China’s Power Industry IV – Cost Comparisons and Electricity Prices

While it appears that PV market in China is between a hard place and a rock, there is hope within the BAPV and small PV farm sector in the east as the power shortage severely constrains the economy

---

Here is a table of cost estimation of various power-gen forms. The table was made late last year and I updated some numbers for PV as the cost went down further. The cost for a large 1GW power plant is used here as an example. Of course, PV-BAPV cannot scale to 1GW, but still the per-watt cost is valid. 

This table contains lots of information. The row of 20-yr depreciation cost is very important as it gives the initial installation cost lost in a 20-yr span divided by the generated electricity. Compared to wind power, PV farms still lag in cost. Nuclear and hydro also beat PV farm by cost. The initial BAPV cost is slightly lower than PV-Farm because it does not include land cost. Due to the environmental and national security concerns in hydro and nuclear, the main competitor for solar energy is wind. In China, the per kwh cost for wind electricity is about 30 cents lower than solar even with the sharp decline in the PV cost, which explains the hyper growth for wind power. Right now, the FIT for wind is about 61 cents while it is 100 cents for solar.

Cost of power-gen

One hidden cost is not included in the table – the transmission cost. Most of wind and PV farms are located in the west and northwest, away from the economic centers. Large transformer substations and long transmission lines are needed to accommodate their capacities. Large amount of wind electricity were wasted last year due to the grid congestion. The government recently issued a rare urgent notice to the SGCC, demanding it to act promptly to take in more wind electricity. Still, with added transmission cost, wind is getting close to be competitive to the coal-fire power. For PV, it is not there yet although not far either. That is why a major power-gen company “Zhong-Dian-Tou” just announced on 03/08 that it would double its wind installation in 2012 while cut back its PV installation by about 20%.

Another important piece of puzzle is the electricity price. In China, the price is controlled by the government (CDRC) and varies from places to places. The price scheme is moderately complicated, with pricing different for the 4 sectors: 1. residential, 2. commercial and small industries, 3. agriculture, 4. big industries. Residential has a flat rate of about 50 cents per kwh though there is expected to be a laddered price scheme this year. For other sectors, price can range from ~30 cents for agricultural irrigation to over 130 cents for peak hour commercial. Not only price can differ from time to time with peak hour more expensive, but also from the intake voltage with low voltage more expensive.

While it appears that PV market in China is between a hard place and a rock, there is hope within the BAPV and small PV farm sector in the east as the power shortage severely constrains the economy. When price is right, there will be a boom for user-side installation who would essentially build PV systems for their own consumption and the scalability of PV means everyone can find right-sized system. An insider predicted this user-side installation would go mainstream in 2013.