Strategies for Financing Small-Scale Solar Power Plants

Financing Mechanisms for Solar PV Distribution in China

Wang Sicheng
Energy Research Institute, NDRC June 7, 2012 Manila

Sectors of PV Utilization

Rural Electrification

Industry & Commun.

Solar Products

PV Buildings BIPV&BAPV

LS-PV in Gobi - Desert

200MW PV Power Plant by Yellow-River Hydropower

The largest PV power plant in the world, 2011-10-29

Cost Reduction of PV in Last 6 Years

Year Cumulative InstallationGWp Module PriceYuan/Wp System PriceYuan/Wp Lifetime of PV ModuleYear Reasonable Tariff of PV (Yuan/kWh)
Module Price
Average Selling Price (Yuan/Wp)
70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2007 2008 2009 2010 2011 2012

2007 0.10 36.0 60.0 20 3.20

2008 0.14 30.0 50.0 25 3.00

2009 0.30 19.0 35.0 25 2.50

2010 0.80 13.0 25.0 30 2.00

2011 3.30 9.0 17.5 30 1.15

2012 8.30 6.0 12.0 >30 1.00

System Price

83% of PV module price has been reduced during last 6 years; 80% of PV system price has been reduced during last 6 years.
Year

Cost of PV is still higher than other RE

Power Source Coal-Fire Power Gas Power Nuclear Power Wind Power Biomass Power Solar PV Capital Cost (Yuan/kW) Tariff (Yuan/kWh) 4000-5000 4500 12000-15000 6000 6000 12000 0.35-0.45 0.50-0.60 0.40-0.50 0.51-0.61 0.60-0.70 1.00-1.30

1. The reasonable tariff of PV still higher than other power sources (nearly double), so subsidy is required currently. 2. So, financing mechanism is very important.

Incentives for PV Rural Electrification

1. PV Supply for Remote Villages 70 - 100% of capital investment financed by central and local government (poverty alleviation); The left cost will be born by project developer and allow to charge tariff to the end users; For centralized village power systems, government provide 4000 Yuan/kW per year to subsidy battery replacement and afterword services.

2. Solar Home Systems 50 - 70% of capital investment financed by central government and the left is born by end users; The afterward service and replacement of battery need to be paid by the end users after warrantee period.

Solar Home Systems

Centralized PV Station for Villages

The Tibetan Kids and PV Plant

Who will finance battery replacement for centralized PV stations?

Solution for Rural Electrification

SHS: All barriers relative with SHS, cost and quality, even afterward services, can be removed by commercial way. Government needs to give support mainly in quality control, training and establishing service networks.
Village Power System: Government should give financial support not only to capital investment but also to the afterward service and battery replacement. RESCO is needed and to be selected to take charge of afterward services and technology support for at least 15 years. EPC Co. and RESCO should be bound together and be selected through bidding. RESCO shall be responsible for not only system installation and also afterward service.

PV Market in China (2004-2011)

Year Off-Grid (MW) 2004 8.8 2005 7.4 2006 9 2007 17.8 2008 19 2009 18 2010 25 2011 20

Grid-Tied (MW)
Annual Inst. Cumulative (MW)

1.2
10 62.1

1.5
7.9 70

1
10 80

2.2
20 100

21
40 140

142
160 300

475
500 800

2480
2500 3300

3000

Installed PV (MW)

2500 2000 1500 1000 500 0 2007 2008 2009 Year 2010 2011 off-grid PV grid-tied PV

Incentive Policies for Grid-Tied RE

22 Billion Yuan per Year

10 Billion Yuan per Year

Financing for Grid-connected PV Projects

Grid-connected PV projects will enjoy FIT, but the capital investment must be borne by project developers. It is difficult for private companies. The LS-PV power plants usually have capacity larger than 20MW, the capital investment is at least 200 Million Yuan; Bank should be willing to issue loan to the project developers if they have PPA with grid-company, but Bank needs to be guaranteed if the PV plants can reliably generate electricity for 15-20 years as they designed. So, insurance will be the key factor to assure the quality to the Banks; The evaluation standard for long-term PV power generation is the key to persuade Insurance Company. (Technical Evaluation is required: solar resources, design, quality of hardware, quality of construction, degradation, efficiency, etc..)

Thank You for Your Attention!