China’s announcement this summer that it plans to establish new nationwide feed-in tariffs has unleashed a wave of renewed optimism in the solar industry. The policy stands to substantially boost domestic demand for solar technologies, making China not only the biggest manufacturer of solar panels worldwide but potentially also the largest consumer of solar energy. The proposal also indicates how serious the Chinese government is about adopting solar power as a substantial share of the country’s renewable energy mix.
Solar energy makes sense for China. With its booming economy and massive population, which is undergoing the largest urban migration in human history, the country has an overwhelming demand for electricity that will only continue to increase in the future. Ensuring that China has enough resources to sustain its economic growth is a top priority for the government. Facing more environmental challenges at home as well as the worldwide issue of climate change, the government is well aware that it cannot rely only on fossil fuels. Solar energy is the best renewable energy solution for today’s energy crisis, combating climate change and providing access to basic electricity to a quarter of the world’s population.
In its latest five-year plan, released in March, Beijing outlined an ambitious goal to build 235 gigawatts (GW) of power generation capacity from clean energy sources over the next five years. The government plans to add five GW of solar capacity by 2015. Clearly, China intends to maintain its global lead in clean energy investment. Via initiatives like solar FITs, it is further reaffirming its commitment to the utilization of renewable energy.
The new tariffs would also boost the government’s existing Golden Sun program. Launched in 2009, Golden Sun offers government subsidies of up to 50 percent of investment for solar projects as well as power transmission and distribution systems that connect to grid networks. For independent solar power generating systems in more remote regions, subsidies of up to 70 percent are available. The aim of the Golden Sun is to support the deployment of 500 megawatts of large-scale solar projects by 2012 and to add at least a gigawatt every year after that.
The proposed FITs will encourage more investment in the construction of large-scale solar plants in China’s south and west, a region ideal for solar installations. Electricity generated by such infrastructure can be easily connected to the grid and fed to urban areas in the east via ultra high voltage transmission lines that power companies have been building out as part of a new national smart grid system. The subsidies will additionally encourage individuals and businesses in cities, like Beijing and Shanghai, to install small-scale distributed solar systems to integrate into urban smart grid systems that are now being planned and implemented.
Critics consider the FITs as only a temporary fix, raising doubts as to whether they will ultimately boost domestic consumption of solar power. It is important to point out that this is only the beginning of what likely will be more favorable changes implemented to bolster the sector. It is also important to highlight the fact that nationwide FITs for wind energy initiated in 2009 led to explosive growth of the country’s wind energy market. In 2010, China outpaced the U.S., emerging as the biggest market for wind power capacity, for example. Similar growth for the solar sector will undoubtedly occur once the government outlines and implements its proposed FITs.
The China FIT will boost the profitability of the sector as well as open doors for more investment and further development of efficient and affordable solar technologies for China and for the world.