CHINA BOOSTS SUN

China offers big solar subsidy, shares up
Jim Bai and Leonora Walet (w/Eadie Chen, Nichola Groom, Anna Driver, Ben Tan, Derek Caney and Bernard Orr), July 21, 2009 (Reuters)

"China has launched an unprecedented and long-awaited plan to offer subsidies for utility-scale solar power projects, sparking a rally in shares of Chinese solar panel makers…Beijing's bid to boost the solar energy sector could draw more than $10 billion in private funding for projects and put China on track to become a leading market for solar equipment in the next three years…

"As the world's top greenhouse gas polluter, China is trying to catch up in a global race to find alternatives to fossil fuels…Expectations of such a move by China have underpinned a rally in Chinese solar stocks for much of this year."

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"…[Analysts warned, however, that] the subsidy program, although positive, would not lead to a near-term pickup in solar panel demand. The solar industry has suffered this year from a lack of available financing… due to the financial crisis…The Ministry of Finance said the government will subsidize 50 percent of investment for solar power projects as well as relevant power transmission and distribution systems that connect to grid networks…For independent photovoltaic power generating systems in remote regions that have no power supply, the subsidy will rise to 70 percent…

"Grid companies are required to buy all surplus electricity output from solar power projects that generate primarily for the developers' own needs, at similar rates to benchmark on-grid tariffs set for coal-fired power generators."

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"To qualify for the subsidy, in addition to other requirements, each project must have a generating capacity of at least 300 kilowatt peak [and not bigger than 20 megawatts], while construction will have to be completed in one year and operations will have to last for at least 20 years…The government plans to install more than 500 megawatts of solar power pilot projects in two to three years…[One analyst said the initiative is not big enough to offset] the global economic recession and a pullback in subsidies in Spain and Germany [that] have led to an oversupply of solar panels…[and] driven down prices and hurt panel makers' profits…

"China is expected to raise its 2020 solar power generation target more than fivefold to at least 10 GW. With incentives, analysts expect over 2 GW in new solar capacity will be installed as early as 2011, up from just over 100 MW in 2008…"