Just as polysilicon prices are stabilizing after hitting historic lows last year, China announced new targets for domestic solar companies that will substantially raise production capacity.
Prices hit those lows because Chinese solar manufacturers increased capacity to the extent that it caused a worldwide glut in solar components.
China's Solar Industry 12th Five Year Plan (2011-2015), released today, aims to further reduce the price of solar by increasing capacity. The goal is to reach $1,111 per kW by 2015 and $794 per kW by 2020.
It also includes targets to raise the efficiency of polysilicon cells to 19%, monocrystalline sillcon solar cells to 21% and amorphous silicon cells to 12% percent by 2015.
To get there, China is requiring leading solar companies to ramp up production to 50,000 tons of polysilicon capacity and 5 gigawatts of solar cell capacity a year by 2015.
The plan includes government support for those companies to increase annual sales and specifies that 80% of solar equipment will manufactured in China.
"In an industry that's oversupplied, that the government announces support for so much new capacity is not a positive," Sean McLoughlin, industry analyst for HSBC Holdings told Bloomberg. "The news that China's aggressive ramping up of production will continue is not helpful for Western producers and their shares."
China now supplies about half the world's solar cells and 45% of polysilicon.
In December, China raised its target for solar 50% to 15 GW by 2015.
As of 2011, China has 2 GW of solar installed, but it could still reach 15 GW in 2013. Starting this year, China plans to add about 3 GW a year, but 5-7 GW could be installed this year because of the push toward higher domestic production.
The raise in production might not lead to a higher overall production, because many smaller companies may no longer be in business in the next few years. And polysilicon levels won't be raised until the glut ends.
China' second largest wind turbine manufacturer, Xinjiang Goldwind plans to diversify into producing solar inverters to help take up the slack from weaker wind equipment demand. Last year, the wind industry also saw a steep fall in prices.
China Establishes Renewables Think Tank
China established its first renewable energy policy research think
tank yesterday, the China National Renewable Energy Center.
The Center will develop policies and strategies based on research and carry out collaborative programs internationally. It will help policymakers create a renewable energy roadmap and collect data that can be used by policymakers.
In addition to the Chinese governmnent, funding for the Center will come from the Sino-Danish Renewable Energy Development Program, a five-year joint project with the Danish
In January, China's prime minister confirmed the country will increase the amount of non-fossil fuel energy it uses to 11.4% by 2015, and will "vigorously" develop renewable energy as part of its 5-Year Plan.