TABLE OF CONTENTS

List of Figures ............................................................................................................................ 4 List of Tables ............................................................................................................................. 5 1. 2. 3. China Solar Photovoltaic (PV) Market Introduction .......................................................... 6 China Solar Feed-in Tariffs Present Status and Impact ...................................................... 7 China Solar PV Market Size, 2006-2010 ........................................................................... 8 3.1. 3.2. 4. 5. 6. China Solar PV On-Grid and Off-Grid Cumulative Installed Capacity, 2006-2010 .. 8 China Solar PV On-Grid and Off-Grid Annual Installed Capacity, 2006-2010 ....... 10

China Solar PV Power per Capita, 2006-2010 ................................................................. 11 China PV Shipments, 2007-2010 ..................................................................................... 12 China Solar PV Market Segmentation.............................................................................. 13 6.1. 6.2. By Technology Capacity and Output, 2010 .............................................................. 13 On the Basis of Applications of Solar PV, 2010 ....................................................... 14

7. 8.

China Solar PV Market Competitive Landscape .............................................................. 15 China Solar PV SWOT Analysis ...................................................................................... 18 Strengths .................................................................................................................... 18 Weakenesses.............................................................................................................. 18 Opportunities ............................................................................................................. 18 Threats ....................................................................................................................... 19

9.

China Solar PV Market Future Outlook ........................................................................... 19 9.1. 9.2. 9.3. 9.4. China Solar PV Cumulative Installed Capacity, 2011-2015 ..................................... 20 China Solar PV Annual Installed Capacity, 2011-2015............................................ 22 China Solar PV Power Per Capita, 2011-2015 ......................................................... 24 China Total Electricity Demand and Solar PV Electricity Contribution, 2009-2015 25 China Macro Economic Indicators: Current and Projections ....................................... 26 Population, 2006-2015........................................................................................... 26 GDP, 2006-2015 .................................................................................................... 27 2

10.

10.1. 10.2.

11.

Appendix ....................................................................................................................... 28 Market Definition .................................................................................................. 28 Abbreviations......................................................................................................... 29 Research Methodology .......................................................................................... 31 Data Collection Methods ........................................................................................... 31 Approach ................................................................................................................... 32

11.1. 11.2. 11.3.

11.4.

Disclaimer .............................................................................................................. 33

LIST OF FIGURES
Figure 1: China Solar PV Market Size in terms of Grid Connected and Off-Grid Cumulative Installed Capacity in Percentage, 2006-2010............................................................................. 9 Figure 2: China Solar PV Market Size in terms of On-Grid and Off-Grid Annual Installed Capacity in Percentage, 2006-2010 ......................................................................................... 10 Figure 3: China Solar PV Power Installed Capacity per Capita in Watt/Inhabitant, 2006-2010 .................................................................................................................................................. 11 Figure 4: China Solar PV Shipments in Megawatt (MW), 2007-2010.................................... 12 Figure 5: China Solar PV Market Segmentation on the Basis of Applications of Solar PV, in Percentage, 2010 ...................................................................................................................... 14 Figure 6: China Solar PV Cell/Module Producers Market Share on the basis of Production or Shipment Volume in Percentage, 2010 .................................................................................... 17 Figure 7: China Solar PV Market Size in terms of Cumulative Installed Capacity in Megawatt, 2011-2015 .............................................................................................................. 21 Figure 8: China Solar PV Market Size in terms of Annual Installed Capacity in Megawatt, 2011-2015 ................................................................................................................................ 23 Figure 9: China Solar PV Power Installed Capacity per Capita in Watt/Inhabitant, 2011-2015 .................................................................................................................................................. 24 Figure 10: China Total Electricity Demand in Terawatt hour (TWh) and Contribution of Solar PV Electricity in Percentage, 2009-2015 ................................................................................. 25

LIST OF TABLES
Table 1: Present Scenario and Impact of Feed-in Tariff Plans in China Solar Photovoltaic Market ........................................................................................................................................ 7 Table 2: China Solar Photovoltaic Industry Feed-in Tariff Rates, in CNY/kWh in 2011 ......... 8 Table 3: China Solar PV Market Size in terms of On-Grid and Off-Grid and Total Cumulative Installed Capacity in Megawatt (MW), 2006-2010 ............................................... 9 Table 4: China Solar PV Market Size in terms of On-Grid and Off-Grid and Total Annual Installed Capacity in Megawatt (MW), 2006-2010 ................................................................. 11 Table 5: China Solar PV Market Segmentation by Technology Capacity and Output, 2010 . 13 Table 6: Competitive Landscape of Major Solar Photovoltaic Cell/Module Producers in China (JA Solar, Suntech, Yingli Solar and Trina Solar) ........................................................ 15 Table 7: China Major Solar PV Cell/Module Producers Production or Shipment Volume in Megawatt (MW), 2009-2010 ................................................................................................... 17 Table 8: China Solar PV Market Size in terms of Cumulative Installed Capacity in Megawatt, 2011-2015 ................................................................................................................................ 22 Table 9: China Solar PV Market Size in terms of Annual Installed Capacity in Megawatt, 2011-2015 ................................................................................................................................ 23 Table 10: China Population Trend in Million, 2006-2015 ...................................................... 26 Table 11: China Gross Domestic Product in USD Billion, 2006-2015 ................................... 27

