Cloudy Outlook For China's Solar Industry

Not strong enough incentives for manufacturers.

Solar power has the potential to be a growth industry in China but the nation's government does not seem keen on providing the support the sector needs, according to observers. "Manufacturers are expanding their capacity, but I don't see a major drive to install solar power domestically," said Wang Xing, a senior program officer at the Energy Foundation's China Sustainable Energy Program.

"Right now there is not a very strong incentive program for solar power," he said.

The central government wants renewable energy sources to provide 10% of all energy consumed by the year 2010, up from about 7% now. Its aim is for the figure to rise to 16% by 2020.

An industry source said hydro-electric capacity would likely by the top priority, followed by wind and solar power.

But experts said it was one thing to set lofty targets, and quite another to implement them, with few signs of a major government-funded push. This was a problem, they said, because China's domestic solar power sector would continue to need government help in the near term since high installation costs and low returns deter entrants to the market.

Instead, most domestic manufacturers are gearing production towards the export market while looking to tap public investment in projects such as electrification programs in the countryside. "It's a rural market ... at the moment," said William Wallace, a senior technical advisor at the project management office for the United Nations Development Program and Global Environmental Facility.

Industry analysts said that one of solar energy's largest obstacles was an inability to link small scale power production units to a larger power grid. "Currently, solar energy is only combined with power generation grid networks on a trial basis in first-tier cities like Beijing and Shenzhen," said Gao Hu, a researcher with the state-controlled Energy Research Institute. Grid connection provides a substantial incentive for alternative energies such as solar, wind, and small-scale hydro-electric plants by allowing excess capacity to be sold back to the power grid.

Copyright Agence France-Presse, 2007

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