This document provides an outline and preliminary findings from a study analyzing barriers to solar PV investment in China. The summary is: The study examines literature on market, technical, regulatory, and social barriers to solar PV adoption in China. Preliminary findings show that after the 2008 financial crisis, China's solar panel manufacturers faced oversupply as global demand declined. In response, China invested billions to spur domestic solar demand and set a goal of 25 GW of solar capacity by 2020. However, barriers like high upfront costs, lack of knowledge, and inconsistent policies could hamper reaching this target unless addressed. The study aims to identify solutions to barriers and determine the right policy mix to encourage sustainable PV development in China.

1. Carson Stones
Master of Global Policy Studies candidate
Energy, Climate, and Security specialization
LBJ School of PublicAffairs
The University ofTexas atAustin
Investing in and installing PV panels
in China – Preliminary Findings
1

2. Outline
1. Abstract
2. China’s energy landscape
3. Solar PV manufacturers
4. The growth of PV around the world
5. Solar irradiance in China
6. Research questions
7. Methodology
8. Preliminary findings
9. Gaps in the literature/ Further research
10. References
2

3. Abstract
After the financial crisis of 2008, Chinese solar photovoltaic (PV) panel
manufacturers were faced with a potential crisis when demand for solar PV
in Europe and the United States significantly decreased. In response, the
Chinese government issued an aggressive series of policy directives to spur
domestic demand for solar panels. Today, the price of solar PV is
approaching grid parity while the manufacturing industry consolidates and
smaller firms face insolvency. But there are significant challenges to
reaching the government’s goal of 25 GW of installed capacity by 2020. This
paper analyzes the current literature concerning barriers to investment and
adoption of solar PV in China as it relates to Green Development. The four
types of barriers can be classified as market, technical, regulatory, and
social challenges. Possible solutions to each barrier are proposed as they
relate to the Chinese market. Finally, gaps in the literature are assessed for
future research.
3

4. Energy by the Numbers - China
Energy
Source
Production/
Capacity
World
Ranking
Consumption World
Ranking
% Portfolio
Consumption
Petroleum 4,416.2 K b/d 4 4,128.8 K b/d 4 19
Natural Gas 3,827 Bn ft3 6 5,151.87 Bn ft3 4 4
Coal 3,991 Mn ST 1 3,976.1 Mn ST 1 70
Hydro 687.1TWh 1 797.4TWh 1 6
Wind 73.2TWh 2 797.4TWh 1 0.3 (with solar)
Solar 3TWh 5 797.4TWh 1 0.3 (with wind)
Nuclear 92.6TWh 6 2
CO2 8,715.3 MMT 1
Primary
Energy
97.8 Qd Btu 1 109.6 Qd Btu 1
• K b/d = thousand barrels per day
• Bn ft3 = billion cubic feet
• Mn ST = million short tons
• MWp = Megawatt Peak
• MMT = million metric tons
• Qd Btu = quadrillion British thermal units
4

5. 5

6. 6

7. PV Manufacturers – Chinese market
dominance
Source: Renewables 2012, Global Status Report
7

8. The Major Players in China
8
Source: Solidiance (2013) – China’s Renewable Energy Sector

9. The Changing Market for PV
9
Source: European Photovoltaic IndustryAssociation (2013) – Global Market Outlook for PV

10. A Growth Story for China
10
Source: European Photovoltaic IndustryAssociation (2013) – Global Market Outlook for PV

11. 11

12. Research Questions
 What are the barriers to solar PV investment?
 How can these barriers be overcome?
 Why does China lead the world in solar PV manufacturing
but lags behind in installed capacity?
 What is the right mix of regulatory policies and market based
incentives to encourage sustainable PV development?
12

13. Methodology
 Keyword search in Science Direct, ProQuest, and Google
Scholar
 “barriers solar PV buildings” from 2010 to present
 “green buildings China PV” from 2010 to present
 “China renewable energy development” from 2010 to present
 pub-date > 2009 and "green" and "build*" and "China" and
("photovoltaic*" OR "PV") and related articles
 Papers with related key words or specifically cited within
systematically searched body of literature
 Policy documents cited in the literature
 Green building codes in Hong Kong
 Financial Reports for developers in the BEAM database
 PV industry publications13

