In China, the Price is Right For Solar

(MoneyWatch)  Proponents of solar power in the United States may soon have reason to be green with envy over their Chinese peers. Shi Lishan, a spokesman from China's National Energy Administration, says that the country will soon pass a 1.09 yuan per kilowatt hour feed-in tariff for solar power, equal to about 16 cents, according to the Wall Street Journal.

A feed-in tariff is often an easier way to encourage renewable energy than a complex cap-and-trade scheme like the US is trying to institute. Where cap-and-trade will make all non-renewables more expensive, the tariff leaves them alone but pays more for renewable energy. That gives utilities with a choice between a new coal and solar plant the ability to decide on factors other than cost, on the basis of which coal would always win.

And I'd hazard a guess that the 16 cents figure the Chinese landed on was very carefully considered. Tariffs have been used around the world, especially in European countries like Spain and Germany. On our side of the Atlantic, a rather reckless tariff in Ontario offers 42 cents per kWh for solar power, much more than is probably necessary to make it competitive.

Most tariffs, in fact, have tended to be unbalanced, either too high or low. An offer of 16 cents per kWh, on the other hand, is right in the sweet spot for a swathe of solar thermal companies like Ausra, BrightSource and eSolar. These companies tend to be just a touch too expensive to compete with coal, with most estimates of how much they need to be paid per kWh ranging from 10 - 15 cents per kWh, provided they build in good desert land.

But the amount is probably a tiny bit low for solar photovoltaics, the typical silicon panels most people associate with solar power. Photovoltaics costs have been hurtling downward over the past year, and are probably about ready to become competitive for utility-scale generation. Having a firm figure will give an extra incentive to the most brutally efficient manufacturers -- many of which will be Chinese firms like LDK Solar and Suntech.

The new subsidy also helps explain how China anticipates having 20 gigawatts of solar power by 2020.