Qinghai sets sights on solar leadership
Qinghai, one of the mainland's least-developed provinces, is taking advantage of being the largest one - excluding autonomous regions - and aims to become a national leader in solar power production.
The province, known for tourism, fertiliser and agriculture rather than its manufacturing prowess, also wants to take advantage of the planned construction of a vast number of solar farms to build a sizeable solar panel and components production industry.
Qinghai is at a disadvantage in terms of technology, human resources and access to funding enjoyed by the big solar panel and parts makers in eastern China who sell to world markets. But it has set its sights on becoming a leader in the domestic market.
The province's relative proximity to Tibet, Xinjiang, Inner Mongolia, Ningxia and Shaanxi, whose solar energy resources are the richest in the nation, means shorter transportation distances and cost competitiveness in supplying solar equipment compared to the east.
'Qinghai's ambition is to become the nation's largest solar power generation base and a key solar equipment supplier with a complete supply chain,' said Zheng Yuming, vice-director of the East River Industrial Park in the provincial capital of Xining. It is the largest of the city's four industrial parks by output value, focusing on the production of solar equipment, parts and raw materials.
'This used to be part agricultural and part waste land,' he said, pointing to the western section of a model of the industrial park housed in an exhibition centre. 'It is now part of the first industrial park in Qinghai endorsed and backed by the central government.'
Qinghai, with a land mass slightly larger than France, is sitting on the eastern section of the Qinghai-Tibet plateau. It is blessed with ample sunshine that averages over 3,000 hours a year, the second-longest in China after Tibet.
This is partly due to its average elevation of over 3,000 metres and partly to its dry weather. With less than 400mm of annual rainfall, it has stronger ultraviolet radiation than China's central and southern plains.
The advantages are offset by the fact that the province only has 5.5 million people, with 2 million living in the capital. It also has harsh weather that see temperatures often dipping to below -15 degrees Celsius in the winter and strong sand storms in spring. Its per capita economic output ranked 22nd out of the nation's 31 administrative regions.
Such conditions have made it hard for the province to attract and retain talent. Long dependent on central government handouts, Qinghai has been an ethnic melting pot for many centuries. Currently, 54 per cent of the population is made up of Han Chinese, 21 per cent Tibetans, 16 per cent Islamic Hui people and 8 per cent other minorities.
Recently, Beijing has issued a document giving solar power projects in Qinghai a favourable power price of 1.15 yuan (HK$1.38) per kilowatt-hour, according to Qinghai New Energy (Group) chairman Zhang Zhimin. This followed a similar directive last year giving the same power price to four projects in neighbouring Ningxia autonomous region.
The policy for Qinghai is only temporary, covering projects that are completed by the end of September. But Zhang said it had already attracted enough interest from developers to ensure 300 megawatts of solar farm installation before year-end, making Qinghai the largest solar power production base in the nation. China had 900MW of installed solar power capacity at last year's end.
Project developers have called for fixed-subsidised power prices for solar projects across the nation. Beijing has for the past two years dragged its feet on the issue. It fears the subsidies would be unaffordable if the prices it gives are too favourable, or it will find no takers for projects if it set prices too low.
Instead, the central government in the past two years launched two rounds of open tenders in a bid to find the 'right' market prices. But state-owned energy firms won the projects with loss-making power price bids that range from 0.73 yuan to 1.09 yuan per kWh. These huge companies were motivated mostly by their need to meet clean energy development quotas imposed by Beijing.
At 1.15 yuan per kWh - and with a 20 per cent plunge in solar panel prices since the start of this year - the State Development & Investment Corp's solar farm development unit in Qinghai's Geermu region said it could make a return on investment of over 7 per cent on its 10MW project.
Hsu You-yuan, chief executive of Hong Kong-listed Solargiga Energy, which makes solar panels parts, said its 20MW plant in Geermu could achieve a return that exceeded 8 per cent.
Still, the future of Qinghai's solar industry will depend on Beijing's subsidy policies. It will also depend on the speed at which state-owned State Grid Corporation can build new power lines to send electricity from new solar farms in remote regions to consumption centres.
Ray Lian Rui, a Shanghai-based analyst at Untied States-based industry consultancy Solarbuzz, said due to the small size of the domestic market, most of the power generated from Geermu would need to be connected to high-voltage power lines to be sent to far away customers in other provinces.
Qinghai has 12,500MW of power generation capacity, and aims to have 2,000MW of solar farms by 2015, according to Zheng.
Zheng said State Grid was spending tens of billions of yuan to build ultra high-voltage power lines and related transformer stations between Geermu and Xining by the end of next year.
The rich hydro power resources of the province - home to the sources of the Yellow, Yangtze and Mekong rivers - means it can store excess energy generated during the day from solar farms by pumping water upstream. Then it could generate power at night by releasing it.
Qinghai is blessed with ample sunshine that averages over this number of hours a year, the second-longest in China after Tibet