China's rooftop power generation surges despite challenges

After installing eight photovoltaic panels on the roof of his two-story house, Wen Xingwang's financial future is looking a bit brighter.

In nine months following the installation off the panels, the 22-year-old has made more than 900 yuan selling the excess power back to the state grid, with overall revenues reaching 1,400 yuan.

Wen, who works at a PV company in Shizuishan City of northwest China's Ningxia Hui Autonomous Region, invested 20,000 yuan last December building the simple distribution PV generation unit.

The 2-kilowatt generation unit has so far produced more than 2,000 kilowatt hours(kwh) of electricity, with the extra energy produced sold for 0.59 yuan per kwh to the state grid, earning an extra 60 percent from the deals in the form of a subsidy from the central government. The current price for household electricity is 0.45 yuan per kwh.

Wen plans to expand the capacity of his rooftop power generation unit to 5 kw as the central government continues encouraging the development of distributed PV generation units, normally installed on the roofs of residential and commercial buildings.

China's National Energy Administration (NEA) issued a statement on Sept. 2, asking local governments to facilitate the construction of distributed PV generation units by reducing taxes for those using them and encouraging banks to help provide financing.

The administration also asked the state grid to offer the same price for the electricity as they would for large-sized PV power stations. That means Wen can get prices as high as 0.9 yuan per kwh, boosting annual revenues to 5,000 yuan.

Wen is not the only one cashing in on rooftop power generation.

Zhu Qijie, a villager in Yangzhou City of east China's Jiangsu Province, made 4,449 yuan in profits within one year generating 6,000 kwh of electricity through a rooftop PV unit by the end of June.

In Jiangxi Province, about 2,000 households have applied to install distributed PV generation units after the province began the promotion in June 2013.

According to NEA data, 990,000 kw distributed PV capacity were added to the state grid in the first half of this year, more than that in the whole year of 2013.

The NEA unveiled its PV development targets for 2014 in August, vowing to install 13 gigawatts of new PV power capacity this year.

The target is more ambitious than the State Council guideline released in July 2013, which outlined plans to install 10 gigawatts of PV power capacity every year from 2013 to 2015.

To boost the sagging solar power industry, China has turned to distributed PV power generation and rolled out a string of preferential policies, including subsidies and tax reduction.

However, promoting doesn't always equate power production.

Huge initial investment and long cost recovery time affect people's enthusiasm to build the distributed PV generation units, said Kang Hailong, general manager of Ningxia Photoelectricity Construction Engineering Co. Ltd, which is building PV facilities in residential compounds in the region.

For Wen, it will be 10 years before he can reclaim his cost under current earnings level. The average lifespan of a distributed PV unit is roughly 25 years.

"It takes too long to recover the cost," said Kang. "Those who have no thorough understanding of PV power generation would have no confidence."

Unlike residential generators, for companies that hope to develop the distributed PV generation units on a larger scale, installing panels on the roof also involves problems of property rights. Sharing profits with the roof owners and management also pose potential risks, said Kang.

"Due to risk control, banks are not quite interested in lending on the distributed PV generation programs, which has restricted the development of the PV industry," he said.