China's 280 MW of Solar Projects sees Stiff Competition;Would Lead to Zero to Negative Investor Returns

China has recently invited bids for 280 MW of Solar Projects to be built in Northern and Western China.These projects are to built in 8 of these provinces with 60MW projects planned in Xinjiang, Gansu and Inner Mongolia, as well as a 50MW project in Qinghai, a 30MW plant in Ningxia and a 20MW project in Shaanxi Province.Unlike other countries China has opted to have seperate Feed in Tariffs for different provinces and thees rates are quite low at 20c/KwH.These low rates lead to low returns but stiff competition is being seen particularly from  State Owned Giant Utilities like Datang,Huaneng,Guangdong Nuclear and others.Some of these companies have bid for all the 13 projects on offer in order to get a head start in the Solar Energy Business.

China has been Extremely Slow in promoting Solar Energy

China is the Largest Energy Consumer in the World and its Energy Demand continues to grow at a fast clip.However China has not enacted a national feed in tariff policy despite having the world’s largest solar manufacturing capacity.China’s solar companies account for 35-40% of the world’s solar production which is estimated to be 12-15,000 MW in 2010.Compared to global demand,China’s installed capacity is minuscule at only 300MW cumulative installations by 2009.This despite China being the largest wind energy installer in 2009 and forecast to be the biggest in 2010 as well.The increase in Chinese solar demand has been very slow and cautious.Last year China had given out projects under the “Golden Sun” program but after that there has been little progress.Note India has taken the lead in promoting solar energy through JNNSM which sets a target of 20 GW by 2022.

Returns have been Zero to Negative for Investors in China’s Solar Projects

The  competition has been extremely high for these projects leading to zero to negative returns for investors.This is due to a) low electricity rates on offer b) Aggressive bidding leading to even lower rates.Giant state utilities can easily bid to win even if they lose money in the process.Some of the solar companies that are bidding are Yingli,Suntech and Canadian Solar.Note Suntech has said that it has lost money in the projects it executed under the old program in China.Looks like this time won’t be any different.