A look at Jiangsu Province’s newly reported solar incentives and further reflections on the national Solar Roof Program.
Fast on the heels of the new national solar subsidies (Solar Roof Program) announced last week by the Ministry of Finance and the Ministry of Housing and Urban-Rural Development (see previous post), a report (Chinese only) yesterday says that Jiangsu province will be enacting aggressive provincial solar incentives to target 260 MW of installed solar capacity and 30,000 tons of annual polysilicon production by the end 2011. Not much details on how exactly these incentives will be rolled out, but a March 30 Bank of America report that landed on GLF’s desk suggest that this may actually take the form of a feed-in-tariff.
According to the B of A report:
…Jiangsu province of China is considering a budget of CNY1bn per annum (~$145mn) for solar subsidy in form of feed-in tariff. If confirmed, the news will be a major positive development not only for more provincial support, but the fact that a formal feed-in tariff could be in place, confirming our thesis that more provincial and municipal support could follow very quickly …
According to our understanding, the annual CNY1bn subsidy will be distributed in form of a feed-in tariff and is separate from the central government’s CNY20/Wp subsidy. Based on a feed-in tariff rate of CNY2/kWh (although we believe ~CNY1.5/kWh is the optimal rate), this could potentially translate into a 200-250MW market over the next 1-2 years in Jiangsu alone. We are not surprised by such proposal, given the Jiangsu province houses major PV manufacturers such as Suntech, Trina and Renesola.
Hallelujah!!! This is exactly the knock-on effect that the solar industry is waiting for. The 200-250 MW figure is consistent with the 260 MW announcement, which was released the day after the B fo A report. To put 260 MW into perspective, the national target for all types of solar power (including non-photvoltaic solar such as concentrated solar power applications) for 2010 is 300 MW (to total installed capacity at the end of 2007 was 100 MW). Jiangsu alone can single handedly propel China past the admittedly modest national target.
We’ve yet to see any Chinese media sources confirming the exact nature of Jiangsu’s subsidies, and whether it will take the form of a feed-in tariff, but we’ll keep checking. With respect to polysilicon production, “Jiangsu has designated Xuzhou, Yangzhou, and Lianyungang as bases for the province’s polysilicon industry,” reports JLM Pacifc Epoch.
It is no surprise that Jiangsu is leading the way here. It is afterall, the “California” of energy policy. (Indeed, it is actually colloborating with the Californian government on demand side management in the utilties sector.) Hopes are high that other provinces may follow suit. Continued the B of A note:
We believe that other provinces may follow the suit in offer local level support, which includes Hebei (which houses Yingli and JA Solar) and the more affluent provinces such as Zhejiang and Guangdong. Less affluent provinces such as Gansu, Inner Mongolia, Qinghai and Sichuan (which houses major poly manufacturers) are also potential candidates to offer more local support.
Giddyup, the rest of China!
Some Updates and Further Reflections on the Solar Roofs Program
The Ministry of Finance (MOF) issued an Interpretation (Chinese only) this week to follow up on the Solar Roofs Program announced last week. It reiterates that the policy is meant for PV systems associated with buildings only and clarifies that after MOF has provided a 70% of the subsidies for any given project, the remaining 30% will be disbursed not by the provinces (as we originally thought), but by MOF as well, but only after certain project requirements have been fulfilled. This two step funding process is essentially a governance measure to ensure project quality. This must come to the relief of provinces and the solar market, because it means that these building PV projects will not be hamstrung by provincial budgets.
What we at GLF do not like as much about the Solar Roofs Program is that it rewards installed capacity (by providing subsidies on a per W basis) and not actual solar power generation (on a KWh basis). We’ve already seen in the Chinese wind industry how the dogmatic pursuit of installed capacity targets came at the expense of actual generation as many wind farms were left unconnected to the grid (see a previous post on the wind industry). A feed-in tariff is preferable because it rewards actual solar power generation–you only get the money for actual power actually produced.
There are perhaps two mitigating factors to the installed capacity approach. First, as already described in our previous post, there are conversion efficiency requirements that the PV systems have to hit, depending on what PV technology is used. Second, the program seems to contemplate that policies such as feed-in tariffs would fall within the jurisdiction of provinces (see the Implementation Measures, Article 4) , perhaps reflecting the understanding that different regions have different solar endowments and different existing eletricity tariff structures, thus requiring a more tailored approach that are best left to the provinces.
Naturally, we’ll keep you posted on the latest solar policy developments here at GLF when we learn more.