| 08 March 2011
Ordos is a city in the north China, famous for the mausoleum of Genghis Khan. Its pillar industry after 1949 was cashmere, and Erdos, a leading manufacturer used the slogan, “Warm the whole world.”
Holding one-sixth of the coal reserves in China, Ordos seems to have enough reason to rely on coal. However, the coal business brought not only money but increased the population to an unbearable level; the environment suffered, housing prices soared and resources, such as water, became an expensive commodity. The government turned, instead, to clean energy and the old slogan, “Warm the whole world,” took on a whole new meaning.
Last year, when bidding results were in on 13 PV power plants, 280MW in total, even some insiders were surprised at the low prices.
In September 2009, First Solar and relevant departments of the Chinese Government signed a memorandum of understanding (MoU) that agreed to cooperate in the construction a 2GW solar photovoltaic power station in Ordos City, which is expected to be the world's largest PV power station. The total investment is $4 to 6 billion US (26 to 39 billion Chinese RMB). Constructed in four steps, the first three (30MW, 100MW and 870MW) are scheduled before 2014, and the other 1GW to finish the total construction is due by 2019.However, construction began 14 months later in November 2010, when the National Development and Reform Commission (NDRC) approved the plan. In January 2011, China Guangdong Nuclear Power Holding Corporation (CGNPC) became a co-operator. According to the MoU, First Solar and CGNPC were to jointly implement the first 30MW project. But now CGNPC will be in charge of the project's construction and operation, responsible for project engineering, procurement and construction (EPC); First Solar will provide advanced thin film solar photovoltaic modules, along with support and advice in the engineering, procurement and construction (EPC) and Operations and Maintenance (O&M).
CGNPC’s increased involvement meant a diminished role for First Solar; the company’s focus now is on selling the modules and being a consultant—not generating or selling electricity. The likely reason? China has not announced the price of its PV electricity; therefore, it is unclear as to what the return will be from the Ordos PV power plant.
The price
Last year, when bidding results were in on 13 PV power plants, 280MW in total, even some insiders were surprised at the low prices. Meng Xiangan, vice president of the Chinese Renewable Energy Society, said prices dropped too suddenly. The minimum bid price was 0.7288RMB/kWH, which is 0.08 Euro or 0.11 US Dollar. The bids on all 13 projects were below 1 RMB ($0.15 US) per kWH. Back in mid-2009, people were astonished by the 1.09 RMB per kWH and now they’ve been cut by 25%. Considering the cost of the construction and maintenance, this price is so low that the bidding has created a barrier to private companies, leaving only the state-owned enterprises to win bids.
Can the companies make money from these projects, and, if so, how?
Dimming golden sun
As mentioned in PV Policy in China 1997 to Today, the Chinese government launched Golden Sun Projects in March 2009. With a subsidy of up to 10 billion RMB ($1.5 billion US) per year to the solar roof project and BIPV, many companies showed interest in applying for this project. Up to 329 projects were included in the first stage of construction, and the total amount is 690MW. However, only 120 remain in November 2010, according to the Ministry of Finance, Ministry of Science and Technology, National Energy Administration and Ministry of Housing and Urban-Rural Development.
Policy makers cared more about how many plants were built rather than how much electricity a plant can produce.
The government subsidies help in two ways: subsidizing according to the need of equipment and subsidizing according to the installation capacity. Both of these are aimed at the construction size, but not the long-term operation of the power plants. This means the policy makers cared more about how many plants were built rather than how much electricity a plant can produce.
When the Golden Sun came into practice, the government found that applicants could get more money from the government than they should. Over and under invoicing, fraudulent quotations and incomplete projects are just a few of the ways that applicants took advantage of the loose Chinese policies. If the current policies do not become more detailed and more practical, it may hurt all participants in Chinese Solar industry.
Written by Jiang Zhu, Contributing Editor—China