1. CHINA SOLAR PHOTOVOLTAIC (PV) MARKET INTRODUCTION

China Solar PV industry is the second largest market behind Japan in Asia Pacific with the cumulative installed capacity of 893 MW in 2010. The installed capacity has increased over 8 times from the level of 100 MW in 2007 to 893 MW in 2010. Though the Chinese PV market has showcased phenomenal growth in the installed capacity, the local market still contributes around 4% to total PV production. The country ships over 96% of the total PV production to overseas countries. The domestic PV market has taken off in 2010 under the umbrella of national program Golden Sun. In 2009, the country announced a gamut of plans and incentives to back the growth of the solar PV market including open bidding for solar power plant licenses, the Solar Rooftop Plan and the Golden Sun China has over 400 solar PV Demonstration Projects. Such activities were directed at companies which produce over growing large-scale solar power plants and urban 23% of the PV products globally rooftop solar power systems. With this growth prospects in line, the government expects that 20 GW of cumulative installation capacity will be installed by 2020. Well, it would be difficult to achieve this target with the current shortcomings in the market. China is however definitely expected to become a Gigawatt market by 2011 driven by various national and provincial programs. There are several trends and developments which have been witnessed in the Chinese solar PV industry such as the increasing share of thin film wafer in the solar cells production due to improved conversion ratio and efficiency, gaining popularity of the administrative work business associated with the license for solar PV installations, increasing flow of capital investment in the PV equipment manufacturing and production of raw material line of business and changing competitive landscape with the evolving technology. Few challenges and opportunities await the PV manufacturers in the country. The supply chain in the country has witnessed an increase in the manufacturing capacity along with the rise of business with companies expanding via vertical integration. The insufficient capacity in the Chinese market with respect to supply chain will not be dealt in the short run and will continue to linger on in the near future. The disparity in capacity is largely because of restrictions in technology, availability of funds and others. For instance, polysilicon which is used as a raw material in manufacturing of solar cells is supplied 50% internally and the rest is imported. This has resulted in a high price of polysilicon in the country. The competition is expected to increase in the near future internally as well as externally with introduction of more technologically advanced products. Many big investors and corporate electronic giants are constantly tracking the PV industry and are looking out for ways and 6

means to enter the PV industry which will alter the competitive positioning of various players. The players which are operating in this sector are also looking out for more advanced products so as to create a niche in the market for themselves.

2. CHINA SOLAR FEED-IN TARIFFS PRESENT STATUS AND IMPACT

China is the largest consumer of renewable energy generated from solar power and hence is one of the largest markets for solar energy in the world. Government has showcased several endeavors to increase the solar PV installations every year. In 2007, the energy development plan had set an aim to increase the energy from organic resources and was seeking to increase the supply to 15% of the total energy consumption by 2020. In December 2009, changes were brought about in the law wherein it was made mandatory for electricity grid companies to purchase all the power from renewable energy generators. It is expected that in the next five year plan (2011-2015) onwards, the country will duly emphasize on the energy from renewable energy sources. Chinese government introduced the Solar Roof Plan to propel the applications of building integrated projects. In the mid of July 2009, Golden Sun was introduced in association with Ministry of Finance, Ministry of Science and Technology and National Energy Administration in which subsidies were offered for PV projects in the following two to three years. The Ministry of Finance in China reintroduced the plan in July 2011 under which the state will provide 50% of the total investment subsidies. This subsidy may increase to 70% for solar power projects in remote areas which are not presently connected to the grid. Power projects with a minimum capacity of 500 MW will be eligible for the related incentive. Government still needs to provide some more clarity on FiT for domestic installations. Table 1: Present Scenario and Impact of Feed-in Tariff Plans in China Solar Photovoltaic Market
Policy Implementation Date 1 July 2011

Present Scenario National Development and Reform Commission (NDRC) has launched a United FiT for the solar PV industry especially for grid connected systems in line to meet 5 year plan of

Impact Positive outlook; Expected to boost solar PV grid connected installations Tariff is low such that foreign investors will be limited to

building 235 million kW of power generation capacity from clean energy forms by 2015, and increasing its installed photovoltaic power capacity over the next five years to 10 GW by 2015.
Source: AM Mindpower Solutions

purchasing Chinese solar modules and inverters or using Chinese firms to build profitable projects

Table 2: China Solar Photovoltaic Industry Feed-in Tariff Rates, in CNY/kWh in 2011
Category/ Capacity (KWp) Tariff Rates, 2011, (CNY/kWh) 1-1.15; varies on the timing and location of the project

Grid Connected Power Systems

Source: AM Mindpower Solutions

3. CHINA SOLAR PV MARKET SIZE, 2006-2010

3.1. CHINA SOLAR PV ON-GRID AND OFF-GRID CUMULATIVE INSTALLED CAPACITY, 2006-2010

With the rapid demand arising from European countries, the PV industry in China has surged phenomenally. During 2006-2010, the cumulative PV installed capacity has increased at an exceptional CAGR of 82.8%. China is one of the largest solar cell manufacturers in the world China Solar PV industry is the second which contributes more than half of the global largest market behind Japan in Asia output in 2010. There are nearly 300,000 Pacific with the cumulative installed capacity of 893 MW in 2010. The individuals associated with this sector and the installed capacity has increased over 8 entire PV industry in China has generated times from the level of 100 MW in 2007 revenue of more than USD 44 billion.
to 893 MW in 2010

