Photovoltaic industry powering ahead

Suntech Power Holdings plans to develop 100 mW of solar projects in Hainan province. Other companies that plan to build solar farms in China include Yingli, Canadian Solar, LDK Solar and JA Solar.

Chinese photovoltaic installed capacity is still quite small compared with wind power development, which is the largest in the world with 62.7 gW of installed capacity as of 2011, or 25 percent of the world's total.

China's installed solar capacity was about 3 gW in 2011, according to figures from the NEA, which is 10 percent of the world's total.

The development of the wind industry may provide a template for how large-scale solar development may unfold in China.

As the wind industry process showed, the Chinese government is prepared to scale renewable development aggressively once the technology reaches a price point that it considers appropriate, and when local manufacturers and developers can competently fulfill the government's growth targets.

After the central government asked local governments to save energy, reduce carbon emissions and develop high-tech industries, the local governments have been eager to develop the solar industry in their regions in the past few years. The photovoltaic industry happens to meet all those requirements.

More than 300 Chinese cities are making efforts to develop the solar photovoltaic industry, mostly driven by short-term interest, leading to the issue of overcapacity in the sector, said an official from the NEA who declined to be named.

Overcapacity in the polysilicon sector - a key material in the production of solar panels - led to 80 percent of the plants shutting down this year.

"There are more than 2,000 companies in the country's photovoltaic industry, half of which are focusing on producing solar products," according to Shi Lishan, deputy director of the New Energy and Renewable Energy Department with the NEA.

China controls nearly 70 percent of the world's solar panel production capacity and exports almost 90 percent of its output to Europe and the US. In comparison, Chinese companies only account for about 8 to 10 percent of the global solar products value chain.

Over the past eight years, the price of solar products has significantly dropped due to the development of solar technology in China. The cost of solar modules has been lowered to $1 per watt. The solar cells conversion rate has continued to increase, rising from 14 percent to 19 percent.

The investment return of downstream businesses - solar farms - is around 8 percent now, which is relatively good, industry players said.