China Solar Future

INTRODUCTION 1
EXECUTIVE SUMMARY 2
China’s Energy Profile, Electricity Consumption
and Carbon Emissions 2
PV Benefits and China’s PV Advantage 2
Global Status of PV Installations 3
Global Status of PV Production and State of
China’s PV Industry 3
Government Support for PV 4
Global Benchmark: The German
Feed-in Tariff 4
PV Technology, Costs and
Competitiveness 5
Call for Accelerated Adoption of PV 5
Proposed China PV Policy Roadmap 5
Policy Vision Statement 5
Key Policy Recommendations 5
About the Authors 6
Members of the China PV Advisory
Committee 6
What’s Next 6
Comments and Feedback 6
PV GROUP WHITE PAPER – CHINA’S SOLAR FUTURE
MAY 2009
China’s Solar Future
A Preliminary Report on a Recommended China
PV Policy Roadmap
INTRODUCTION
China, as the world’s fastest growing developing country, has
fuelled a massive demand for energy. Chinese leaders, from the
central government to regional levels, are addressing China’s rising
energy needs and encouraging the development of renewable
energy sources. However, less focus has been placed on PV.
In 2008, SEMI joined forces with leaders from China’s PV
companies and academia and formed the China PV Advisory
Committee. The Committee initiated a PV industry advocacy
program to collectively address issues facing China’s PV industry
and to petition for more government support in the areas of
legislation, policy, and financial support, with the aim of expanding
the industry and opening up a domestic market for PV.
As an important part of the industry advocacy initiative, the
Committee drafted a China PV Policy Roadmap. The Roadmap
attempts to present an overview of China’s energy profile,
electricity consumption, growing need for energy, the benefits of
PV, global status of PV, and the state of China’s PV industry. The
Roadmap also attempts to provide an in-depth analysis of the cost
of crystalline silicon based PV systems and the cost of PV
electricity. It delineates a PV installation roadmap with clear annual
targets up to year 2020. The Roadmap also looks at different
government incentive models and provides detailed government
spending levels for each model. Finally, the Roadmap analyzes
China’s current PV policies and offers policy recommendations.
The goals presented in the Roadmap are challenging, both for the
Chinese government and for the China PV industry. The SEMI
China PV Committee hopes that this Roadmap will serve as a
reference document for the Chinese government when it comes to
setting new national targets and new policies for PV installation.
The Committee also hopes that the Roadmap will kindle a
commitment from China’s PV industry to drive down the cost of
PV through continuous technological innovation and sustainable
business practices.
PV GROUP WHITE PAPER – CHINA’S SOLAR FUTURE
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EXECUTIVE SUMMARY
CHINA’S ENERGY PROFILE, ELECTRICITY
CONSUMPTION AND CARBON EMISSION
Coal consumption plays a central role in China’s economy.
Seventy percent of China’s energy consumption comes
from coal, much higher than the global average. Coal
burning creates a negative impact on China’s environment
and generates massive amounts of carbon dioxide. The
World Bank estimates that by 2020, the external costs
from coal usage will reach 13% of China’s GDP. In the
2008 edition of the International Energy Outlook, the
Energy Information Administration predicts that in 2030,
China will generate more than half of the world’s total
carbon dioxide emissions from coal use.
At the same time, as the world’s largest developing
country, China’s energy demand has been increasing
steadily. The Energy Information Administration also
predicts that China’s net electricity consumption will
continue to grow at an average annual growth rate of
4.8%. By 2030, China will consume 20% of world total
electricity output.
On the supply side, it is estimated that in 2010, after
accounting for coal, hydro, and nuclear, there would be a
6.4% shortage in electricity supply. The shortage will grow
to 10.7% in 2020. (Figure 1) The gap between electricity
supply and demand will have to be filled by renewable
energy. PV powered systems will play a critical role.
Coal, 68. 4%
Gap, 6. 4%
Hydr o, 23. 1%
Nucl ear, 2. 1%
Gap, 10. 7% Coal, 62. 3%
Hydr o, 23. 2%
Nucl ear, 3. 8%
Figure 1 – 2010 vs. 2020 Energy Shortage Scenarios
Recognizing the global opportunities in PV products and
systems, China has been building a massive PV industry
representing all facets of the supply chain, from polysilicon
feedstock, ingots and wafers to cells and modules. In 2007,
China took the world’s number one spot in solar cell
manufacturing with a total production of over 1GW. In 2008,
China manufactured 2GW of solar cells, representing 30% of
the global total production, to secure a leading position.
