China’s New Solar Goal: Does a Doubled Target Mean Double Trouble?

Reports indicate that China is about to raise its 2015 goal for solar photovoltaic (PV) power to 10 gigawatts (GW), confirming an anonymous report that was leaked earlier this year. The target was originally set at 5 GW in the 12th Five-Year Plan released in March but has since been doubled in the newly submitted Development Plan for Renewable Energy during the 12th Five-Year Period, a document submitted to the State Council at the beginning of this month.

China aims to be a global giant on solar power

It might appear that this doubling is a direct reaction to the ongoing nuclear crisis in Japan, and that China may follow Germany’s steps in halting nuclear energy development. But that isn’t likely to happen. Although the Chinese government did issue an urgent safety review of domestic nuclear power plants, especially those in the construction and planning stages, there has been no official decision to stop or even slow China’s nuclear development. Rather, according to the latest statement from the Director-General of the China Atomic Energy Authority (CAEA), the country will continue to grow its nuclear power industry.

So, what can we glean from the news that both solar and nuclear energy will be expanded significantly in China? For one, it’s clear that China needs more energy to sustain its rapid economic growth and will be exploring every option available to boost its non-fossil fuel energy supply. Although the country is working hard to decrease its energy intensity—it cut its economy-wide energy use per unit of gross domestic product by almost 20 percent during the 2006–10 period and aims to cut another 16 percent in the next five years—China’s absolute energy consumption will continue to grow. It remains an issue of debate when exactly domestic energy usage will peak.

Meanwhile, the Chinese government has committed under the United Nations Framework Convention on Climate Change (UNFCCC) to raise the country’s share of non-fossil energy usage to 15 percent of total primary energy consumption by 2020 (it’s currently below 9 percent). In view of these considerations, a doubling of the solar development goal seems appropriate.

With a solar manufacturing capacity that already is large enough to meet worldwide demand for solar PV equipment, there is little question that China can scale up its production to meet the needs of the 10 GW goal. The greater issue, however, is how to grow the solar industry in a more environmentally friendly way and, more practically, how to put to full use all of the country’s installed solar power capacity.

In 2010, four Chinese companies made it on to the list of the top 10 global solar PV producers, and the country is home to hundreds more small and medium-sized solar equipment manufacturing companies. Although these companies are demonstrating to the world the rapid growth in and sheer volume of China’s production capacity, they are not particularly skilled in technological advancement. Most companies lack research and development (R&D) investment, and even the top-ranked companies do not have global competitive advantage in terms of core technology development in the field.

China’s solar industries, similar to the country’s other manufacturing sectors, still benefit more from a cheap labor force than from having a technological edge. One drawback of this is that price has become the dominant competitive element. Although China’s lack of a technological standard for entry has helped drive down the global market price for solar PV components, it also has steered China’s domestic PV manufacturing industry onto an unhealthy development path. Reports (in English and Chinese) warn about the environmental risks of growth in the country’s poorly regulated PV industry, especially in the area of polysilicon production.

Direct utilization of solar energy should be further promoted

In addition to environmental concerns on the manufacturing end, China’s solar industry still faces huge obstacles in the ability to connect solar power to national grids. So far, China’s solar development plan has focused on large-scale generation facilities, primarily huge construction projects in the most solar-abundant regions. But those locations are often far from where electricity is needed the most. Some of the most resource-abundant areas, like the Tibet Plateau, lack basic electricity grids to cover local demands, not to mention the more advanced transmission grids needed to supply the solar-powered electricity to other regions.

Numerous plans, both at the local government level and within the national grid company, aim to expedite grid infrastructure construction in the next 5 to 10 years. However, as observed in a previous posting, it’s not clear how these plans will accommodate the country’s increasingly ambitious renewable energy goals. Moreover, there are many coordination issues between the competitive electricity generation sector and the monopolied grid sector that require extensive market reform in the future. The Chinese government hasn’t yet signaled a clear plan on these institutional arrangements.

Let’s hope that there will be follow-up implementation plans to erase many of these uncertainties. Stay tuned for further coverage in ReVolt of China’s climate and energy actions.

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