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China's Solar Master Plan Sets Production, Efficiency and Price Goals

China has made it clear that it wants to add solar energy generation at a fast pace, so it's not surprising that the government also has big plans to boost solar manufacturing. In fact, China's Ministry of Industry and Information Technology posted a plan Friday that calls for certain polysilicon producers to reach 50,000 tons of annual production capacity by 2015; it also wants solar cell and panel makers to reach 5 gigawatts of annual capacity by the same time frame.

The plan doesn’t specify which “leading companies” in polysilicon or solar panel manufacturing should hit the 2015 production goals, but it does spell out some of the long-ranging views the government holds in supporting domestic manufacturing and installation as well as research and development. 

The production goals are part of a 5-year plan that began in 2011, when China upped its solar energy installation goal twice: from 10 gigawatts, which it set after Japan’s nuclear disaster last March, to 15 gigawatts (cumulative) by 2015. The Chinese government said the new 5-year plan aims to promote domestic solar energy use and bolster Chinese manufacturers’ competitive edge in the global market that is marked by intensifying competition and trade disputes.

The ministry’s plan noted the accomplishments of the Chinese’s solar manufacturing sector – it grew quickly to become a leading supplier of solar panels from 2007 through 2010 – and boosted the efficiencies of solar cells to as much as 19 percent for monocrystalline silicon cells. But it also noted that China still relies on more technically advanced production equipment from other countries for solar cell production and lags behind in polysilicon production and thin film technologies.

By 2015, the government wants to see 21 percent efficiency for monocrystalline silicon cells, 19 percent for polysilicon cells, and 12 percent for amorphous silicon thin films, according to the plan. It also wants to see greater research and development of solar energy storage and other technologies for integrating solar electricity into the grid. Other research areas include the development of copper-indium-gallium-tin solar cells, thinner silicon wafers in the 150-160 micron range, and what the plan calls quasi-single crystal ingot technology, which sounds like the concept that has is being incorporated by companies such as Suntech Power and JA Solar. 

To make solar more competitive with conventional sources of power, the plan also calls for reducing the price of solar panels to 7000 yuan per kilowatt, or around $1 per watt in today’s conversion rate, by 2015. PV system price should hit 13,000 yuan per kilowatt, and the cost of solar electricity should hit 0.8 yuan per kilowatt-hour. By 2020, the solar panel price should fall to 5,000 yuan per kilowatt and 10,000 yuan per kilowatt for a PV system, and 0.6 yuan per kilowatt-hour for solar electricity generation cost (the plan doesn't specify whether it's talking about power production cost or wholesale price). 

The government’s intention to support manufacturing expansion might seem foolish now given the glut of solar energy equipment that has caused solar panel prices to plummet by 50 percent in 2011 and forced several manufacturers to shutter factories or file for bankruptcies all together. American solar panel makers Solyndra, SpectraWatt, Evergreen Solar and Energy Conversion Devices all have filed for bankruptcy over the past year. German company Solon has done the same.

But if China is serious about increasing its use of solar energy and planning for a global solar market that still has a lot of room to grow, then it makes sense for the government to draw a long-term manufacturing expansion plan.

Knowing when to expand production to meet growing demand is, of course, easier said than done. Building a large-scale factory (in hundreds of megawatts) and bringing it online takes a few years. If you start expansion only after a stellar year, then you may well fall behind rivals who scaled up earlier and can now market and ship more than you can in the next 12 months. Sanyo, now part of Panasonic, is closing a 30-megawatt silicon ingot and wafer factory in California this year while building a new, 300-megawatt plant in Malaysia that is set for completion by the end of this year.

But if you are investing in production equipment when there is a glut of products and prices are falling fast, as is the case in 2011, then reigning in that factory expansion plan is a wise thing to do. First Solar did – the company decided late last year to suspend a plan to bring its Vietnam factory online. 

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