Yes, you heard me right! A residential PV industry in China - it exists! Though saying it is dwarfed by the utility scale industry is an understatement.
Through a really wonderful friend I made at Trina Solar, I was able to visit Wuhan, Hubei and spend the better part of today with an up-and-coming residential installation company. It was probably one of the best research experience of my fellowship so far - Chinese people are so welcoming! We capped the visit off by eating a whole duck, a whole fish, and some Baijiu. I still can't stomach the "spicy" liquor, but based on how things are going, if enough Chinese people want to show their respect to me through "white wine", I will likely develop a taste of the damn stuff. Still, a duck, fish, and Chinese liquor, what more can you ask for?
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| My favorite part is that you can see the bill on the bottom left. Didn't eat that part - oh! I just remembered! Duck tongue is a delicacy and I forgot to eat it!! : ( |
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| The CEO said his ancestors were fisherman. They would keep the fish heads (the best part) and sell the rest of the fish. |
The growth of PV in China is fueled by the feed-in tariff (FIT). Recently, a 0.42 RMB ($0.07)/ kWh FIT for distributed PV generation (DG) was enacted. Unlike most European FIT, Chinese customers receive the FIT if electricity is exported AND if it is consumed in the home. Most European FIT were only awarded when the electricity was exported. To me, this FIT makes much more sense because it supports self-consumption from the get-go. I'll have to think a bit deeper about it, though, since self-consumption and an FIT does result in a much higher return. You're eliminating the cost of grid electricity AND getting the FIT. Though this may generate higher returns, promoting self-consumption seems worth it because fewer grid issues will result since less electricity is being exported.
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| Left is my good friend from Trina and the right is the CEO of the installation company. |
The systems are usually between 2 kW - 15 kW. They do almost exclusive residential installations. Last year, they installed 400 kW - say an average of 10 kW a system, that's 40 systems - not bad!
I'll (not so) quickly add that the commercial and residential market appear to be a bit more polarized in China with less middle ground. Though the applications seem the same (factories, hospitals, and government buildings) for some reason the size of commercial systems seem much larger. I have heard a lot of talk about several MW commercial power plants, which to me seems larger than I expected. In California, commercial to me was 100+ kW. The thought of a 3 MW system on a rooftop was hard to fathom. So, when this installer isn't doing commercial, it makes sense, since commercial in China seems to me small power plants. This is actually because most developers are manufacturers themselves. Manufacturers have an incentive to build big plants, so they are likely focusing on as big as systems as possible. There aren't very many pure developers in the commercial segment, which is why the DG market is so polarized.
One of the biggest hurdles to the residential and commercial market is the lack of financing. Currently, all residential installations are paid for straight out of pocket. The people can't even get bank loans, let alone get financing from the installer. The CEO joked with me today that he is working on a system for a banker and hoped that might open up this bank to consider financing PV systems.
This is an obvious point, but I thought it worth making anyway. They don't install storage currently, but may do it for systems that are "off-grid". Off-grid in this context means systems on apartment buildings that aren't eligible for the FIT because the customer doesn't legally own the roof. Property rights is another major impediment to the Chinese DG industry. To be eligible for the FIT, you need to own your roof. Most Chinese people in the cities living in apartments that communally own the roof. This means that to install a system on the roof, you need the signature of a majority (perhaps 60%) of the tenants. I think the off-grid case applies to systems that didn't receive the 60% of signatures and just installed the systems (illegally), anyway. The batteries are necessary because it is off-grid. For a question, I thought I knew the answer to, I received a pretty fruitful answer!
It seems the longest step in the development process is customer acquisition. The CEO threw out a few numbers. It might take 4 months to fully develop the relationship with a customer, build trust, and decide upon a system. This may be an good point to highlight how cultural differences affect the market. Without trying to get too political, China has been described to me as being run by the rule of man, not the rule of law. I guess you can see this in how what the party says - goes. It doesn't matter what the laws say, or what the party said before; what the party says right now - goes. Because there isn't a formal rule of law, there is much more importance put on personal trust, since there aren't laws to fall back on. Thus, when trying to install PV systems, you have to build that trust so that the customer believe he is buying a good product that won't fail in a month and find that you coincidentally have skipped town.
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| I'm so happy that I got a picture of the old man! He was such a cute, old man and a solar supporter boot! Also shows that is isn't just rich people installing PV in China, though I suspect there is a decent amount of that. |
So, where was I - 4 months. Referrals subsequently take less time because the friend who is referred relies on the trust he has in the friend that gave the referral. Referrals may take 1-2 months to close. What is amazing, though, is that it only takes about 1 month to install the system! This isn't road-runner speed, and who knows how consistent it is, but 1 month really isn't too bad. There doesn't seem to be a lot (or perhaps any) front-end approval of system design, but there is a final inspection by a government inspector before the system is commissioned.
That's all for my notes/thoughts from todays visit. I am writing an article for
PV Magazine on my research in China and also covering two solar conferences for them, so I am excited for that! I thus should be posting some more thoughts. As you can also see (I'm sure to many people's delight!) the blog posts are a bit less dry. I have a few in the pipeline, so hopefully I will post them soon!
Lastly, I'll add a picture from my wonderful trip to Trina Solar. Perhaps, I will write a separate post on that... But let's be honest. It's not going to happen. So I'll end with an explanation of the Trina name - which I found super cool! In Chinese, Trina Solar is 天合光能. 光能 is just photovoltaic energy, but 天合 in Chinese means the harmony between the sky, people, and earth. So Trina is a combination of the trio (sky, earth, man) and China. Tri-na (or Tr-ina). It was a surprisingly thoughtful name. Overall, I was really impressed by the company (and their name).
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| During my visit to Trina Solar yesterday. The caption behind me is "Benefiting Mankind with Solar Energy". It was such an amazing tour that started in a magical showroom showing the future of a world filled with solar power. Now I know what all those screaming girls felt like when they saw the Beatles. Luckily, I contained my screams. |