The PV industry in the country is becoming competitive with several local companies adapting the cell manufacturing process with the latest technologies and silicon purification. Most of the raw material used in manufacturing and the equipment used in installations are locally available. China has emerged in its position in the solar PV market as the industry has realized economies of scale with the 8

manufacturing capacity in full swing, resulting in price reductions and control on supply chain management

Figure 1: China Solar PV Market Size in terms of Grid Connected and Off-Grid Cumulative Installed Capacity in Percentage, 2006-2010
100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 2006 2007 Off-Grid
Source: EPIA, AM Mindpower Solutions

11.0%

10.8%

10.2%

9.4%

8.7%

89.0%

89.2%

89.8%

90.6%

91.3%

2008 On-Grid

2009

2010

Table 3: China Solar PV Market Size in terms of On-Grid and Off-Grid and Total Cumulative Installed Capacity in Megawatt (MW), 2006-2010
On-Grid Cumulative Installed Capacity (MW) 71 89 130 338 815 Off-Grid Cumulative Installed Capacity (MW) 9 11 15 35 78 Total Cumulative Installed Capacity (MW) 80 100 145 373 893

Years 2006 2007 2008 2009 2010

Source: EPIA, AM Mindpower Solutions

3.2. CHINA SOLAR PV ON-GRID AND OFF-GRID ANNUAL INSTALLED CAPACITY, 2006-2010

The solar PV industry has evolved in the past, in terms of its installed capacity and price of the solar PV systems. In the last 3 decades, the price of the PV solar modules has decreased from USD 78 to USD 2. This drastic decrease has been largely due to decrease witnessed in the prices of the raw material used, worldwide acceptance and the efficiency achieved in the operations. On the other hand, the annual installed capacity has increased manifold from 12 MW in 2006 to 520 MW in 2010. With plenty of resources available in the country, China has emerged as one of the major supplier of PV systems offering quality and innovative products. The country has over 400 solar PV companies which produce over 23% of the PV products globally. The number of grid connected large scale PV installations has increased in the country. It has been witnessed that the proportion of on-grid installations in the total annual installed capacity has risen over the years. The grid connected installations were 477 MW in 2010. Figure 2: China Solar PV Market Size in terms of On-Grid and Off-Grid Annual Installed Capacity in Percentage, 2006-2010
100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 2006 2007 Off-Grid
Source: EPIA, AM Mindpower Solutions

11.0%

10.0%

9.0%

8.8%

8.2%

89.0%

90.0%

91.0%

91.2%

91.8%

2008 On-Grid

2009

2010

10

Table 4: China Solar PV Market Size in terms of On-Grid and Off-Grid and Total Annual Installed Capacity in Megawatt (MW), 2006-2010
On-Grid Annual Installed Capacity (MW) 11 18 41 208 477 Off-Grid Annual Installed Capacity (MW) 1 2 4 20 43 Total Annual Installed Capacity (MW) 12 20 45 228 520

Years 2006 2007 2008 2009 2010

Source: EPIA, AM Mindpower Solutions

4. CHINA SOLAR PV POWER PER CAPITA, 2006-2010

Chinas per capita solar PV power capacity is among the lowest in the world. The country has registered a ratio of 0.7 watt per person in 2010 which was just 0.1 watt per inhabitant in 2008. This was largely due to the massive population in the country whose electricity demand is huge comparative to supply in terms of installed capacity. Though the ratio is expected to increase in the future, the solar PV market has a long distance to cover in order to penetrate the electricity consumption market. Figure 3: China Solar PV Power Installed Capacity per Capita in Watt/Inhabitant, 2006-2010
0.7 0.6 Watt/Inhabitant 0.5 0.4 0.3 0.2 0.1 0.0 2006 2007 2008 2009 2010 0.1 0.1 0.1 0.3 0.7

Source: EPIA, IMF, AM Mindpower Solutions

11

5. CHINA PV SHIPMENTS, 2007-2010

The various government programmes and the feed-in-tariffs have created a surge in the demand for PV in the country. In 2010, 520 MW of installed capacity was installed compared to only 12 MW installed in 2006. China is one of the leaders in the production of PV cells and modules but lag in the number of PV installations. Although the country has witnessed growth in the PV sector, still in terms of PV installations the country has a small share of 4% of the global PV installations as the country ships over 96% of its production to overseas market. The shipment level has increased almost 8 times from the level of 1,088 MW in 2007 to 8,000 MW in 2010.

