projects only account for about 10% of total capacity. If system prices continue to fall, electricity generation by PV will become economic for self-consumption by industrial and commercial users in provinces such as Zhejiangas early as 2013. This will greatly stimulate building-mount project development by the corporate sector in China.

Figure 1. China Non-Residential PV Project Pipeline by ProvinceSource: Solarbuzz China Deal Tracker