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 focus more on the domestic market, with urbanization becoming a key driver for growth. Recently, the National Development and Reform Commission led the initiative, and over ten ministries including the Ministry of Finance, the Ministry of Land and Resources, and the Ministry of Housing and Urban-Rural Development are preparing the draft for the National Plan for Promoting the Healthy Development of Urbanization (2011–2020). The plan suggests the development of more than 20 urban agglomerations, over 180 cities at or above the prefecture level, and more than 10,000 towns, potentially driving a 40 trillion yuan investment in the next decade. For the solar thermal and photovoltaic industry, urbanization brings direct benefits. Cities and towns will become the main battlegrounds for energy conservation, emission reduction, and green growth, creating numerous opportunities for new energy applications that are energy-efficient and environmentally friendly. According to the National Energy Administration’s goal during the “Twelfth Five-Year Plan,” the installed capacity of photovoltaics is expected to reach 35GW, meaning an additional 10GW of PV installations each year from 2013 to 2015. Li Hejun, Chairman of Hanergy Holding Group, stated, “As long as there is appropriate policy support, building-integrated PV 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 see distributed power generation as a key 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 solar power plants. According to the National Energy Administration’s “Notice on Declaring the Scaled Application of Distributed Photovoltaic Power Generation,” the plan emphasizes the large-scale deployment of distributed power systems, especially in the central and eastern coastal areas and inland regions. It encourages the construction of distributed solar power systems in urban industrial parks and large enterprises. In this context, distributed photovoltaic applications are becoming more widespread. In 2010, China’s total installed capacity was 105.5GW, 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. Li Hejun predicts that as photovoltaics expand into rural areas, the market for PV buildings could drive 10 trillion yuan in investment over the next decade. A representative from a Jiangxi-based PV company noted that the cost of solar power generation is decreasing, making it more competitive compared to traditional energy sources like coal. However, they also pointed out that technical conditions for distributed generation are still not fully mature, and while the market potential is vast, policy improvements and infrastructure development are essential for real success. Compared to the PV urbanization path, solar thermal applications are more familiar. Recently, Mu Ge announced that urban engineering, retail, and township retail have been incorporated into its core business. Li Jun, President of Four Seasons Muge Group, believes that urbanization provides a broader platform for solar integration, including solar water heating and thermal projects for public buildings. He emphasized that solar energy may be the first step in clean energy adoption, urging companies to restructure and plan strategically. **Policy Horn** The government has recognized the urbanization strategy of PV companies. Shao Ning, Deputy Director of the State-owned Assets Supervision and Administration Commission, warned that overcapacity in industries such as wind power and polysilicon has caused losses. He stressed the importance of using the domestic market to support Chinese companies, noting that without sufficient domestic demand, overcapacity issues will persist. To stimulate the urbanization market, various departments are developing supportive policies. The Ministry of Industry and Information Technology is leading the “Photovoltaic to the Countryside” initiative, aiming to bring large-scale solar PV into rural markets. Additionally, the draft of the “Guiding Opinions on Promoting the Healthy Development of the Solar Water Heater Industry” signals a push toward greater industry concentration, with goals to cultivate three major companies with annual sales exceeding 3 million units by 2015. The draft also sets targets for solar water heaters to account for over 40% of the water heater market within three years, with 50% of products reaching high energy efficiency standards. Despite these plans, the market faces challenges, as reported by Zhongyikang, which showed a 32.26% decline in solar water heater retail sales in 2012. According to National Bureau of Statistics data, by 2020, China’s urban and rural housing construction area is expected to reach about 89 billion square meters. If 15% of wall area and 20% of roof area are used for photovoltaics with a 10% conversion rate, the country could achieve around 100GW of installed capacity. With an average annual solar power generation of 1300 hours, this could replace 30% of national electricity demand and reduce CO₂ emissions by 20%. Li Jun predicts that the solar industry will continue to grow in 2012 and maintain steady progress, with major breakthroughs expected in 2014 and 2015. He analyzed that if China’s urbanization rate reaches 60% by 2020, it would mean 10 million people moving to cities annually, turning urban areas into the main battlefield for energy conservation and green growth. **Caution** However, concerns remain about the feasibility of the solar thermal and PV urbanization strategy. Wang Haisheng, Chief Analyst at Xinsheng Securities, pointed out that the conditions for promoting PV in rural areas are still immature, with no clear policies or technical solutions in place. Issues like grid line transformation and electricity sales contracts pose significant challenges for PV companies. Another concern is the payback period. The latest on-grid price proposal from the National Development and Reform Commission reduced subsidies significantly, increasing the dynamic payback period for PV projects from 5-8 years to 13-16 years. This could dampen enthusiasm among companies planning to enter the PV power plant market. A Jiangsu-based PV company noted that the industry is high-risk and high-reward, with a four to five times income gap between good and bad projects. Without timely subsidies and market guidance, rural PV development could lead to project differentiation, intensifying competition among companies and creating a polarized market.

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