Figure 4: China Solar PV Shipments in Megawatt (MW), 2007-2010

9,000 8,000 8,000 7,000 6,000 MW 5,000 4,011 4,000 3,000 2,000 1,000 0 2007 2008 2009 2010 1,088 2,600

Source: IEA

12

6. CHINA SOLAR PV MARKET SEGMENTATION

6.1. BY TECHNOLOGY CAPACITY AND OUTPUT, 2010

Since most of the PV products are exported to different countries, there exists a wide disparity between the production and consumption of PV products. Since most of production is exported, there is heavy dependence on foreign markets leading to susceptibility in the Chinese market. The local companies in China are also susceptible to amendment in the exchange rate and the feed-in-tariffs introduced by other countries. The country has a moderate capacity utilization ratio of 53% in terms of output of polysilicon material. China generated 45,000 tons of polysilicon wafers in 2010 comparative to the capacity of 85,000 tons. The market is currently dominated by the multi-crystalline and single crystalline technology. About 11 GW of solar cells were produced in 2010. Thin-film wafer is the new and upcoming technology which has improved the conversion efficiency ratio. Presently, 0.5 GW of solar cells were produced in 2010 with the installed capacity of 2.5 GW. The thin film wafer system is considered as the next big technology in the solar PV market which will be a game changer as it is effective and efficient in performance and cost.

Table 5: China Solar PV Market Segmentation by Technology Capacity and Output, 2010
Technology Polysilicon Silicon Ingot/Chip Si Solar Cell Thin film Cell
Source: SEMI PV Group, China Photovoltaic Industry Association

Capacity, 2010 85,000 Tons 23GW 21GW 2.5GW

Output, 2010 45,000 Tons 11GW 8.5GW 0.5GW

13

6.2. ON THE BASIS OF APPLICATIONS OF SOLAR PV, 2010

Rural electrification was the largest application of PV systems in China. Almost 50% of solar PV installations are utilized for electrifying the rural areas. With more emphasis by government on the BIPV segment, its share of 17.5% in 2010 is likely to increase in the coming years. Communication and Industrial Applications, Small solar PV appliances and ground based large scale PV power plants are other segments where PV installed capacity are utilized.

Figure 5: China Solar PV Market Segmentation on the Basis of Applications of Solar PV, in Percentage, 2010

2010
7.0% 10.5% Building-integrated photovoltaics (BIPV) Communication and Industrial Applications Small Solar PV Appliances Rural Electrification

15.0%

50.0%

17.5%

Ground-based Large-Scale PV power plant (LS-PV)

Source: SEMI PV Group, China Photovoltaic Industry Association

14

7. CHINA SOLAR PV MARKET COMPETITIVE LANDSCAPE

Table 6: Competitive Landscape of Major Solar Photovoltaic Cell/Module Producers in China (JA Solar, Suntech, Yingli Solar and Trina Solar)
Major Players Key Business Segments Business Overview Founded in 2005, JA Solar is a leading solar power products manufacturer Offers solar cells, modules and panels for residential, commercial and utilityscale power generation Has total manufacturing capacity of 2.1 GW in 2010 relative to 25 MW in 2006 Major customers include BP Solar, Solar-Fabrik and MEMC/SunEdison Headquartered in Shanghai, China (Revenue Contribution) Solar Cells (69.6%): Manufactures Monocrystalline Silicon and Multicrystalline Silicon solar cells with average conversion efficiency rate of 17.8% and 16.5% respectively Solar PV Modules (21.3%): Produces both monocrystalline and multicrystalline solar modules ranging from 155W to 240W in power output Solar Product Processing (9.1%): Provides solar product processing services to customers who supply polysilicon or silicon wafers PV Cells (0.8%): Produces a variety of monocrystalline and multicrystalline silicon PV cells PV Modules (95.3%): Produces a variety of PV modules ranging from 2 watts to 290 watts in power PV System Integration (3.9%): Involves the design, installation and FY2010 Group Revenue: USD 2.9 billion (up 71% y-o-y) FY2010 Domestic Revenue: USD 154 million (5.3% of the total Has offices in 13 countries including regional headquarters in San Francisco, California, Schaffhausen, Switzerland, and Wuxi, China Operates in major solar energy markets including Germany, Italy, Spain, France, Financials FY2010 Group Revenue: USD1.78 billion (up 211% y-o-y) FY2010 Domestic Revenue: USD 909 million FY2010 Shipments: 1.46 GW (up 187% y-o-y) Geographical Reach Operates 2 solar cell manufacturing facilities in Ningjin, Hebei Province and in Yangzhou, Jiangsu Province Recently established a PV module production facility in Fengxian, Shanghai, with an annual capacity of 500 MW

Founded in 2001, Suntech design, develop, manufacture and market a variety of PV cells and modules, including a broad range of valueadded BIPV products Has shipped over 15 million panels since inception and has installed solar modules in over 80 countries Has PV Cell and module

15

manufacturing capacity of 1,800 MW in 2010 Headquartered in Wuxi, Jiangsu province, China and employs over 20,200 people

testing of PV systems; provide this services through subsidiary, Suntech Energy Engineering

revenue) FY2010 Shipments: 1.572 GW (up 123% yo-y)

Benelux, Greece, the US, Canada, China, the Middle East, Australia and Japan.

