So, even though these prices may indicate that solar power will be produced in China for less than 1 Yuan/kWh as early as 2012, it is quite possible that the final price will not be as aggressive as the winning bids suggest.
The Chinese certainly are displaying their eagerness to scale up domestic use of solar energy, while driving down its cost. Winning bids for the 13 new projects (totaling 280 MW) ranged from US $0.10 per kWh (0.7288 Yuan/kWh, which equals $0.107/kWh@ 6.8 Yuan/$1) at the low end, to US $0.15 per kWh (0.9907 Yuan/kWh equal to $0.146/kWh) on the high end. These bids were approximately one-third lower than the bids that came in last year for the first utility-scale solar power plant, a 10-MW plant to be located in Dunhuang, Qinghai Province.
This year, more than 70% of the winning bids were won by government-controlled enterprises. The China Power Investment Group dominated the most recent round of bidding with a total of seven successful bids. The Upper Yellow River Hydropower Development Co., a subsidiary of the China Power Investment Group, submitted the lowest bid for this round of PPAs (0.7288 Yuan/kWh) and became the winning bidder for the Qinghai Gonghe 30-MW project. At 0.9907 Yuan/kWh, the Xinjiang Energy Co., Ltd., also a subsidiary of the China Power Investment Group, was the winning bidder for the 20-MW Xinjiang Hetian project.
There were a total of 135 bids submitted by 50 firms for the 13 solar power projects, which will be scattered among six provinces: Inner Mongolia (3 x 20 MW); Xinjiang (3 x 20 MW); Gansu (3 x 20 MW); Qinghai (1x 30 MW and 1 x 20 MW); Ningxia (1 x 30 MW) and Shaanxi (1 x 20 MW). The 20-MW Baotou, Inner Mongolia project attracted the most bidders at 16, yet there were at least 10 bidders for most projects. The term of each PPA is 25 years.
These 280 MW of solar power plants to be developed, though much larger than the 10 MW Dunhuang bid process in 2009, do not yet mark the initiation of a real market for scale development of solar in China. Instead this looks like the Chinese government’s attempt to explore the contours of the economics of utility-scale solar power development and to test the ability of firms to produce utility-scale solar power at steadily lower prices.
The 2009 Dunhuang solar PPA price subsequently was adjusted upward to 1.15 Yuan/kWh ($0.169/kWh) from the original successful bid of 1.09 Yuan/kWh. Based on the estimates of component, labor and financing costs for solar power development in China, it would not be surprising if the final prices per kWh for the most recent round of solar PPAs also were adjusted upward.
At present the price for utility-grade solar power development in China is said to be as follows: 9-10 Yuan/watt for PV modules; 1 Yuan/watt for inverters; 1 Yuan/watt for structures; 1 Yuan/watt for electric cable; 1 Yuan/watt for labor and an estimated 6% bank interest rate. Based on these current costs, total PV system equipment and labor costs should be in the range of 15 Yuan/watt. If maintenance expenses over 25 years and an internal rate of return of 8% are also factored in, a PV system should be able to have a small profit at 16-17 Yuan/watt [US $2.35-2.50 per watt]. The present average PPA prices, however, are approximately 14 Yuan/watt [US $2.06 per watt].http://www.electroiq.com/index/display/photovoltaics-article-display/3458444904/articles/Photovoltaics-World/industry-news/2010/september/chinese-solar_power.html