China's rooftops hold power to propel solar into the mass market

UGE International

07/12/2015 21:00

* China challenges Germany as world's top solar producer 
    * Rise has come from large-scale parks, not on roofs 
    * Subsidies, falling costs make rooftop solar more 
attractive 
 
    By Adam Rose 
    BEIJING, Dec 8 (Reuters) - China may be on the verge of 
finally cracking the crucial urban and suburban solar market 
thanks to a new funding model that allows buyers to have panels 
installed for free. 
    The world's largest producer of photovoltaic panels has 
built massive solar farms in the country's deserts, but a 
disappointing take-up of solar power in cities and industrial 
hubs has meant the country has fallen well short of official 
targets. 
    Even as China is set to overtake Germany as the country with 
the world's highest installed solar capacity, growth in 
small-scale solar such as rooftop panels has been so weak that 
planners didn't even bother setting new targets this year for 
installations under 20 megawatts (MW) in size. 
    But the arrival of third-party financing models, already 
popular in the United States, could help China unlock the 
potential of solar like Germany and Japan, where rooftop panels 
helped to boost capacity and bring record levels of renewable 
energy into the power mix.  urn:newsml:reuters.com:*:nL8N12X3V6 urn:newsml:reuters.com:*:nL4N0XO1LD 
    "The options today in China are a lot better than they were 
12 months ago," said Ross Allan, director of business 
administration at Dulwich College, Suzhou, an international 
school which is considering installing panels. 
     
    TAKE-UP 
    China wants to boost solar capacity from 28 gigawatts (GW) 
in 2014 - roughly 2 percent of the country's total power 
capacity - to 100 GW by 2020. 
    But interest from households and businesses has been muted 
due to high installation costs, difficulties acquiring rooftop 
rights, limits on leases in a country where all land belongs to 
the state, and relatively low returns for selling excess power 
into the grid. 
    Small-scale installations accounted for just 17 percent of 
China's installed solar capacity at end-2014, compared with at 
least 70 percent of capacity in Germany, according to the 
country's Federal Network Agency. 
    Thanks to subsidies and falling manufacturing costs, 
however, a burgeoning industry to fund and install photovoltaic 
(PV) panels in small-scale projects has begun to emerge that 
offers the chance to go green with little upfront cost. 
    Small-scale solar could rise to a third of total capacity in 
just five years with the help of such funding models, said Frank 
Xie, senior analyst with IHS in Shanghai. 
    "Third-party financing is really critical to the 
sustainability and the viability of the China PV market," Xie 
said.  
    Singapore-based real estate investment firm Redwood Group, 
which has carpeted its Japanese warehouses with rooftop panels, 
has recently launched a 248-kilowatt (KW) pilot project in 
China, where it owns more than half a million square metres of 
roof space. 
    Redwood signed a power purchase agreement with New 
York-based solar developer UGE International  UG.V  and its 
financing partner, Hong-Kong's Blue Sky Energy Efficiency Co. 
    Under the Redwood deal, UGEI and Blue Sky lease rooftop 
space from Redwood to operate solar panels and then sell the 
electricity back to Redwood, the building owner, at prices below 
grid rates. 
     
    TIME IS RIGHT 
    While Redwood's energy cost savings are small - initially in 
the hundreds of dollars a year - the 20-year deal also allows it 
to hedge against rising utility prices. 
    "The time is right now for solar on rooftop in China because 
the cost of putting a system on the roof is becoming much more 
attractive," said Tianyu Sieh, chief executive of Blue Sky. 
    UGEI and Blue Sky have also partnered with global real 
estate services firm Jones Lang LaSalle in China to offer the 
same model to its portfolio of commercial clients. 
    "The benefits are going to be around avoided capital, 
reduced costs, or cost predictability,  and  branding benefits," 
Matthew Clifford, the head of Energy and Sustainability Services 
for North Asia at Jones Lang LaSalle, said.  
    "China is the latest  country  where we've got a really good 
business case." 
    While the third party-funding model encourages businesses to 
install enough power to meet their own needs, a low feed-in 
tariff still discourages adding extra panels to sell power back 
to the grid. 
    To make rooftop panels ubiquitous, a higher feed-in tariff 
might be needed to copy the model in Japan and Germany. 
    "We can put solar panels on the roof sufficient to service 
our own needs," Redwood's China Construction Director Colin 
Clark said.  "But really we could do so much more." 
  ($1 = 6.3981 Chinese yuan renminbi) 
  ($1 = 122.9400 yen) 
 
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GRAPHIC-Top 10 countries using solar power:    http://reut.rs/1Qa5QuJ 
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 (Editing by Henning Gloystein and Richard Pullin) 
 ((adam.rose@thomsonreuters.com; +86 10 6627 1003; Reuters 
Messaging: adam.rose.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA SOLAR/