By staff reporter Wang Zhiyong

Yingli Green Energy (NYSE:YGE), and SDIC Huajing Power have submitted a joint bid to build a 10-MW solar power plant in Dunhuang in northwest China to supply the national grid at an unprecedented low price, RMB0.69/kwh (US$0.1/kwh).

When China.org.cn staff reporter visited the Yingli plant in Baoding City, some 120 km south of Beijing on March 24, the company told?that they were aiming to reduce the cost of solar power to RMB1/kwh by 2012.

A 9.8 MWp grid-connected PV system at Navarre province, Spain built by Yingli Green in November 2006.

But the following day, the news of the RMB0.69/kwh bid for the Dunhuang project came out.?

"Right now, Yingli can produce solar electricity for RMB1.1 to 1.3/kwh, depending on weather conditions." Yingli spokesman Li Wei told China.org.cn yesterday. "We can achieve this for example in Tibet, which has many hours of sunlight."

"Costs are influenced by many factors, for example preferential loan rates and preferential tax policies," Li said. "We are confident we will win the bidding."

Li refused to confirm the RMB0.69/kwh bid price. But a deputy general manager of Yingli who was involved in the bid did not deny it.

"Of the 18 consortia bidding, the highest bid price was RMB1.92/kwh, and the average was around RMB1.3-1.4/kwh. There was only one bid below one yuan – the one from Yingli and SDIC Huajing," a company executive who took part in the bidding told 21st Century Business Herald. "This was very unexpected, and far below the current cost of production," he said.

In June 2008, Yingli Green won a 62-megawatt project in Portugal, the largest solar energy project in the world so far.

The 10 cents/kwh price?might be?possible because of the plunge in the price of the polysilicon used in the production of solar cells from US$400/kg to about US$100/kg, one local paper reported by quoting an anonymous insider.

Analysts suggest the polysilicon price could slide further to US$50/kg by the end of 2009 or early 2010. In the long run, the price may stabilize around US$30/kg or even US$15/kg due to the technological advances in upgrading metallurgical grade silicon.

As China's largest solar power plant, the Dunhuang project will set the benchmark on-grid price for future projects and will lay down a model for nationwide subsidies to solar power plants.

The plant will cost around 500 million yuan to build and will generate 16.37 million kilowatt hours of electricity annually. Construction will take less than 18 months and it is expected to be in operation for at least 25 years.

According to some reports, Yingli Green Energy is replacing Suntech Power (NYSE:STP) as the leading low cost solar technology company in China and the world.

Earlier this year, Suntech Chairman Shi Zhengrong said China would achieve solar electricity costs as low as to RMB1/kwh by 2012. GreenPeace predicted the cost of solar electricity would drop to RMB1.5/kwh by 2015 and RMB1/kwh by 2020. In Japan, industry insiders see solar electricity falling to RMB1.53/kwh by 2010.

China approved the construction of a 205 kw solar power project in Erdos in Inner Mongolia, and a 1-MW solar power project in Shanghai with an on-grid price of RMB4/kwh. The Dunhuang project is the third major project to be approved but there are several more in the pipeline in Tibet, Yunnan and Jiangsu.

The global financial crisis and the collapse in the price of oil in the second half of 2008 damaged all the major players in the solar energy field and the share prices of both Yingli and Suntech dropped sharply last year.

"The financial crisis has resulted in weak funding and a shrinking market. But the situation will not last long. As solar energy costs fall, the market will eventually rebound," Li Wei told China.org.cn. "We have received 400-mw of orders for this year."

(China.org.cn March 26, 2009)