Yingli Green is leading photovoltaic product manufacturers which design, manufacture and sell PV modules and install PV systems Has manufacturing capacity of over 1,000 MW for each of crystalline polysilicon ingots and wafers, PV cells and PV modules in 2010 Company sells PV modules under brand names, Yingli and Yingli Solar, to PV system integrators and distributors

PV Cells: Produces PV Cells to use in the production of PV modules; Company purchases a small amount of PV Cells from third party to meet the requirement PV Modules (98.2%): Produces Monocrystalline and multicrystalline PV modules with an average output ranging from 150 to 270 watts Integrated PV Systems (1.8%): Produces PV systems and also design, assemble, sell and install stand-alone PV systems for lighting systems, mobile communication base stations and residential applications Solar PV Modules: Produces standard monocrystalline PV modules ranging from 165 W to 185 W in power output and multicrystalline PV modules ranging from 215 W to 240 W in power output for use in a wide range of residential, commercial, industrial and other solar power generation systems

FY2010 Group Revenue: USD 1.89 billion (up 72.3% y-o-y) FY2010 Domestic Revenue: USD 113 million (up 127.1% y-oy) FY2010 PV Modules Sold: 1,061.6 MW (up 102% yo-y)

Markets products to Germany, the US, Italy, China, Spain, the Netherlands, Greece, Czech Republic, France, the United Kingdom, South Korea and Japan

Founded in 1997, Trina Solar is leading manufacturer of mono and multicrystalline solar modules Has annual manufacturing capacity of ingots and wafers of approximately 750 MW and cells and modules of approximately 1,200 MW in 2010 Serves customers for an off-grid and on-grid residential, commercial, industrial and utility scale applications

FY2010 Group Revenue: USD 1,857.7 million FY2010 PV Modules Shipments: 1,057 MW (up 164.9% y-o-y) Average Selling Price: USD 1.75 per watt

Operates in Switzerland, US, Japan, China, Madrid, Munich, Milan, San Jose, Seoul, Tokyo and Shanghai Markets solar products in the US, Belgium, Germany, Spain, Italy, Australia, India, China, the Czech Republic, France, Israel, Japan and South Korea

16

 Headquartered in Changzhou, China and employs 12,863 people

Source: Company Reports, AM Mindpower Solutions

Figure 6: China Solar PV Cell/Module Producers Market Share on the basis of Production or Shipment Volume in Percentage, 2010
10.6% 2.9% 3.5% 4.4% Trina Solar China 6.1% Solarfun* Jinko Solar China* 18.6% 6.8% China Sunergy Ningbo Solar* Changzhou Yijing* 13.5% 13.5% Others 20.0% Suntech Power JA Solar Yingli Green Energy

Source: IEA, Company Reports, AM Mindpower Solutions Note: * 2010 estimates

Table 7: China Major Solar PV Cell/Module Producers Production or Shipment Volume in Megawatt (MW), 2009-2010
Solar PV Cell/Module Producers Total PV Cells/Modules Production or Shipment Volume (MW), 2009 739 509 525 399 Total PV Cells/Modules Production or Shipment Volume (MW), 2010 1,572 1,462 1,062 1,057

Suntech Power JA Solar Yingli Green Energy Trina Solar China

17

Solarfun* Jinko Solar China* China Sunergy Ningbo Solar* Changzhou Yijing* Others
Source: IEA, Company Reports, AM Mindpower Solutions Note: * 2010 estimates

220 120 190 140 135 504

535 480 344 275 225 831

8. CHINA SOLAR PV SWOT ANALYSIS

STRENGTHS Positive and robust national and regional subsidy program including tax rebates, incentives and soft loans Easy administrative and regulatory policies for obtaining solar power plant licenses Worlds leading supplier of solar PV products and cost effective solar technology to western European markets

WEAKENESSES Immature and small domestic solar PV market High dependency on exports to drive the growth

OPPORTUNITIES Rich solar power resources with average annual solar radiation level of over 5,000 mega joules (MJ) per square meter and 66% of the country's area receiving over 2,200 hours of sunshine per year Increasing investment from government and foreign players in on-grid, building mounted and ground mounted systems

18

THREATS Rising rivalry from other Asia Pacific countries in the price sensitive solar PV market Declining demand from Europe expected to take a toll on export dependent solar PV market

9. CHINA SOLAR PV MARKET FUTURE OUTLOOK

China is expected to emerge as a prominent country with respect to manufacturing solar PV products. The dominance of European countries and the US are expected to fade away with rise of China as the epicenter of solar manufacturing. The low cost of production backed by technological advancement are some of the factors which are creating a share for the Chinese competitive products. The soaring requirement of various PV products such as inverters and batteries in 2010, made Chinese PV industry ramp up its production. The effect of increased production is being felt in 2011 and beyond as the excess production will lead to a reduction in the price of the components. Cheap products on offer are likely to stir the demand globally. The cheap Chinese products will exert more pressure in the market in terms of pricing of products and are also expected to improve its technology in the coming years. It is also expected that consolidation may take place in the industry as the market is getting saturated, with number of players increasing the competition. Financial and credit markets worldwide experienced unprecedented deterioration in 2008 and early 2009. Due to the global economic downturn and a concurrent decrease in consumer demand, China experienced a slowdown in its economic growth during the second half of 2008 and early 2009. Consumption in general was adversely affected during that downturn in the global economy. Although the Chinese economy has recovered recently, it is doubtful whether such recovery will continue for the remainder of 2011 and beyond. Any recurrence of a global financial crisis may cause a further slowdown in its economy. These changes in macroeconomic conditions have, had, and are expected to continue to have, an adverse impact on the business and operations. These factors may also intensify competition for market share. Improvements in the economy and general business conditions will depend on the extent to which government policies succeed in addressing fundamental weaknesses in the markets, restoring consumer confidence and increasing market liquidity in an adequate and timely manner. Any recurring weakness in the global economy or in the economy of China may materially and adversely affect the revenues. 19

