The solar feed-in tariff, the price of solar power generated electricity, could drop below 0.8 yuan (12.5 cents) for each kilowatt-hour (kWh) by 2015, equal to conventional coal-fired electricity by that time, according to the latest report by the Energy Research Institute, the NDRC’s think tank.
Before China announced the new FIT, analysts expected China to install 1GW of photovoltaic power in 2011, and 1.4GW in 2012. Incentives could now push installations up about 50%, adding a combined (2011 and 2012) 1.5GW to the estimate. 2012 solar installations could reach a total of 2.4GW.
Despite the promising prospects, the current pricing system may fail to provide enough funding to subsidize 2 GW of solar energycapacity which will require at least 2 billion yuan, experts said.
Meanwhile, the country is expected to produce 90,000 tons of polysilicon this year, representing 80 percent of its domestic demand, said Wang Sicheng, a researcher at the Energy Research Institute.
Polysilicon is an essential material for solar photovoltaic panel production. Domestic polysilicon output is estimated to have been 40,000 tons in 2010 but demand stood at 80,000 tons, with imports topping up the shortfall.
China produced 48 percent, or 13 GW, of the world’s solar photovoltaic panels in 2010 and experts expect the country to be the world’s largest solar photovoltaic market within two years.
The NDRC set the country’s first unified benchmark solar power feed-in tariff last month. The rates start at 1 yuan for each kWh for projects approved after July 1 and 1.15 yuan a kWh for those projects approved before July 1 and completed by the end of this year.
The rates are higher than many of those that were proposed and accepted by State-owned solar power developers in China’s previous official tenders, which ranged from 0.73 to 0.99 yuan for each kWh last year.
"The rates should vary in accordance with the density of solar resources (in any given area)," said Wang of the Energy Research Institute, adding that the rate should be set at 1 yuan in western China, where the solar resource is richer, and 1.6 yuan in the east.
However, as investors become bullish about the industry’s prospects and the government remains committed to ramping up domestic demand, with a target of 10gW by 2015, concerns are being expressed about overheating in the sector.
China had 900 megawatts of solar energy capacity by 2010 and more than one thousand players in the industry. "Any policy should be in accordance with the scale and pace of development, rather than spurring another round of fever," said Li Junfeng, director of the Energy Research Institute, referring to a potential influx of players.
China plans to obtain 11.4 percent of its energy from renewable energy sources by 2015, according to the country’s 12th Five-Year Plan (2011-2015).