Extremely Low Feed in Tariff Rates of 10.8c/unit seen in Bidding for Second Phase Chinese Solar Projects

China recently announced 280 MW of Solar Projects to be awarded through competitive bidding.This resulted in more than 50 groups vying for the 13 projects on offer.Like the Golden Sun Project awarded last year,I expected that these Solar Projects would result in Cutthroat Competition leading to zero to negative returns for investors.It seems that the script is playing out exactly in that manner.Sources say that one consortium has bid as low as 0.73 yuan/KwH for the Hami Project.Note such a low Feed in Tariff rate will definitely lead to losses for the investors in such a project.This electricity tariff is THE LOWEST for a solar project anywhere in the world if it is awarded.Note in the first phase of the Solar Project Awards,companies had seen negative returns from installing solar projects in China despite the some of lowest bids being rejected.Suntech,the largest Chinese Solar company had lost money while constructing one such project.However the prospect of losses has not deterred the massive SOEs of China who are hell bent on getting the first mover advantage in building Chinese projects.

The 10.8c/KwH Tariff will be almost 35% lower than the earlier project awarded in the Ningxia province.For comparison 10.8c/KwH is generally given to Wind Energy which has considerably lesser costs than Solar Energy.Parts of USA and Europe have electricity tariffs of greater than 20c/KwH at present.Such low tariffs may not be useful as they might lead to project delays if not cancellations.This will lead to further delays in the development of the Solar Energy sector in China.Note China has not implemented a national Feed in Tariff (FIT) for Solar Energy till now.These projects are supposed to provide some sort of roadmap for the authorities to bring a FIT in the future.However such irresponsible competition will not help in deciding the appropriate level of electricity tariffs.

China firms offer $0.108/kWh feed-in rate in solar tender-source – Reuters

A Chinese consortium offered to accept a grid feed-in tariff of as low as 0.73 yuan ($0.108) per kilowatt hour (kWh) in its bid for one of China’s second batch of utility-level solar power projects, an industry source said on Monday.The price, if endorsed by the National Energy Administration which organised the tender, would be more than a third lower than the 1.15 yuan per kWh that the National Development and Reform Commission set in April for four utility-level photovoltaic power stations in Ningxia region.”The low bid price for Hami might indicate they were optimistic about future development in the sector,” said the source, who also participated in the bidding.

“Central government-owned power companies were quite aggressive (in bidding),” he said, declining to be named because the final winners of the tender had yet to be determined.

Chinese companies had offered to accept feed-in rates of less than 0.7 yuan/kWh in the country’s first open tender in 2009, but Beijing awarded the Dunhuang project to a consortium led by China Guangdong Nuclear Power Corp that offered 1.09 yuan/kWh, as many industry officials doubted the lowest bid price was realistic.