Virtually all of this PV production has been exported. In 2008,
China installed 40 MW of PV domestically—only 0.7% of the
global total. According to China’s 11th Five-Year Plan, China
will reach only 17% of the world average level of PV-generated
power by 2010, and only 6% of the world average by 2020.
This report recommends an accelerated adoption of PV
power in China to reach global average level of PV power
generation by 2014.
PV BENEFITS AND CHINA’S PV ADVANTAGE
PV offers tremendous environmental benefits. While
conventional energy sources such as coal, natural gas, oil will
eventually run out and produce global warming gases, the sun’s
energy is free and limitless. Every 1 MW PV system in China
can replace 500 tons of coal and reduce more than 900 tons
of carbon dioxide emission annually. The energy payback time
is about 2 years for a system based on crystalline silicon
technology in most parts of China. For a thin film system, the
energy payback time is even shorter.
PV offers enormous economic and social benefits. In order to
ensure national energy security, China needs to develop a
balanced energy structure and reduce its heavy reliance on
coal. PV will play an important role in this regard. In many
places around the world, PV has become a new growth area
to stimulate economic development and job creation. China
still has many remote areas that are not targeted for grid
connection. PV can bring electricity to these areas, relieving
poverty and regional imbalances.
Even though the cost of PV is still higher than conventional,
non-renewable energy sources, in the near future the costs of
PV will come down to where no financial incentives are
needed.
China has some unique advantages for developing PV. More
than half of China’s land is located in rich to very rich solar
resource areas and offers tremendous opportunity for PV
power generation. China has already become the world’s
leader in PV manufacturing and holds a huge yet-to-be-opened
domestic market for PV.
PV GROUP WHITE PAPER – CHINA’S SOLAR FUTURE
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GLOBAL STATUS OF PV INSTALLATIONS
Driven by favorable government policies, global PV
installation has increased dramatically in recent years,
growing at 45% CAGR from year 2000 to 2008. In 2008
alone, 5.5GW of PV was installed globally, pushing the
cumulative installation close to 15GW. However, China has
installed only 40MW of PV in 2008, representing only 0.7%
of the global total. China’s cumulative installation is
140MW, only about 1% of the global total. Off-grid rural
electrification represents the majority of China’s installed PV
systems.
Application
Cumulative
Installation
(MW)
% of
Total
Rural Electrification 48 34.3%
Communication and
Industrial
35 25.0%
Goods and Services 30 21.4%
Grid Connected BIPV 26 18.6%
Grid Connected Large
Scale PV Power Plant
1 0.7%
Total 140 100%
GLOBAL STATUS OF PV PRODUCTION AND
STATE OF CHINA’S PV INDUSTRY
To meet the dramatically increasing demand for PV, worldwide
PV production has experienced rapid growth. Since 2004, China
has moved towards a huge solar production ramp on all fronts of
the domestic supply chain, from polysilicon feedstock, ingots and
wafers to cells and modules. In 2007, China took the world’s
number one spot in solar cell manufacturing with a total
production of over 1GW. In 2008, China manufactured 2GW of
solar cells, representing 30% of the global total production, to
secure its leading position. Among the top 25 global PV
producers, eight are Chinese companies. Since 2005, more than
10 Chinese solar companies succeeded in some highly prominent
initial public offerings in overseas exchanges.
Capacity Production Capacity Production
Polysilicon (Ton) 4,550 1,100 20,000 4,500
Ingot/Wafer (Ton) 20,000 11,800 30,000 13,000
Solar Cells (MW) 2,000 1,088 4,000 2,000
Modules (Including Thin
Film) (MW)
3,000 1,753 5,000 3,000
2007 2008
After a few years of rapid growth, China’s PV industry is now
facing tough challenges. Some fundamental problems that were
concealed during the boom times have become prominent.
The first challenge is the major imbalance between production
and consumption—98% of China’s PV products are shipped to
overseas markets. Heavy reliance on foreign markets increases
the vulnerability of China’s PV industry, as evidenced by recent
industry decline due to reduced overseas demand. Chinese
companies are also vulnerable to changes in foreign currency
exchange rates and incentive policies of other countries. China’s
lack of PV demand also threatens government solar incentives in
other countries. Policy makers in Europe, US and elsewhere may
view China as the primary beneficiary of domestic economic
policies that encourage PV demand, while China itself is not
contributing to global fossil fuel reduction and a reduced carbon
footprint.
