China to exceed solar power installing target, UBS says costs fall and transmission becomes efficient

China will exceed its target for installing solar power as costs decline and transmission becomes more efficient, UBS said today.

While the National Energy Administration pledged last year that China’s installed solar power capacity will total at 110 gigawatts by 2020, the actual amount may rise to 225 gigawatts as the nation is adding 37-39 gigawatts annually, said Alex Liu, an analyst specializing in energy and public utilities at UBS.

China has installed 77.42 gigawatts of solar power by the end of last year, while adding 37-39 gigawatts every year from 2017 to 2020 encouraged by efforts to improve transmission efficiency while costs fall, Liu said.

In the first half of this year China added 23.6 gigawatts of installed solar capacity, up 34.2 percent from a year ago. This has already surpassed expectations as many analysts predicted at the start of the year that China may add only 20-25 gigawatts for the whole year, Liu said.

The installation hasn’t slowed, as polysilicon producers such as Tongwei Group announced they are producing at full capacity until September. Polysilicon is the raw material for solar panels.

The upbeat mood was helped by the average 15 percent annual fall in the cost of erecting solar farms, given that solar cells cost US$1.4 per watt in 2010, while producers only paid 56.8 US cents per watt for them in 2015, said China Power Enterprise Management, a magazine run by China Electricity Council.

The decline has exceeded the pace of the government cutting subsidies for solar plants.

The feed-in-tariff for solar plants this year is below 0.75 yuan (11 US cents) per kilowatt-hour, down from 0.89 yuan per kilowatt-hour in 2016.

By 2020, solar power generation cost could be equal to that of thermal power at around 0.37 yuan per kilowatt-hour, which means solar plants don’t need subsidies to ensure profitability, he added.

Meanwhile, China is also improving electricity transmission efficiency to boost the use of solar power, which would also increase its demand.

Between this year and next year China will add nine ultra high voltage transmission lines to boost the power distribution efficiency, according to the State Grid Corp.

As well as the largest solar power producer, China is now the biggest consumer as it accounts for nearly 40 percent of the growth in world demand annually, Liu said.