There is huge potential for the growth of the PV market in the country. Although the market for PV cells and modules is the largest in the world but there is huge scope in the PV installation market. Most of the PV products produced in China are exported to European countries which have led to an increasing demand for PV products. The local PV manufacturers needs to start targeting the local market for their product as it will be a major market in the coming years. The government should introduce new ways and means in terms of policies and recommendations to sustain the growth of PV market. The processes should be streamlined with clear understanding of the implementation and evaluation of different events. More incentives need to be introduced either by subsidy or feed-in-tariff which will have a positive bearing on the market. With abundance of space available, rooftop and BIPV installations should be encouraged. Most of the projects are run by state run companies. Most of the PV business is operated by government firms and there are hardly any projects run by private enterprises. In order to promote healthy growth of the PV industry it is highly recommended that the market should be more diverse with local players (both public and private companies) and foreign players.

9.1. CHINA SOLAR PV CUMULATIVE INSTALLED CAPACITY, 2011-2015

China Solar PV market has witnessed major growth in production of solar PV cells, modules and panels in 2010. The country is the largest exporter of solar PV systems to Europe and other countries with a commanding market share. The domestic market on the other hand is still underdeveloped and hence requires a major impel in the growth. The country has larger proportion of small scale residential power projects till date. With the government initiative on the commercial power projects, investors focus has shifted towards large scale grid connected commercial power projects. It is expected that with this trend line along with the government national and provincial program, the solar PV installations will increase phenomenally in the country. Under the normal business conditions, it is expected that new players will enter in the industry and existing players will consolidate resulting in the influx of investment for the solar PV projects. The economies of scale in terms of low cost of solar PV power systems along with the increased preference for improved thin film wafer technology will aid the investors to achieve the grid parity in the long run. It is expected that cumulative solar PV installed capacity will incline to 1,650 MW by 2011 and to 10,610 MW by 2015. 20
With governments initiative on commercial projects along with investors targeting big grid connected projects, the Chinas PV installations are expected to increase tremendously

The worst case scenario signifies that China will face stiff competition from other Asian solar PV systems manufacturing countries such as Taiwan and South Korea resulting in the decline in market share of exports in the country. Additionally, increasing pressure on European solar PV markets due to the reduction in the tariff rate will result in low demand for solar PV systems in the future. Since the domestic market contributes a marginal proportion to the total solar PV capacity, the decline in the exports will affect the industry. Hence, the cumulative installed capacity in this situation will increase to 1,276 MW in 2011 and will reach 6,930 MW by 2015. With Chinas commitment to cut down carbon emission per unit of the GDP by 40 to 45% by 2020 in comparison to 2005 levels ahead of the Copenhagen climate summit, the country is expected to face increased pressure to reduce its dependency on conventional sources. Hence under the best case scenario, it is expected that government will provide a major impel in the future in terms of new incentive plans for investors for investing in large scale commercial projects along with residential installations. Under this situation, the cumulative installed capacity is expected to increase to 1,980 MW in 2011 and to 17,934 MW by 2015.

Figure 7: China Solar PV Market Size in terms of Cumulative Installed Capacity in Megawatt, 2011-2015
20,000 18,000 16,000 14,000 12,000 MW 10,000 8,000 6,000 4,000 2,000 0 2011 2012 Worst Case
Source: AM Mindpower Solutions

2013 Base Case

2014 Best Case

2015

21

Table 8: China Solar PV Market Size in terms of Cumulative Installed Capacity in Megawatt, 2011-2015
Years Cumulative Installed Capacity (MW) Worst Case 2011 2012 2013 2014 2015
Source: AM Mindpower Solutions

Base Case 1,650 3,120 5,180 7,670 10,610

Best Case 1,980 3,967 6,975 11,155 17,934

1,276 2,290 3,780 5,350 6,930

9.2. CHINA SOLAR PV ANNUAL INSTALLED CAPACITY, 2011-2015

Under the base case scenario, the cumulative capacity is expected to breach a Gigawatt benchmark with annual installations of 757 MW in 2011. The capacity is expected to incline with the prevailing situation in the country resulting in an increase to 10,610 MW by 2015. Under the worst case scenario, increasing pressure on the European solar PV markets and propelling other Asian countries will eat up the market share of China in exports and will affect the annual installations in the country. In such situation, the annual installed capacity is expected to decline marginally to 383 MW in 2011. However, it is expected that market will soon stabilize as the domestic market will drive the growth of the solar PV industry. Hence, the annual installed capacity will increase to 1,014 MW in 2012 and to 3,200 MW in 2015. The best case scenario assumes compelling infusion of capital investment in the market along with decrease in solar PV systems prices resulting in fast adoption to clean renewable electricity over other conventional sources of electricity. This will drive the grid parity in the country resulting in an increased demand for solar PV installations. Hence, in this case, the installed capacity will increase by 1,087 MW in 2011 to cumulative installations of 1,980 MW.