The second challenge is an imbalance in the domestic industry
supply chain. Most silicon material needs to be imported. Most
Chinese companies do not have large-scale production and lack
world-class production technology in high purity silicon.
The third challenge facing China’s PV industry is that many
companies rely on imported technology and equipment and few
companies invest sufficient funds in R&D.
PV GROUP WHITE PAPER – CHINA’S SOLAR FUTURE
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GOVERNMENT SUPPORT FOR PV
The electricity generation costs for PV systems are
currently higher than conventional electricity generation.
Government support is needed to further develop a strong
PV industry and encourage the PV market in China.
Government incentives not only spur China’s domestic
market for PV, but also expedite the cost reduction of PV
electricity, and eventually will drive PV to market driven
rather than government driven.
There are two commonly used government financial
incentive mechanisms for PV—Direct Investment (one-time
upfront subsidy or as a tax credit) and a Feed-in Tariff.
For the Direct Investment Model, three stages are
expected.
• Stage I – government investment needed to
encourage private investment in PV system with a
reasonable ROI.
• Stage II – with PV electricity below one RMB per
kWh, decreasing amount of government
investment will be needed to allow a good ROI for
private investment in PV systems and a good
amount of PV installation.
• Stage III – with PV electricity below the cost of
conventional generation, investment in PV will
become an attractive investment option; PV will
become market driven, instead of government
driven.
For the Feed-in Tariff Model, two stages are expected.
• Stage I – as the cost of PV continues to fall and the
cost of conventional generation continues to
increase, the feed-in tariff needed for PV will
decrease dramatically.
• Stage II – when grid-parity is achieved, PV
generation will cost less than conventional
generation and no more subsidies will be needed.
The Chinese government can drive China's renewable
energy through government political power and financial
backing and therefore a western economic framework for
analyzing the energy industry and companies may not apply
in China. China, however, should learn from international
best practices and develop a government support system
that best fits its unique situation.
As an example of a global benchmark for driving PV energy
adoption, here we present a brief description of the
German Feed-in Tariff System.
GLOBAL BENCHMARK: THE GERMAN FEED-IN
TARIFF SYSTEM
The up-front costs for solar electricity systems have been
recognized as a significant barrier to wider market penetration.
Investment subsidies have been implemented in many countries
with uneven results. The most successful market incentive
program for solar power has been the feed-in tariff, implemented
by Germany. It is widely regarded as principal reason for
Germany’s leadership in solar power generation and is a valuable
model for policy-makers worldwide.
In Germany in 2008, the utilities pay a tariff of between
€0.35/kWh and €0.47/kWh (depending on the size and type of
system) for solar electricity from newly-installed PV arrays1. The
utilities are authorized to pass on this extra cost, spread equally,
to all electricity consumers through their electricity bill. This
means that the feed-in program works through market incentives
independent of government budgets and subsidies. In Germany,
the monthly extra costs per household due to the tariff for solar
electricity were €1.25 in 2008. The result is also that every
electricity consumer contributes to the restructuring of the
national electricity supply network. In addition, a feed-in tariff
guaranteed by law over a sufficient period of time has proven to
be an excellent support for private financing. While unfamiliar at
first, currently the financing of PV systems via bank loans in
Germany are no longer an unusual and time-consuming activity.
Source: Solar Generation V, EPIA and Greenpeace
To encourage cost reduction and the eventual elimination of
tariffs, the feed-in tariff in Germany is reduced each year by 5%
(from 2009 the degression rate will be increased to 8 -10 %), but
only for newly-installed PV systems. Once a PV system is
connected to the grid, the tariff remains constant over the
complete period of 20 years. This approach allows solar
customers to easily calculate the return on investment in their PV
system, while ensuring the industry to continuously reduce costs
to main the market.
PV GROUP WHITE PAPER – CHINA’S SOLAR FUTURE
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PV TECHNOLOGY, COSTS AND
COMPETITIVENESS
Based on the cost analysis of crystalline silicon PV
technology and a set of assumptions including cost of silicon
materials, cost of manufacturing process, manufacturing
scales, future technology and others, it is predicted that the
cost of PV electricity for a c-Si based system in the rich
solar resource area will reach one RMB per kWh in 2012,
and grid parity is expected somewhere around 2015 and
2016.
CALL FOR ACCELERATED PV ADOPTION
The International Energy Agency (IEA) predicts in its
Moderate Scenario, that by 2010, 0.1% of global total
electricity will come from PV and 1.2% by 2020. According
to China’s 11th Five-Year Plan, China will reach only 17% of
the world average level by 2010 and only 6% of the world
average by 2020.
