Solar Energy in Guangdong - A Big Supplier Trying to

UNCLAS SECTION 01 OF 02 GUANGZHOU 000497 SENSITIVE SIPDIS BEIJING FOR DOE USDOC FOR MAC 4420 USDOE FOR OFFICE OF THE SECRETARY USDOE FOR INTERNATIONAL AFFAIRS USDOE FOR FOSSIL POLICY AND ENERGY STATE FOR EAP/CM, EEB/ESC STATE PASS USTR FOR CHINA OFFICE E.O. 12958: N/A TAGS: ENRG ECON SENV PGOV CH SUBJECT: Solar Energy in Guangdong - A Big Supplier Trying to Increase Local Demand ¶1. (U) Summary and comment: Guangdong is a major producer of solar energy equipment in China, but local demand for solar energy is still low. The province has set ambitious targets for increasing solar energy use. The provincial government has initiated demonstration projects and has taken advantage of national subsidy programs to expand the use of solar energy. Nevertheless, solar energy firms still call for more government support to increase demand in China, which will likely be an increasingly important market for companies that have in the past relied almost entirely on exports. End summary and comment. -------------- --- Energizing the Solar Industry: Increasing Demand -------------- --- ¶2. (U) Guangdong is ranked number one in the production of solar water heaters in China, but only 5% of Guangdong's households use them. More than 200 companies in Guangdong produce approximately 20% of China's solar water heaters, but most are made for export. Guangdong's solar cell manufacturers do not fare any better in retaining their products in Guangdong. The provincial government, with the support of the central government, is now looking for ways to transition from solely producing solar energy systems to increasing domestic demand and utilization of solar energy. ¶3. (SBU) According to Zheng Lepeng, Chairman of the Guangdong Solar Energy Association, Guangdong's history in the solar energy sector is extensive. Zheng noted that the Guangdong Institute of Energy Conversion developed the nation's first solar water heater and in the past Guangdong's solar cell manufacturers were at the forefront of China's solar cell industry. However, Zheng believes that recently Jiangsu and Zhejiang provinces have placed a greater emphasis on developing alternative energies, and Guangdong's overall solar energy industry and policy now lags behind them. ¶4. (SBU) The province has ambitious goals for the expansion of solar energy use. Guangdong has set a 2010 target to reach a 30% household usage rate for solar water heaters. Zheng also points out that the province aims to have a 20 megawatt installed capacity for �A;solar power generation. The central and provincial governments have enacted several policies and subsides to stimulate the consumption of solar energy. Zheng said the policies could potentially kick start the photo-voltaic industry in China. However, he noted that the impact had been small so far in Guangdong because implementation guidance is still lacking. Industry contacts told us that some of the new policies could represent a turning point in the industry. -------------- Subsidies and Demonstration Projects -------------- ¶5. (U) The use of solar power in Guangdong is still largely in the demonstration phase, with applications in a few street lights and 20-30 demonstration projects around the province. Among the most prominent programs, the provincial government is subsidizing solar water heater usage through demonstration projects in rural communities. One project in a village in the Xijiang District of Shaoguan Municipality was rolled out in 2007 with assistance from the Guangdong Economic and Trade Commission and the Guangdong Financial Department. Under the program, 62 households installed "economical solar water heaters;" The RMB 1,600 cost of each heater was shared by the provincial government (RMB 300),local government (RMB 500) and each rural household (RMB 800). A second demonstration project was launched in 2008 involving 1,449 households in rural areas of Heyuan City. Provincial authorities GUANGZHOU 00000497 002 OF 002 expect that over 8,000 solar water heaters will be installed in rural areas this year through this program. ¶6. (U) The province is also taking advantage of central government support programs to increase solar energy consumption. In concert with the central government's "Solar-Powered Rooftops Plan," Guangdong province hopes to have 100,000 rooftop solar cells installed by 2010. The "Solar-Powered Rooftops Plan" will subsidize the project at a rate of RMB 20 (US$3) per watt of solar energy. For some projects, the plan has subsidized as much as half of the total cost of the solar cells. ¶7. (SBU) Local governments in Guangdong also have programs to increase usage of solar energy. According to Zheng of the Guangdong Solar Energy Association, the Foshan Economic and Trade Bureau launched a pilot program in 2008 to encourage use of solar water heating systems in textile companies in Foshan. Provincial officials believe the program was a success, and the Guangdong Economic and Trade Commission is trying to create a similar expanded program for the entire province. -------------- Enterprises Want More -------------- ¶8. (SBU) Liu Jun, Sales Manager at Guangdong Fivestar Solar Company, told us that the success of his company was due to its own efforts rather than government support, but still called for more assistance for the solar energy industry. He said enterprises were looking for implementation of long term incentives that go beyond demonstration projects. They want sustainable subsidies to encourage the necessary capital commitments to increase and improve solar energy products. Liu called for direct support to enterprises, alongside users of solar energy products. -------------- Enterprises Attempt to Grow Domestic Demand -------------- ¶9. (SBU) According to Liu, his company has tried to develop a stronger domestic distribution network and generate media publicity to increase solar energy utilization in Guangdong and more importantly expand sales. The company also sponsors demonstration projects that increase consumer awareness of energy saving methods available through the use solar energy. Most solar energy companies in Guangdong still appear to cater to a foreign consumer. However, with some developed countries cutting subsidies for solar energy and the global financial crisis slowing the development of solar energy projects overseas, Chinese companies may be increasingly looking to the domestic market for future growth. GOLDBECK