14. Barriers to PV Adoption
 1) Market barriers
 High up-front cost
 Long payback period
 Lack of profitability for utilities
 2)Technical barriers
 Lack of specialized knowledge
 Unreliable supply chain
 3) Regulatory barriers
 Need for regulatory standards
 Regional feed-in tariffs
 Appropriate subsidies
 4) Social barriers
 Low demand
 Public acceptance and desirability of low carbon mitigating technology
14

15. Market barrier – High Upfront Cost
 Challenge
 Cited by every paper as the number one challenge
 Remedy
 Financial support and training services from the government
(Zhang X., et al. 2012)
 Initial investment from the government, market demand later
(Liu, J.Y., et al. 2012)
 Creative financing such as cash incentives, Renewable Energy
Credits, solar leasing, and community solar (Coughlin J. and
Cory K. 2009)
15

16. Market Barrier – Long Payback Period
 Challenge
 Trouble recouping investment on a 20 year payback period
 Remedy
 Utility bill savings and net metering benefits (Coughlin J. and
Cory K. 2009)
16

17. Market Barrier – Lack of Profitability for
Utilities
 Challenge
 Small size of most distributed PV projects deters utility buy-in
 Remedy
 New business model for distributed PV – avoid direct
competition with established technologies in terms of cost
(Richter M. 2013)
 Establish a consistent rate at which distributed generation is
purchased; more transparency (White L., et al. 2013)
17

18. Technical Barrier – Lack of Specialized
Knowledge
 Challenge
 Learning curves for green development slow down
construction and add to costs
 Remedy
 Certification programs for buildings and professionals (Liu J.Y.,
et al. 2012)
 Green promotion and experience sharing program (Zhang X, et
al. 2011)
 Build up expertise and knowledge for the local industry (Wong
J., et al. 2013)
18

19. Technical Barrier – Unreliable Supply
Chain
 Challenge
 Many construction projects are slowed down because of
unreliable supply chains
 Specialized parts are needed
 Parts need to be certified to meet specific standards
 Remedy
 Evaluations of specifications in the design stage that adhere to
industry wide standards (Shi Q., et al. 2013)
 More rigid policies and national standards (Yuan X., et al. 2013)
 Strict market access and transparency; incentives for renewables
that meet standards, penalties for polluters that don’t (Yunna
W., et al. 2013)
19

20. Regulatory Barrier – Need for
Regulatory Standards
 Challenge
 Different regions have different requirements
 Suppliers and developers need a set of guidelines
 Remedy
 Design specific codes and regulations concerning the ownership
of systems (Zhang X., et al. 2012)
 Deregulate market entrance, reform energy price regulation
(Qiu X. and Li H. 2012)
 Establish a regulatory commission based on separation of
authority (Qiu X. and Li H. 2012)
 Consistent political regulation less biased towards fossil fuels
and nuclear energy (Sovacool, B. 2012)
20

21. Regulatory Barrier – Regional Feed-In
Tariffs (FITs)
 Challenge
 A national feed in tariff fails to take into account for differences in
insolation and cost of electricity
 Feed in tariffs drove the EU’s solar PV growth over the last decade
 FITs can be seen as a regressive tax – benefit few at the cost of all
 Remedy
 Draw lessons from China’s FIT scheme for wind power and
Germany’s scheme for PV (Zhang S. and HeY. 2013)
 Higher initial FIT prices can increase adopters’ willingness to
install (ROI) but can also be a burden on the government if not
implemented carefully (Hsu C.W. 2012)
 City councils can determine appropriate FITs for their
community (White L., et al 2013)21

