Launching urbanization strategy, photovoltaic targeting, trillions of markets

**Abstract** The impact of the "double anti-" measures in Europe and the United States has pushed photovoltaic (PV) companies to shift their focus toward the domestic market. Urbanization is now seen as a major opportunity, or "wind" for shareholders. Recently, the National Development and Reform Commission took the lead, with over ten ministries and commissions, including the Ministry of Finance, the Ministry of Land and Resources, and the Ministry of Housing and Urban-Rural Development, working on the draft of the National Plan for Promoting the Healthy Development of Urbanization (2011–2020). The plan aims to build more than 20 urban agglomerations, involving over 180 cities above the prefecture level and more than 10,000 towns, which could drive an investment of about 40 trillion yuan over the next decade. For the photothermal and photovoltaic industries, urbanization offers significant benefits. Cities and towns will become key areas for energy conservation, emission reduction, and green growth. A wide range of energy-saving and environmentally friendly new energy applications are expected to create numerous opportunities. According to the National Energy Administration's goal of increasing PV installed capacity during the “Twelfth Five-Year Plan” to 35GW, this means that 10GW of new PV installations will be added annually from 2013 to 2015. Li Hejun, Chairman of Hanergy Holding Group, said, “As long as there is appropriate policy support, photovoltaic building integration alone could drive a market worth 10 trillion yuan.” He added, “The spring of China’s PV application has just begun.” **Urban Strategy** In response to the urbanization trend, PV companies have positioned distributed power generation as a tool for capturing the rural market. In mid-April, Hanergy completed the world’s largest single-film thin-film solar power station in Hainan and Qinghai, with a total capacity of 50MW. This project is widely used in distributed generation, residential consumption, and ground-mounted photovoltaic power plants. According to the National Energy Administration’s “Notice on Declaring the Scaled Application of Distributed Photovoltaic Power Generation,” the plan includes developing “roof” distributed power stations in central and eastern coastal areas, and encouraging the construction of distributed solar power systems in urban industrial parks and large enterprises in central and western regions. With this context, distributed PV applications are becoming increasingly widespread. It was reported that in 2010, China’s total installed PV capacity reached 10.55GW, but in 2011, it only reached 3GW. Market expectations suggest that PV installations could reach 15GW this year, potentially driving 150 billion yuan in investment at current price levels. Li Hejun predicts that as PV technology matures and expands into rural areas, the market for photovoltaic buildings could drive 10 trillion yuan in investment over the next decade. A representative from a Jiangxi-based PV company stated in an interview that the cost of solar power generation is decreasing as a clean energy source. Compared to traditional energy sources like coal, the efficiency of solar energy conversion is improving, highlighting its cost control advantages. However, they noted that the technical conditions for distributed generation are still not fully mature. Although the market potential is vast, the industry still needs policy improvements and supporting infrastructure to truly capitalize on the opportunity. Compared to the road of urbanization, the application of solar thermal systems is more familiar. Recently, Mu Ge announced that in addition to its existing urban engineering and retail businesses, it has expanded into township retail. Urban engineering has now become part of Four Seasons Muge’s core business. Li Jun, President of the Four Seasons Muge Group, believes that urbanization provides a broader platform for solar energy and building integration, as well as for solar water heating and thermal projects in newly built or renovated public buildings. “Compared to other clean energy sources, solar energy may be the first step, and companies should reorganize and plan strategically,” he said. The company has already established nearly 2,000 first-tier dealers and over 20,000 second-tier dealers across China, covering counties and most townships. **Policy Horn** The urbanization strategy of PV companies has been recognized by the government. Recently, Shao Ning, Deputy Director of the State-owned Assets Supervision and Administration Commission, mentioned in an internal speech that overcapacity has caused losses in industries such as wind power and polysilicon. He warned that if Chinese companies fail to expand domestically and cannot enter international markets, the problem of overcapacity will persist for a long time, leading to sharper performance issues. Shao Ning emphasized that big countries should use