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FM AMCONSUL GUANGZHOU
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RHMFISS/DEPT OF ENERGY WASHINGTON DC 0021
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RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC 0007
RUEAIIA/CIA WASHDC 0217
RUEKJCS/DIA WASHDC 0213
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 02 GUANGZHOU 000497 
 
SENSITIVE 
SIPDIS 
 
BEIJING FOR DOE 
USDOC FOR MAC 4420 
USDOE FOR OFFICE OF THE SECRETARY 
USDOE FOR INTERNATIONAL AFFAIRS 
USDOE FOR FOSSIL POLICY AND ENERGY 
STATE FOR EAP/CM, EEB/ESC 
STATE PASS USTR FOR CHINA OFFICE 
 
E.O. 12958: N/A 
TAGS: ENRG ECON SENV PGOV CH
SUBJECT: Solar Energy in Guangdong - A Big Supplier Trying to 
Increase Local Demand 
 
¶1. (U) Summary and comment: Guangdong is a major producer of solar 
energy equipment in China, but local demand for solar energy is 
still low.  The province has set ambitious targets for increasing 
solar energy use.  The provincial government has initiated 
demonstration projects and has taken advantage of national subsidy 
programs to expand the use of solar energy.  Nevertheless, solar 
energy firms still call for more government support to increase 
demand in China, which will likely be an increasingly important 
market for companies that have in the past relied almost entirely on 
exports.  End summary and comment. 
 
--------------------------------------------- --- 
Energizing the Solar Industry: Increasing Demand 
--------------------------------------------- --- 
 
¶2. (U) Guangdong is ranked number one in the production of solar 
water heaters in China, but only 5% of Guangdong's households use 
them.  More than 200 companies in Guangdong produce approximately 
20% of China's solar water heaters, but most are made for export. 
Guangdong's solar cell manufacturers do not fare any better in 
retaining their products in Guangdong.  The provincial government, 
with the support of the central government, is now looking for ways 
to transition from solely producing solar energy systems to 
increasing domestic demand and utilization of solar energy. 
 
¶3. (SBU) According to Zheng Lepeng, Chairman of the Guangdong Solar 
Energy Association, Guangdong's history in the solar energy sector 
is extensive.  Zheng noted that the Guangdong Institute of Energy 
Conversion developed the nation's first solar water heater and in 
the past Guangdong's solar cell manufacturers were at the forefront 
of China's solar cell industry.  However, Zheng believes that 
recently Jiangsu and Zhejiang provinces have placed a greater 
emphasis on developing alternative energies, and Guangdong's overall 
solar energy industry and policy now lags behind them. 
 
¶4. (SBU) The province has ambitious goals for the expansion of solar 
energy use.  Guangdong has set a 2010 target to reach a 30% 
household usage rate for solar water heaters.  Zheng also points out 
that the province aims to have a 20 megawatt installed capacity for 
solar power generation.  The central and provincial governments have 
enacted several policies and subsides to stimulate the consumption 
of solar energy.  Zheng said the policies could potentially kick 
start the photo-voltaic industry in China.  However, he noted that 
the impact had been small so far in Guangdong because implementation 
guidance is still lacking.  Industry contacts told us that some of 
the new policies could represent a turning point in the industry. 
 
------------------------------------ 
Subsidies and Demonstration Projects 
------------------------------------ 
 
¶5. (U) The use of solar power in Guangdong is still largely in the 
demonstration phase, with applications in a few street lights and 
20-30 demonstration projects around the province.  Among the most 
prominent programs, the provincial government is subsidizing solar 
water heater usage through demonstration projects in rural 
communities.  One project in a village in the Xijiang District of 
Shaoguan Municipality was rolled out in 2007 with assistance from 
the Guangdong Economic and Trade Commission and the Guangdong 
Financial Department.  Under the program, 62 households installed 
"economical solar water heaters;" The RMB 1,600 cost of each heater 
was shared by the provincial government (RMB 300), local government 
(RMB 500) and each rural household (RMB 800).  A second 
demonstration project was launched in 2008 involving 1,449 
households in rural areas of Heyuan City.  Provincial authorities 
 
GUANGZHOU 00000497  002 OF 002 
 
 
expect that over 8,000 solar water heaters will be installed in 
rural areas this year through this program. 
 
¶6. (U) The province is also taking advantage of central government 
support programs to increase solar energy consumption.  In concert 
with the central government's "Solar-Powered Rooftops Plan," 
Guangdong province hopes to have 100,000 rooftop solar cells 
installed by 2010. The "Solar-Powered Rooftops Plan" will subsidize 
the project at a rate of RMB 20 (US$3) per watt of solar energy. 
For some projects, the plan has subsidized as much as half of the 
total cost of the solar cells. 
 
¶7. (SBU) Local governments in Guangdong also have programs to 
increase usage of solar energy.  According to Zheng of the Guangdong 
Solar Energy Association, the Foshan Economic and Trade Bureau 
launched a pilot program in 2008 to encourage use of solar water 
heating systems in textile companies in Foshan.  Provincial 
officials believe the program was a success, and the Guangdong 
Economic and Trade Commission is trying to create a similar expanded 
program for the entire province. 
 
--------------------- 
Enterprises Want More 
--------------------- 
 
¶8. (SBU) Liu Jun, Sales Manager at Guangdong Fivestar Solar Company, 
told us that the success of his company was due to its own efforts 
rather than government support, but still called for more assistance 
for the solar energy industry. He said enterprises were looking for 
implementation of long term incentives that go beyond demonstration 
projects.  They want sustainable subsidies to encourage the 
necessary capital commitments to increase and improve solar energy 
products.  Liu called for direct support to enterprises, alongside 
users of solar energy products. 
 
------------------------------------------- 
Enterprises Attempt to Grow Domestic Demand 
------------------------------------------- 
 
¶9. (SBU) According to Liu, his company has tried to develop a 
stronger domestic distribution network and generate media publicity 
to increase solar energy utilization in Guangdong and more 
importantly expand sales.  The company also sponsors demonstration 
projects that increase consumer awareness of energy saving methods 
available through the use solar energy. Most solar energy companies 
in Guangdong still appear to cater to a foreign consumer.  However, 
with some developed countries cutting subsidies for solar energy and 
the global financial crisis slowing the development of solar energy 
projects overseas, Chinese companies may be increasingly looking to 
the domestic market for future growth. 
 
GOLDBECK