In 2012, solar energy was responsible for 10% of all new power generating capacity in the world. In 2013, that grew to 29%, making solar power the second fastest-growing source of energy behind natural gas.
As the above chart shows, over the next six years, $1 trillion is expected to be spent on 537 GW of new solar installations. To understand just how massive an accomplishment that would be, consider that the total amount of solar power in the world at the end of 2013 was just 137 GW. This means that solar power is expected to grow nearly five-fold in just more than half a decade -- a 30.4% annual growth rate.
China leading the way
China is known for two things -- air pollution and strong economic growth. Things have gotten so bad on the pollution front that on February 24 pollution levels in China's capitol of Beijing reached eight times the World Health Organization's maximum safe levels. To alleviate the first problem while providing badly needed power for continued economic growth, the Chinese government has announced it will ban coal-fired power plants in Beijing by 2020, and continue the most ambitious solar expansion program in history.
In 2013, China installed 11.3 GW of solar capacity, which is an impressive 37% of global solar growth. In fact, according to a new report from the China New Energy Chamber of Commerce, China's solar market grew by 232% in 2013, making it the world's largest solar market by a wide margin.
China has installed 3.3 GW of new solar in the last six months, marking a 100% increase over the same period last year. To keep the momentum going, the government has announced its goal of 13 GW in 2014. To put that goal into perspective, it would mean adding 1.7 GW per month for the rest of the year, which is nearly as much solar capacity as exists in the U.K. It would also be more new solar capacity in just one year than total solar capacity of the United States, a nation that has grown its own solar capacity by a stunning 418% since 2010.
Chinese solar facing massive problems
Before China can conquer the solar world, it first has to come to terms with three major problems it's facing with its current solar projects: poor quality panels, shoddy installations, and substandard grid connectivity.
China is home to the world's largest solar production industry, 26 GW of annual solar panel capacity at the end of 2013, which is more than the rest of the world combined. Solar panels are supposed to last 20 to 30 years; however, when the Massachusetts-based company SolarBuyer audited 50 Chinese solar factories, they found defect rates of 5.5% to 22%. This poor quality can result in panels that fail in just two to three years. According to Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, "The performance issue definitely exists... since so many solar panels were produced here in such a short time, it is hard to imagine that there is no quality problem."
To understand the problem, consider the fact that, a decade ago, China essentially had no solar panel manufacturing base to speak of. To reach industry-dominating levels so quickly, Chinese panel makers took on billions in debt, and have spent the last several years in a vicious price war to win market share. Thus, they've cut costs to the bone, and sourced the cheapest possible components.
Combined with poor installation quality, China's massive solar capacity is failing to live up to its hype. Ji Zhenshuang, Deputy Director at the Beijing-based China General Certification Center, has investigated 472 solar projects during the last four years. He's found that "many solar installations failed to generate as much electricity as planned."
Grid connectivity is another major problem. According to Mr. Zhenshuang:
Grid constraint is still an issue in western China. Sometimes solar farms are forced to shut down because power grids there are unable to carry the generated electricity. This on-and-off operation ruins solar systems in a similar way as frequent start-and-stop does to a car brake.
Problems threaten to derail solar plans
According to Wang Sicheng, a senior researcher at the Energy Research Institute of China's National Development and Reform Commission, China's existing underperforming solar capacity is already slowing the growth rate of the industry. This is because banks are leery to finance projects that might fail to live up to their promised rates of returns, or even catastrophically fail within just a few years.
To solve this problem, the government is preparing guidelines, to be released next month, to help solar developers greatly improve project quality. Mr. Zhenshuang, however, isn't so sure the new guidelines will help all that much. He has stated: "The question is no one knows what kind of products or designs can last through 25-year operation. We haven't seen enough solid information from the field."
His concern is that, if guidelines prove too strict, then costs of Chinese solar projects could soar and derail the country's solar ambitions.