Cooling down the cost bubble
"Although there exist many problems, the development and scale of China's photovoltaic industry is still something to be proud of", said Xu Honghua, a researcher of the Institute of Electrical Engineering of the Chinese Academy of Sciences. Xu Honghua suggested that China was gradually becoming one of the most important countries of the world's photovoltaic industry.
Last year, the production capacities of China's silicon wafer, battery, and module have all exceeded 410 million watts, an increase of 100 percent over the previous year, accounting for about 60 percent of total global output. In the meantime, China exported approximately 16 GW of solar energy battery, the export value being US$ 25 billion. Mainland China has four of the world's top ten polycrystalline silicon companies, and six of the world's top ten silicon wafer companies.
Last October, the USA announced that it would carry out anti-dumping and anti-subsidy investigation on China's crystalline silicon photovoltaic batteries, and initial result was published in March this year which asserted that related Chinese photovoltaic companies had received "unfair subsidy" from the government. Meanwhile, subsidies to photovoltaic energy generation in many European countries that are the world's major photovoltaic markets have been significantly reduced or even cancelled.
These multiple blows chill China's photovoltaic industry. There are cries across the industry that "winter has come".
However, for the overheated photovoltaic industry, a "winter" may not be as bad as it seems. Take price for example, the chill cools down the power generation cost that has been inflated by high profit. In the spot market, the price of polycrystalline silicon was at one point as high as US$ 500/kg in 2008, but now the price is only around US$ 20/kg. People in the industry said that "this is not shrinking, but dehydrating".
"One good thing about the rapid slip in the price of the silicon supply chain is that it would accelerate the realization of par grid connection", said chief photovoltaic industry analyst of the famous solar energy analysis organization HIS-iSuppli.
Zhu Gongshan, chairman of the board of GCL-Poly Energy Holdings, believes that under the pressure of the collapse of price, the development of photovoltaic enterprises are switching from reliance on volume and capacity expansion to reliance on scientific advancement and cost reduction. The process of photovoltaic power generation going to ordinary household is being accelerated.
It's encouraging that in the meantime of cost reduction, the conversion rate of photovoltaic power generation is improving significantly. "At present, we can see that the downward curve of the production cost of photovoltaic products is very obvious. Meanwhile, the conversion rate of solar energy production has increased from 10 percent to 15 percent, with some even reaching 18 percent", said a person From Narada.
"In the recession of the industry, the significant price reduction of photovoltaic products results in the significant cost reduction of photovoltaic power generation. The critical point to par grid connection is getting nearer", said Shi Zhengrong, chairman of the board of Suntech.
With continuously maturing and improving technology and the large-scale development of the manufacturing industry, the cost of photovoltaic modules that account for half of the cost of the entire system has been reduced by more than 50 percent since 2007 at an annual rate of 20 percent.
Experts are very confident about the prospects of the photovoltaic industry: ten years ago, the cost of photovoltaic power generation was as high as RMB 5 Yuan/kwh; now, the cost is lower than RMB 1 Yuan/kwh. It is estimated that photovoltaic power generation cost may be reduced to as low as RMB 0.3 or 0.4 Yuan/kwh in 5 years.
Subsidy is no longer a necessity
Because currently the cost of photovoltaic power generation is higher than conventional power generational, many countries have been subsidizing photovoltaic power generations in various ways so as to compensate companies' loss. Presently, some main countries adopt similar subsidy policy. The electricity price subsidies in all states of America, and the FiT subsidy in Germany, Italy and Japan are all at an appropriate amount after calculating the difference between the costs of the two types of power generation.
Subsidy, however, is a double-edged sword. While it can promote the development of the photovoltaic industry, it can also hinder its "independent" development following market rules. Photovoltaic power generation's par connection to the grid can break this development restriction once and for all.
The Development Plan of the Photovoltaic Industry during the 12th Five-year Plan published not long ago in China specially proposes the "goal of photovoltaic power generation cost", which is the core of the whole plan. According to the goal, in 2015, the cost of photovoltaic system will be reduced to RMB 15,000 Yuan/kw, power generation cost will be reduced to RMB 0.8 Yuan/kwh, and par grid connection will be achieved on the power distribution end; in 2020, the system cost will be reduced to RMB 10,000 Yuan/kw, power generation cost will be reduced to RMB 0.6 Yuan/kwh, par grid connection will achieved on the power generation end, and solid competitiveness will be achieved in major electricity power market.
"What does it mean when the cost of generating one kwh reduced to RMB 0.8 Yuan? It means that par grid connection is achieved on the user end. Now in big cities such as Beijing, Shanghai, and Guangzhou, the price of one kwh of electricity for industrial and commercial use is RMB 1.1 Yuan. If the cost of photovoltaic power generation is only RMB 0.8 Yuan in 2015, photovoltaic power generation will be able to yield profit, and the user end doesn't need government subsidy. And in 2020, the target power generation cost is RMB 0.6 Yuan. The price of thermal power generation may exceed RMB 0.6 Yuan in the year 2020. Therefore, if the price of photovoltaic power generation can be reduced to below RMB 0.6 at that time, it would mean that no subsidy is needed on the power station side", said Meng Xiangan, deputy chairman of China Renewable Energies Society.
Industrial experts believe that par grid connection can be achieved in two phase, namely replacing conventional fossil energies on the user end in the short term and replacing conventional energies on the power generation end in the long term.
From the perspective of the short-term goal, the price of electricity, the conventional energy, is relatively higher in sunny regions and in areas where power-grid construction is weak, such as the northwestern region of China, Africa, and the western coastlines of America, due to such factors as geographical location and transportation. In these places, photovoltaic power generation is fully capable of competing directly with conventional energies. Therefore, it's necessary to develop small-household (off-grid) system selectively, optimize such aspects as module power, installation method, and choice of inverter, and increase effort in market promotion and improvement of sales and after-sales channel. The aim is to make it not only affordable to users, but also accessible and available.
As for the long-term goal, the aim is to replace conventional energies with photovoltaic power generation on the power generation end in large scale, and consequently solve the global energy crisis and climate and environment crisis once and for all. To achieve that, we need to not only make effort in management and cost control, but also continue to renovate technology, improve battery efficiency, improve module power, optimize the efficiency of power station system, and lower the cost of each kwh.