22

Figure 8: China Solar PV Market Size in terms of Annual Installed Capacity in Megawatt, 2011-2015
6,000 5,000 4,000 MW 3,000 2,000 1,000 0 2011 2012 Worst Case
Source: AM Mindpower Solutions

2013 Base Case

2014 Best Case

2015

Table 9: China Solar PV Market Size in terms of Annual Installed Capacity in Megawatt, 2011-2015
Years Annual Installed Capacity (MW) Worst Case 2011 2012 2013 2014 2015
Source: AM Mindpower Solutions

Base Case 757 1,470 2,060 2,490 2,940

Best Case 1,087 1,987 3,008 4,180 6,779

383 1,014 1,490 1,570 1,580

23

9.3. CHINA SOLAR PV POWER PER CAPITA, 2011-2015

China solar PV power per capita ratio is expected to witness a major incline along with an increase in the installed capacity. The ratio will however remain low as compared to the average ratio in Asia Pacific and to that of Japan and Australia. Under the base case scenario, ratio will reach 7.7 watt per person by 2015. The expected growth is based upon the China current trend growth along with the development of the domestic market. Under the best case, the per capita installed capacity will increase to 1.5 watt in 2011 and will reach to 13.0 MW by 2015, at an expected 5 year CAGR of 81.3%.

Figure 9: China Solar PV Power Installed Capacity per Capita in Watt/Inhabitant, 2011-2015
14 12 10 Watt/Inhabitant 8.2 8 6 4 2 0 2011 2012 Worst Case
Source: AM Mindpower Solutions, IMF

13.0

7.7

5.1 3.8 1.5 0.9 1.2 1.7 2.3 2.9 2.8 3.9

5.6

5.0

2013 Base Case

2014 Best Case

2015

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9.4. CHINA TOTAL ELECTRICITY DEMAND AND SOLAR PV ELECTRICITY CONTRIBUTION, 2009-2015

Electricity demand in China has grown at a rapid pace in the past. It was registered at 2,783 TWh in 2010 with solar PV contributing approximately around 0.20%. It is expected that in 2011, total electricity demand will increase to 2,914 TWh while solar PV market share in the electricity consumption will increase to 0.24%. Government consistent effort and support to promote new solar PV projects in order to reduce carbon gas emission will result in increased adoption of clean electricity, though at a higher price comparative to conventional sources. This effort is likely to increase the contribution of solar PV in the total electricity generation and consumption. The electricity demand is expected to grow at an estimated CAGR of 5% and will reach to 3,504 TWh by 2015 with solar PV contribution of 0.51%.

Figure 10: China Total Electricity Demand in Terawatt hour (TWh) and Contribution of Solar PV Electricity in Percentage, 2009-2015
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2009 2010 2011E 2012E 2013E 2014E 2015E 0.16% 0.10% 0.00% 0.24% 0.20% 0.20% 0.29% 2,652 2,783 2,914 3,052 3,196 3,346 3,504 0.51% 0.50% 0.40% 0.30% 0.60%

0.42% 0.35%

Electricity Demand (Thousand GWh)

% of PV Electricity (Global Average)

Source: SEMI PV Group, China Photovoltaic Industry Association

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10.

CHINA MACRO ECONOMIC INDICATORS: CURRENT AND PROJECTIONS

10.1. POPULATION, 2006-2015

China is the leading country in carbon emission which generates about 7,031,916 thousand metric tonnes of annual CO2 emissions with the market share of 23.33% in the global emissions. This indicates that the growing demand for energy from the world most populous country contributed the largest to carbon emissions. China became the worlds largest consumer of energy (18% of the total) when its consumption increased by 8% in 2009 and from 4% in 2008. Oil and coal are still the leading sources used to generate electricity though their market share has reduced over time. The government is taking stringent actions to reduce the population growth and energy reliance on these sources by aiding renewable energy sources power projects. The country has witnessed several solar power projects in the last 3 years and is expected that trend will continue in the coming years. The per capita emission is also expected to reduce in China with the fast pacing growth of non-conventional sources and with reduced population growth. The Chinese population is expected to increase to 1,375.3 million by 2015. Table 10: China Population Trend in Million, 2006-2015
Years 2006 2007 2008 2009 2010 2011 2012 2013 2014 Population (Million) 1,314.5 1,321.3 1,328.0 1,334.7 1,341.4 1,348.1 1,354.9 1,361.6 1,368.4

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2015
Source: IMF

1,375.3

10.2. GDP, 2006-2015

Chinas is the worlds largest manufacturer of PV panels, exporting over 96% of the production to overseas country. The country is one of the biggest harvesters of the sun's energy. The market has seen strong incentive for solar farms and rooftop panels which will come from the governments USD 640 billion economic stimulus fund. The growing GDP and government expenditure is one of the major drivers for the strong economic stimulus. As the economic condition of China will improve, the government will endeavor further to increase the market share of renewable sources in the total electricity demand. The worlds 2nd largest economy and worlds most populous country has great potential for its renewable industries. By 2020, the government is expected to raise the share of renewable energy (excluding hydroelectric power) in the total energy contribution to 6% from the present 1.5%. Table 11: China Gross Domestic Product in USD Billion, 2006-2015
Years 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: IMF

GDP (USD Billion) 2,712.9 3,494.2 4,520.0 4,984.7 5,745.1 6,422.3 7,169.7 8,000.5 8,935.7 9,982.1

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11.

