State-run companies begin bidding war for PV projects
By Terry Wang
Shanghai. September 6. INTERFAX-CHINA - After China's National Energy Administration (NEA) opened bidding for 13 photovoltaic (PV) power projects on Aug. 10, several large state-owned companies surprised industry experts by quoting relatively low power tariffs. The move has led some industry insiders to surmise that these companies have entered into a bidding war to win development contracts and edge out private companies.
In 2009, the NEA launched the country's first bid for a PV project in Dunhuang City, Gansu Province. State-owned SDIC Huajing Power Holdings Co. quoted a tariff price of RMB 0.69 ($0.10) per kilowatt-hour (kWh) on the 10-megawatt (MW) project. The quote was much lower than the RMB 1.09 ($0.16) per kWh the National Development and Reform Commission (NDRC) ended up setting for the project.
The bids for this year's projects, which have a total installed capacity of 280 MW, have attracted the interest of numerous domestic power developers, who have already submitted a total of 135 bidding documents.
Wu Dacheng, vice chairman of the Photovoltaic Committee under the Chinese Renewable Energy Society, told Interfax that bidders who quote the lowest tariffs will win bids for the projects in accordance with standards set by the NEA.
So far, the lowest tariffs quoted by state-owned conglomerates for these projects stood at between RMB 0.7288 ($0.11) and RMB 0.9907 ($.15) per kWh.
Below is a table specifying the lowest quotes on power tariffs for the 13 projects.
Lowest quotes on power tariffs for the 13 PV power projects
|Project location||Size (MW)||Bidder||Lowest quote on power tariff (RMB/kWh)|
|Yulin, Shaanxi||20||Guohua Energy Investment Co. Ltd.||0.8687|
|Gonghe, Qinghai||30||Huanghe Hydropower Development Co. Ltd.||0.7288|
|Henan, Qinghai||20||Huanghe Hydropower Development Co. Ltd.||0.8286|
|Baiyin, Gansu||20||China Power International New Energy Holding Ltd.||0.8265|
|Jinchang, Gansu||20||Huaneng New Energy Industry Holding Co. Ltd.||0.7803|
|Weiwu, Gansu||20||China Power International New Energy Holding Ltd.||0.8099|
|Alaxa, Inner Mongolia||20||Inner Mongolia Guodian Energy Investment Co. Ltd.||0.8847|
|Baotou, Inner Mongolia||20||Baotou Luneng Bayan Obo Wind Power Co. Ltd.||0.7978|
|Bayan Nur, Inner Mongolia||20||Inner Mongolia Guodian Energy Investment Co. Ltd.||0.8444|
|Qingtong Gorge, Ningxia||30||Huaneng New Energy Industry Holding Co. Ltd.||0.9791|
|Hami, Xinjiang||20||CPI Xinjiang Energy Co. Ltd.||0.7388|
|Turpan, Xinjiang||20||CPI Xinjiang Energy Co. Ltd.||0.9317|
|Hetian, Xinjiang||20||CPI Xinjiang Energy Co. Ltd.||0.9907|
Source: Caijing Magazine
Shi Jun, president of PrePower Renewable Energy (Shanghai) Co. Ltd., operates a 1-MW PV project in Ningxia Hui Autonomous Region that receives RMB 1.5 ($0.22) per kWh of electricity produced.
Shi told Interfax that some bidders may not have accurate information regarding the actual cost of operating a PV power project.
"Such tariffs may be feasible for developers in two years' time, but right now they are far too low," Shi thought.
As it currently stands, a tariff of RMB 1.1 ($0.16) per kWh would be needed for a PV project to achieve an 8 percent internal rate of return, Shi conjectured.
Of the lowest tariffs quoted by state-owned companies, seven came from subsidiaries of China Power Investment Corp. (CPIC).
Shi thought that because state-owned companies typically boast greater capital strength than private ones, they are able to withstand longer payback periods and even incur losses from these projects.
Wu added that lower power tariffs would also help reduce the burden on the central government to subsidize PV projects.
Shi said that opinions differ on the issue of the tariffs, as some government officials believe that low tariffs would hurt the development of the sector.
"This is not necessarily the case," he said. "State-owned companies will most likely continue to invest in the PV sector because they can afford it. Some may even develop these projects in order to gain experience or as a promotional tool," Shi postulated.
Shi forecast that PV project development, much like the wind power industry, would become a game that only large state-owned companies like CPIC and China Huaneng Group would be able to afford to play.