22. Regulatory Barrier – Appropriate
Subsidies
 Challenge
 A subsidy that is too high will be a burden on the government
and artificially manipulate the market
 A subsidy that is too low will not drive investment
 Remedy
 Combine with a FIT and other creative financing options to
reach the appropriate ROI (Hsu, C.W. 2012)
22

23. Social Barriers – Low Demand
 Challenge
 Demand for innovative technologies must court early adopters
before driving the price down
 The public must have a willingness to adopt based on adequate
ROI
 Remedy
 Use appropriately differentiated feed in tariffs and other demand
pull policies, such as tax abatements (Avril S., et al. 2012)
 Utilities must convince customers that new products and services
add value (Richter M. 2013)
 Focus on demonstration programs and R&D to control the PV
development until the technology matures (Avril S., et al. 2012)
23

24. Social Barriers – Public Acceptance of
Renewable Energy Technology
 Challenge
 The public will not demand a product which they don’t
perceive as providing them some value
 Public awareness of technology is low
 Public may be apprehensive in belief about climate change
 Remedy
 Government rebates and proactive education to raise awareness
(Zhang, X., et al. 2012)
 Cooperative/ individual ownership of renewable energy
sources; civil society groups involved in permitting (Sovacool,
B. 2012)
 Increase the ROI using the right mix of FIT and subsidies (Hsu
C.W. 2012)24

25. Preliminary Findings - Massive
Investment and Policy Directives
 In 2010, China overtook Germany as the leading solar panel
producer.
 After the 2008 financial crisis, demand for solar panels
internationally shrank significantly.With new tariffs against
“made in china” panels in the EU, it will continue to shrink.
 This has led to oversupply in China’s domestic market.To
avoid catastrophe, the government will invest billions of
RMB into renewable energy investment with an emphasis on
solar PV.
 $264 million in 2011
 Plans to spend $473 billion by 2015 as part of the 12th FiveYear
Plan
 Goal: increase solar capacity to 25 GW by 2020
25

26. Research Question 1
 What are the barriers to solar PV investment?
 Market, technical, regulatory, and social
 International trade disputes
 Difficult to forecast, low tolerance for risk
26

27. Research Question 2
 How can these barriers be overcome?
 Regulatory policies, fiscal incentives, and public financing
 Increase the value of PV for potential adopters
 Carefully structured feed-in tariffs and subsidies
 Cost per panel has been consistently falling
27

28. Research Question 3
 Why does China lead the world in solar PV manufacturing
but lags behind in installed capacity?
 This is rapidly changing
 How will Chinese manufacturers address the problem of
oversupply?
 Potential for enormous domestic demand for solar PV
28

29. Research Question 4
 What is the right mix of regulatory policies and market based
incentives to encourage sustainable PV development?
 Debate ongoing
 Two styles of policymaking – top-down central planning vs.
deregulated market driven
 Regional policies tend to be preferred over national policies,
especially regarding feed-in tariffs and subsidies
29

30. Renewable Energy Support Policies
 Regulatory Policies
 Feed inTariff
 Electric utility quota obligation/ Renewable Portfolio Standards
 Net metering
 Biofuels obligation/ mandate
 Heat obligation/ mandate
 Tradable Renewable Energy Credits
 Fiscal Incentives
 Capital subsidy, grant, or rebate
 Investment or production tax credits
 Reductions in sales, energy, CO2,VAT, or other taxes
 Energy production payment
 Public Financing
 Public investment, loans, or grants
 Public competitive bidding
30

31. Support Policies Around the World
x=nationalpolicy
o=state/
provincialpolicy
FeedinTariff
Electricutility
quota
obligation/RPS
NetMetering
Biofuels
obligation/
mandate
Heat
obligation/
mandate
TradableREC
Capital
subsidy,grant,
orrebate
Investmentor
productiontax
credits
Reductionsin
sales,energy,
CO2,VAT,or
othertaxes
Energy
production
payment
Public
Investment,
loans,or
grants
Public
competitive
bidding
UnitedStates o o o x o o x x x o x o
Germany x x x x x x x
China x x x x x x
Japan x x x x x x x x
Regulatorypolicies FiscalIncentives PublicFinancing
Source: Renewables 2012, Global Status Report
31