APPENDIX

11.1. MARKET DEFINITION

Asia Pacific: The region includes Australia, China, Japan, South Korea and Taiwan Grid Parity Point: It is the point where the electricity generation from other sources is equivalent (in terms of cost) as the electricity generated from grid power. Conversion Efficiency: Defined as the ratio of electrical energy generated by the cell to the sunlight energy that reaches the cell. The conversion efficiency of PV cells is largely determined by the quality of wafers used to manufacture the solar PV cells, which is, in turn, is ascertained by the combination of different types of polysilicon raw materials used in the ingot casting process. Peaking Capacity: It is defined as the maximum electricity-generating potential of a photovoltaic cell or panel Feed in tariff: The price per unit of electricity paid by a utility or supplier for renewable electricity purchased from private generators. The regional or national electricity utilities are mandated to purchase renewable electricity at above market rates set by the government Grid-Connected PV system1: A PV system in which the PV array acts as a central generating plant, supplying power to the grid Off-grid PV System1: System installed in households and villages that are not connected to the utility grid. Usually, a means to store electricity is used. It is also known as "stand-alone photovoltaic power system. Worst Case Scenario: The worst case scenario assumes a market behavior with a major feed-in tariff (FiT) cut or no enforcement of expected FiT proposal while assuming increasing competition or increasing cost of the solar equipment in the market. Base Case Scenario: The base case scenario indicates current business in continuity market behavior with the equitable persistence of current feed-in tariff aligned with the Photovoltaic system prices but with no major impel from government in terms of reinforcement of existing support schemes. Best Case Scenario: This scenario assumes the initiation or continuation of feed-in tariff complemented with a favorable political impel to regard photovoltaic as a major power source in the foreseeing future. This will be accompanied with a removal of futile administrative barriers and the streamlining of grid connection procedures.
Source:1. PV Employment.org

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11.2. ABBREVIATIONS

AC: Alternate Current ADB: Asian Development Bank ASEI: Asia Solar Energy Initiative BIPV: Building Integrated Photovoltaic CAD: Canadian dollar CDTE: Cadmium Tellurid CIGS: Copper Indium Gallium Selenide DC: Direct Current DIA: Denuncia di Inizio Attivita EEG: German Renewable Energy Sources Act ERO: Energy Regulatory Office EU: European Union FIT: Feed-in-Tariff GHG: Green House Gases GSE: Gestore Servizi Energetici SpA GW: Gigawatt INMETRO: Institute for Metrology, Standardization and Industrial Quality IRR: Internal rate of return KW-dc: Kilowatt direct current KWp: Kilo Watt Peak LED: Light-Emitting Diode METI: Ministry of Economy, Trade and Industry MJ: Mega joules MW: Megawatt PIDA: Photonics Industry & Technology Development Association 29

PV: Photovoltaic REC: Renewable Energy Certificate RES: Renewable Energy Sources RESOP: Renewable Energy Standard Offer Program RIPV: Roof-integrated Photovoltaics ROW: Rest of World RPS: Renewable Portfolio Standards TWD: Taiwan dollar V: Volt W: Watt y-o-y: Year on Year

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11.3. RESEARCH METHODOLOGY

Several statistical methods such Covariance, Correlation, Regression and Coefficient of Determination (R square) analysis have been used to assess the industry performance and analyze the future outlook of the industry. Correlation analysis is a measure of degree of association between two set of quantitative data. Correlation coefficient describes the direction and strength (both positive and negative) of association between the dependent variable and independent variables and overcome the shortcomings of covariance analysis. Regression analysis helps to calculate the value of one variable from known or assumed values of other variables related to it. The report has independently studied the cause and effect relationship between dependent and independent variables and has formulated the regression coefficient explaining the estimated change in the response variable due to a unit change in the corresponding explanatory variable, conditional on the other explanatory variables remaining constant. R Square is the coefficient of determination that represents the proportion of total variation in the dependent variable that is accounted for by the variation in the factors. In simple terms, it explains the validity of the independent variables and reflects the degree of influence independent variables have on the dependent variables. The report has analyzed several socio-economic, demographic, political, and regulatory market factors which directly or indirectly affect the industry performance by indicating their degree of impact in the cause and effect relationship between them. The reason for selected these macro-economic and industry factors has also been explained.

DATA COLLECTION METHODS In terms of data collection, we have used both primary and secondary data sources. Secondary Data Sources: Secondary data sources includes the analysis of existing macro economic and demographic factors, obtained from national statistics of several regions and countries and from magazines, journals and online articles The secondary data sources are used to form the initial perception and contention on several forces playing their role in determining the future growth in the industry. Primary Data Sources: Structured interviews are conducted through telecon with several industry veterans including major decision makers of companies operating in the sector, representatives of several solar PV associations and research institute such as EPIA, Chinese Renewable Energy Association. These interviews help the research team to authenticate the 31

data collected from secondary data sources and to reject or accept the hypothesis regarding the future projections.

APPROACH Our research team follows a Top-down approach for the future projections in which they first study the effect of economic factors and then industry factors on the sector. This approach indicates the several independent macro-economic and industry variables and their degree of relationship with the sector. The industry factors and their sensitivity have been discussed in the regional solar photovoltaic market future outlook.

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11.4. DISCLAIMER

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