Top Chinese firms propose solar electricity for 14¢ per kWh

Leading solar manufacturers in China have proposed the government cut its allowance for solar electricity by roughly 75 percent by 2012.

The move, prompted by lower silicon prices and production costs, could encourage the government there to approve more solar power plants. Just three have been approved to-date, including two receiving allowances of $0.584 per kilowatt-hour from the government.

Solar cell maker Suntech Power Holdings (NYSE:STP), wafer manufacturer LDK Solar (NYSE:LDK), Trina Solar (NYSE:TSL), Solarfun Power Holdings (Nasdaq:SOLF) and Nanjing First-Second Power Equipment were among the companies that submitted a proposal to the Ministry of Science and Technology to cut the allowance for solar power generation to $0.146 per kWh in 2012. The government had planned to reduce the allowance to that price in 2015.

The 75-percent price drop by 2015 is feasible, according to the Jiangsu Photovoltaic Industry Association. Industry leaders had predicted last year that it would take until 2020 to reach solar electricity at a cost of $0.146 per kWh.

Part of the reason for the accelerated decline is the price drop for polysilicon, which makes up 70 percent of the cost of silicon solar photovoltaic products. Polysilicon hit a peak of $400 per kilogram in July 2008, falling to less than $100 at the end of the year. Polysilicon is now trading for $30 to $40 per kilogram and is likely to continue dropping (see China solar market in late 2009 spells glut and Is this the end of China's solar boom?).

The 14.6¢ cost is significant because it brings solar in line with fossil-fuel based energy.

China has approved three solar-energy power plants: the 1-megawatt Chongming Island Project in Shanghai, the 255-kW project in Ordos in Inner Mongolia, and the 10MW solar project in Dunhuang.

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