Mega Solar Project Highlights Continued Sector Attractiveness

BMI View : We believe that the progress made on the mega solar project in Turpan Prefecture highlights the ongoing popularity of utility-scale solar projects in Xinjiang. This is despite the downward revision in feed-in tariffs for solar energy in August 2013. Outside of Xinjiang province, we believe that the outlook for the Chinese solar sector remains extremely positive as investors have gained greater clarity and certainty on returns. The government is also likely to keep conditions for the solar sector attractive for the near term as it comes under increasing pressure to fight pollution and support embattled solar manufacturers.

Chinese solar module manufacturer Trina Solar signed an agreement with the authorities of Turpan Prefecture in China's Xinjiang Uyghur Autonomous Region to develop a 1,000MW ground-mounted solar photovoltaic (PV) project in the prefecture on December 30 2013. The project will be completed in phases over 48 months, and each phase will need separate approvals from the government and the State Grid. Construction on the first phase of the project is scheduled to commence in the first quarter of 2014, and the first two phases (with a combined capacity of 300MW) are scheduled to be connected to the grid by end-2014.

Trina has also said that it intends to develop a PV module factory in Xinjiang once the first phase of the project receives approval from the government and grid. Once built, the facility will be supplying modules for the whole 1,000MW project.

Significant Growth In 2014 Despite Tariff Revisions
China - Non-Hydropower Renewable Capacity By Type, GW

BMI View : We believe that the progress made on the mega solar project in Turpan Prefecture highlights the ongoing popularity of utility-scale solar projects in Xinjiang. This is despite the downward revision in feed-in tariffs for solar energy in August 2013. Outside of Xinjiang province, we believe that the outlook for the Chinese solar sector remains extremely positive as investors have gained greater clarity and certainty on returns. The government is also likely to keep conditions for the solar sector attractive for the near term as it comes under increasing pressure to fight pollution and support embattled solar manufacturers.

Chinese solar module manufacturer Trina Solar signed an agreement with the authorities of Turpan Prefecture in China's Xinjiang Uyghur Autonomous Region to develop a 1,000MW ground-mounted solar photovoltaic (PV) project in the prefecture on December 30 2013. The project will be completed in phases over 48 months, and each phase will need separate approvals from the government and the State Grid. Construction on the first phase of the project is scheduled to commence in the first quarter of 2014, and the first two phases (with a combined capacity of 300MW) are scheduled to be connected to the grid by end-2014.

Trina has also said that it intends to develop a PV module factory in Xinjiang once the first phase of the project receives approval from the government and grid. Once built, the facility will be supplying modules for the whole 1,000MW project.

We believe that the progress made on the mega solar project in Turpan Prefecture highlights the ongoing popularity of utility-scale solar projects in Xinjiang. This is despite the downward revision in feed-in tariffs (FiTs) for solar energy in August 2013. The Chinese National Development and Reform Commission (NDRC) had lowered FiTs for solar energy in many western provinces (including Xinjiang) to account for higher grid connection and transmission and distribution (T&D) costs, as well as higher levels of solar radiation. In particular, the price of power for grid-connected PV plants in Xinjiang was lowered from CNY1/kWh to CNY0.95/kWh (except for Kelamayi prefecture, which now receives CNY0.9/kWh).

Significant Growth In 2014 Despite Tariff Revisions
China - Non-Hydropower Renewable Capacity By Type, GW

In our opinion, solar developers continue to be interested in Xinjiang province as the solar FiT is still relatively attractive. The NDRC had said in a March 2013 announcement preceding the actual revision that it planned to award a tariff of CNY0.85/kWh for solar energy in Xinjiang, which would have translated into a tariff reduction of CNY0.15/kWh ( see 'Solar Tariff Changes A Double-Edged Sword', March 12 2013). However, the actual reduction of CNY0.05/kWh carried out in August 2013 is significantly less aggressive than initially planned ( see 'Solar Tariffs Revisions To Improve Grid Stability', September 3 2013). The high levels of solar radiation in the province also enable producers to profit despite lower tariffs as utilisation rates will be higher.

More Players Entering The Market

We believe that the outlook for the Chinese solar sector also remains extremely positive outside of Xinjiang province. For instance, the country's third largest coal producer, Datong Coal Mine Group, entered into a partnership with solar manufacturer Yingli Green at the beginning of 2014 to develop solar power plants in the province of Shanxi in northern China. The project is likely to receive a tariff of CNY0.95/kWh as well, leading us to believe that the reduced tariff for Shanxi province is still sufficiently attractive for investors. In fact, the revisions to the solar FiT are likely to have some positive effects, as the lengthier contracts (of 20 years) offered under the new FiT scheme will provide a high degree of certainty for investors. The tariff for PV projects in eastern regions and in Tibet was also left unchanged in August 2013, maintaining the attractiveness of projects in these regions.

Aggressive Revisions Since December 2012
China - Solar Capacity Targets By Revision Date, GW

In our opinion, the government is likely to keep conditions for the solar sector attractive for the near term. This is because the government has come under increasing pressure to fight pollution and support embattled solar manufacturers in recent years, and has introduced numerous supportive measures for solar energy across the country while introducing bans on new coal-fired capacity in several regions ( see 'Beijing Clears The Air, But Broader Impact To Be Limited', September 16 2013). Additionally, the government has raised its solar capacity targets twice since December 2012 in an aggressive signal to both the private sector and local governments encouraging development of new capacity in the near-term ( see 'New Solar Target In Line With Expectation', July 16 2013).

Read the full article

This article is tagged to:
Sector: Renewables
Geography: China
×

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.