China's solar industry rebounds

Installing 35 GW of solar capacity would cost around $50 billion, plus subsidies granted to solar power producers under long-term purchase agreements.

But it's uncertain how long the current strong Chinese and Japanese demand, expected to account for 40-45 percent of global installations forecast for this year, will last.

With 100 million people still living in poverty, Beijing is unlikely to keep doling out generous solar subsidies indefinitely. Previous investment in solar plants in China has been hurt by delays in subsidy payments.

Japan has already lowered solar power tariff once in 2013.

Globally, the solar industry has made significant gains in driving down costs over the last few years, but it has yet to be weaned off big subsidies. Critics say the world should hold back from large-scale solar expansion until costs come down further and conversion efficiency of solar panels improves.

Solar rush

So far solar power only accounts for a small proportion of total installed power capacity in China, the world's largest energy user, which is predominantly fired by coal.

But whilst the potential would seem to be large, a rapid build-up of solar and wind farms in western China has already created a problem.

State Grid Corp of China has been struggling to transmit power from there to population hubs in the south and east due to a lack of a comprehensive high-voltage and smart grid to harness the intermittent renewable power.

Lin Boqiang, director of the China Centre of Energy Economics at Xiamen University and an adviser to China's National Energy Administration, said he has long-term faith in China's solar power development but reckons grid access is a "tremendous challenge".

Yet generous power tariffs and sweet loans granted by China for solar development have triggered what some analysts call "solar rush" for mostly solar farms in remote western China, where sunshine is abundant.

Beijing is buying electricity from solar farm investors at up to 1.0 yuan/kilowatt hour for up to 20 years, attractive terms that offer a relatively predictable annual return of more than 10 percent.

Separately, US trade officials on Thursday opened investigations into imports of certain solar power products from China and Taiwan, a move that could have a major impact on the nation's fast-growing solar market.

In the last few weeks, Chinese solar panel makers have made a slew of announcements to develop solar farms. They expect it to become a key part of their business as it would form a stable source of demand for their products.

Trina said on December 30 that it had signed a deal to develop a mega 1-GW solar farm project in the western province of Xinjiang. It also announced a plan to build a panel factory there for the project.

Shunfeng Photovoltaic, which is buying the main unit of bankrupt former top solar panel maker Suntech Power Holdings, this month vowed to invest 80 billion yuan ($13 billion) to develop 10-GW projects - nearly 30 percent of Germany's solar installed capacity - over the next three years.

"We want to develop 3 GWs a year so we need more panel capacity," said Shunfeng chairman Zhang Yi. ($1 = 6.0502 Chinese yuan)