their domestic markets to cultivate and protect their own industries. “Currently, the lack of domestic consumption hotspots and fewer profitable infrastructure projects limits the government’s ability to stimulate domestic demand. Additionally, we face various market changes: rising costs, declining competitiveness, challenges in technology sourcing, and a saturated market that requires new opportunities to develop.” To tap into the urbanization market, relevant departments are formulating supportive policies. The Ministry of Industry and Information Technology is leading a plan called “Photovoltaics to the Countryside,” aiming to promote the large-scale entry of solar PV into rural markets and prepare for future urbanization efforts. Additionally, the Ministry of Industry and Information Technology issued a draft of the “Guiding Opinions on Promoting the Healthy Development of the Solar Water Heater Industry,” signaling a push for greater concentration in the solar thermal sector. By 2015, the goal is to cultivate three companies with annual sales exceeding 3 million units. This will not only promote technological upgrades and guide consumer behavior but also encourage the urbanization of solar energy at the policy level. The draft also sets targets for the solar water heater industry, requiring its share in the overall water heater market to exceed 40% within three years, with 50% of the market being energy-efficient models. According to Zhongyikang monitoring data, retail sales of solar water heaters dropped by 32.26% in 2012 compared to the previous year. According to statistics from the National Bureau of Statistics, by 2020, China’s urban and rural housing construction area is expected to reach around 89 billion square meters. If 15% of the east, south, and west walls and 20% of the roofs are covered with solar panels, and assuming a 10% photoelectric conversion rate, the country could achieve approximately 100 gigawatts of installed capacity. At an average annual solar power generation of 1,300 kWh, this could replace 30% of the nation’s electricity demand and reduce carbon dioxide emissions by 20%. Li Jun predicts that the solar industry will continue to grow in 2012 and maintain steady development. “With the implementation of urbanization policies, major breakthroughs are expected in 2014 and 2015,” he said. He analyzed that if China’s urbanization rate reaches 60% by 2020, it would mean 10 million people moving to cities each year, making cities and towns the main battlefield for energy conservation, emission reduction, and green growth. “Urban migration will change people’s consumption habits. Urban residents consume 3.5 times more energy per year than rural residents, and three times more electricity. From a consumption perspective, urban and rural populations show a strong sense of conservation and are more proactive in using new energy.” **Caution** However, despite the growing interest in solar thermal and photovoltaic urbanization strategies, there are still concerns in the market. For example, Wang Haisheng, Chief Analyst at Xinsheng Securities’ Power Equipment and New Energy Department, told reporters that the current conditions for promoting PV in rural areas are not yet mature. There are no clear supporting measures or experiences in system construction and technical issues. “Especially in urbanization projects, line transformation often involves demolition. On the other hand, electricity sales contracts are sold directly to users, and PV companies often struggle to follow the same rules as grid companies. Policy guarantees are crucial in this process.” Another important issue is the payback period. The proposed subsidy price in the “PV On-grid Price Consultation Draft” issued by the National Development and Reform Commission was not satisfactory. According to the draft, the on-grid price in Xinjiang was adjusted to 0.85 yuan/kWh, while in Gansu, Qinghai, Ningxia, and Inner Mongolia, it was set between 0.75 and 0.85 yuan/kWh, and in Tibet, it was lowered to 0.95 yuan/kWh. Compared to the previous rate of 1 to 1.15 yuan/kWh, the latest prices have dropped significantly. Wang Haisheng believes that based on the previous subsidy rate, the dynamic payback period for PV power plants was 5 to 8 years, but with the new rates, it could extend to 13 to 16 years, potentially dampening the enthusiasm of companies planning to enter the PV power plant business. A PV company in Jiangsu noted that the PV industry itself is a high-risk, high-reward project. There is typically a four- to five-fold income gap between successful and unsuccessful projects. Therefore, distributed power generation mainly relies on government subsidies. “If distributed power generation moves to rural areas without timely and effective subsidy policies and market guidance, it could lead to differentiation among downstream projects, intensify competition among companies for quality projects, and result in a polarized situation.”

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