Further solar price falls in China’s new industry 5-year plan

February 27, 2012
China solar flag

In a sign of things to come China’s Ministry of Industry and Information Technology (MIIT) has released details of its 12th five-year plan for the country's solar industry.

The targets increase the likelihood of continued low solar prices following a slump in the cost of solar panels, which has seen prices more than halve over the past year, according to analyst firm Bloomberg New Energy Finance.

The new plan calls for China's leading poly-crystalline silicon manufacturers to reach a 50,000-ton production capacity and the output of leading solar panel makers to reach 5-GW by 2015.

Last year Suntech Power, one of China’s industry leaders, shipped an estimated 2.09-GW with total revenues in the range of USD3.13 billion to 3.015 billion. The ministry says that by 2015 it expects at least one of China’s solar companies to reaching 100 billion yuan (USD 15.87 billion) in sales and three-to-five companies reaching 50 billion yuan (USD7.94 billion).

On the back of this growth the ministry expects the cost of solar power in China to fall to 0.8 yuan (USD0.127) per kilowatt hour (kWh) by 2015 and 0.6 yuan (USD 0.095) per kWh by 2020. Solar panel prices as expected to come down to 7,000 yuan (USD1,111) per kW by 2015 and 5,000 yuan (USD794) per kW by 2020.

In terms of solar technology, China’s goal is to increase the conversion efficiency of mono-crystalline silicon solar cells to 21 percent, poly-crystalline silicon cells to 19 percent and amorphous silicon cell to 12 percent by 2015.

Eighty percent of solar equipment and auxiliary materials will be produced domestically, according to the plan.

Capacity glut

Although China’s solar sector managed to export 90 percent of its output last year, the domestic market will have to bear the brunt of industry growth, according to observers.

"It is unlikely for the sector to continue to see such strong growth in the future, given the shrinking overseas demand," Lin Boqiang, the director of the China Center for Energy Economics Research at Xiamen University, told the Global Times.

Demand from the European Union has seen a drastic decline, and the US is considering slapping anti-dumping duties on Chinese solar cells.

"If the US decides to impose the duties, which may be as high as 100 percent, there is a big chance the European Union will follow suit," said Lin.

He said solar producers need to explore the domestic market to absorb excess production that has depressed prices and margins in 2011. However, Wang Zhao, president of MY Solar Investment Corp, warned that China’s domestic market is far from sufficient to consume the excess capacity.

In all, China’s new plan is good news for those looking to install solar power capacity, but will also increase pressure on western solar panel manufacturers already facing squeezed margins and intense competition from Chinese firms.

The move will both increase the likelihood of consolidation in the solar manufacturing market and reinforce recent government efforts to curb solar incentives in line with the long-term reduction in panel costs.