The China PV Policy Roadmap calls for an accelerated
adoption of PV in order to reach global average level by
2014.
-
5, 000
10, 000
15, 000
20, 000
25, 000
30, 000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
China's Current National Target (MW)
Proposed Cumulative Installation (MW)
Cumulative Installation Needed to Achieve
Global Average Level (MW)
PROPOSED CHINA PV POLICY ROADMAP
By 2020, China’s accumulated PV installation would reach
more than 28GW, to make 1.2% of total electricity
consumption and result in the reduction of 42 million tons
of carbon dioxide emissions. Nearly 3 million people would
be employed in China’s PV industry and the value of output
could reach 3,386 billion RMB.
POLICY VISION STATEMENT
Government plays a vital role in developing a sustainable PV
industry and a prosperous PV market in China.
KEY POLICY RECOMMENDATIONS
• Establish clear targets for PV installation. Adjust current
national targets and achieve global average level by year 2014.
o Adjust 2010 target from 300MW to 745MW
o Adjust 2020 target from 1.8GW to 28GW
• Enact clear and easy-to-administer PV incentive policies that
are suitable for China’s unique situations, using both market
and legal mechanisms to encourage private investment in PV.
Help PV transition from government driven to market driven.
• While maintaining current rural electrification effort, priority
should be given to grid-connected large scale power plant and
building integrated systems.
• Immediately implement government direct investment subsidy
model at central and local levels.
• At the same time effectively implement feed-in tariff programs
stipulated in the Renewable Energy Law.
• Support China PV industry through favorable policies.
• Invest in R&D to strengthen China PV industry’s technological
competitiveness. Boost research and development that will
make PV systems less expensive, more efficient, and highly
reliable.
• Promote education in PV technology along the entire PV value
chain in order to create a skilled workforce.
• Establish industry standards and certification systems.
• Educate the public about PV and instill the idea of green
energy and green lifestyle.
PV GROUP WHITE PAPER – CHINA’S SOLAR FUTURE
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ABOUT THE AUTHORS
This report was prepared by the China PV Advisory
Committee of the SEMI PV Group. The PV Group is a
special interest group of SEMI that serves the photovoltaic
supply chain represented by companies that provide the
cells, modules, equipment, and materials to the global solar
energy industry. The PV Group's mission is to advance
continuous manufacturing cost reductions and sustainable
business practices through international standards
development, events, public policy advocacy, environmental,
health and safety (EHS) support, market intelligence, and
other services.
WHAT’S NEXT
The SEMI China PV Committee is dedicated to the
advancement of China’s PV industry and PV market. The
Committee is committed to continuing its industry advocacy
effort, bringing together the industry and the government to
achieve the grand goals highlighted in this Roadmap.
COMMENTS AND FEEDBACK
SEMI China welcomes comments, feedbacks and suggestions
about any aspect of this report. Please send them to:
msong@semi.org, or to SEMI PV Group at grid@semi.org
For more information, visit: www.pvgroup.org.
MEMBERS OF THE CHINA PV ADVISORY
COMMITTEE
• Andy Tuan, Air Products
• Kevin Sun, Applied Materials
• Yuelong Huang, Baoding Tianwei Solarfilms
• Peng Fang, Best Solar
• Zhibin Xiao, CETC 18th Institute
• Junchao Wang, CETC 48th Institute
• Ben Ighani, Ch2MHILL
• Jianhua Zhao, China Sunergy
• Liyou Yang, Chint Solar
• Bob Zhou, CSI
• Sicheng Wang, Energy Research Institute, NDRC
• Wenjing Wang, Institute of Electrical Engineering, CAS
• Rongqiang Cui, Jiao Tong University
• Bingyan Ren, Jinglong Group
• Yuepeng Wan, LDK Solar
• Peter Pauli, Meyer Burger
• Haiyan Sun, Oerlikon
• Richard For, REC Silicon
• Hengst Thomas, Roth & Rau
• Guoming Zhang, Seven Star Electronics
• Zhumin Liu, Solar Energy Research Center, Yunnan
Normal University
• Hongbang Li, Solargiga
• Hui Shen, Sun Yat-Sen University
• Guangchun Zhang, Suntech Power
• Steven Zhu, Trina Solar
• Setsuo Iwashita, Ulvac
• Shaozhang Chen, Xinguang Silicon
• Linsheng Ren, Xinjiang SunOasis
• Deren Yang, Zhejiang University