32. Literature Gaps and Further Research
 Analysis of current trends in the solar PV manufacturing
market such as industry consolidation and the role of State
Owned Enterprises
 Case studies of high profile green developments in Chinese
cities - what works in Hong Kong to encourage diffusion of
solar PV on rooftops?
 Will increased manufacturing capacity, falling costs, and
government policies ultimately result in sustainable demand
for solar PV? Or will “dirty” coal remain king in China and
around the world…
32

33. References (in order of appearance)
 Energy Information Association (EIA) – Country Statistics http://www.eia.gov/countries/country-data.cfm?fips=CH
 Renewables 2012, Global Status Report. Renewable Energy Policy Network. http://www.map.ren21.net/GSR/GSR2012.pdf
 European Photovoltaic Industry Association (EPIA) – Global Market Outlook for Photovoltaics, 2013-2017. http://www.epia.org/news/publications/
 Rapoza, Kenneth. Forbes.“China Solar Panel Makers Brace forTougherTimes”. June 2013.
http://www.forbes.com/sites/kenrapoza/2013/06/04/china-solar-panel-makers-brace-for-tougher-times/
 Zhang, Xiaoling, Liyin Shen, and SumYee Chan. 2012. "The diffusion of solar energy use in HK:What are the barriers?" Energy Policy no. 41 (0):241-
249
 Liu, JungYing, Sui Pheng Low, and Xi He. 2012. "Green practices in the Chinese building industry: drivers and impediments." Journal ofTechnology
Management in China no. 7 (1):50-63.
 Coughlin, Jason, and Karlynn S. Cory. Solar Photovoltaic Financing: Residential Sector Deployment. National Renewable Energy Laboratory, 2009.
 Richter, Mario. 2013. "German utilities and distributed PV: How to overcome barriers to business model innovation." Renewable Energy no. 55
(0):456-466
 White, L.V., et al. "Are Feed-inTariffs suitable for promoting solar PV in New Zealand cities?" Energy Policy (0).
 Wong, J. L. H., et al. (2013). "Solar Capability Building Programme for Public Housing." Energy Procedia 33(0): 288-301.
 Shi, Qian, Jian Zuo, Rui Huang, Jing Huang, and Stephen Pullen. 2013. "Identifying the critical factors for green construction – An empirical study in
China." Habitat International no. 40 (0):1-8.
 Yuan, Xueliang, XujiangWang, and Jian Zuo. 2013. "Renewable energy in buildings in China—A review." Renewable and Sustainable Energy Reviews
no. 24 (0):1-8.
 Yunna,Wu, and Xu Ruhang. 2013. "Green building development in China-based on heat pump demonstration projects." Renewable Energy no. 53
(0):211-219.
 Qiu, Mark, and Honglin Li. "Energy Regulation and Legislation in China." Environmental Law Reporter 42 (2012): 10678.
 Sovacool, B. K. and P. Lakshmi Ratan (2012). "Conceptualizing the acceptance of wind and solar electricity." Renewable and Sustainable Energy
Reviews 16(7): 5268-5279.
 Sovacool, Benjamin K. 2009. "The intermittency of wind, solar, and renewable electricity generators:Technical barrier or rhetorical excuse?" Utilities
Policy no. 17 (3–4):288-296.
 Zhang, Sufang, andYongxiu He. 2013. "Analysis on the development and policy of solar PV power in China." Renewable and Sustainable Energy
Reviews no. 21 (0):393-401.
 Hsu, Chiung-Wen. 2012. "Using a system dynamics model to assess the effects of capital subsidies and feed-in tariffs on solar PV installations."Applied
Energy no. 100 (0):205-217.
 Avril, S., C. Mansilla, M. Busson, andT. Lemaire. 2012. "Photovoltaic energy policy: Financial estimation and performance comparison of the public
support in five representative countries." Energy Policy no. 51 (0):244-258.33