China’s NDRC sets improved pricing for solar projects

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The National Development and Reform Commission in China, has set new feed-in tariffs for both open and non-competitive PV project tenders that are above those previously accepted in the last bidding process. According to reports, electricity grid operators will pay solar developers 1.15 yuan (US$0.18 cents) per kilowatt-hour on projects approved before July 1, 2011 or be completed by the end of 2011. Pricing of at 1 yuan per kilowatt-hour will be paid on projects approved after July 1st.

Tariffs in the last bidding round were as low as 0.73 yuan and only as high as 0.99 yuan per kilowatt-hour, suggesting China is relatively keen to not penalize PV projects that can offer significantly lower pricing than most other regions of the world.

Update

According to Jeffries, the new solar FiT in China is calculated to allow high single digit IRR. In a research note, Jeffries analysts said that due to the RMB appreciating and the impact of steep module pricing declines in recent months, the module pricing in China is now attractive at around US$1.20/w. With 1 rmb/kWh FiT and <$2/w installed system, project developers get high single digit IRRs.
 
Jeffries estimates that there are roughly 500-600MW projects approved by the local and central NDRC (such as Qinghai Huanghe Hydropower projects), which could qualify for the 1.15 rmb/kWh FiT. 
 
Jeffries forecasted that China solar demand would reach 2GW in 2012 and could become a 5GW+ annual market in subsequent years. 

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