New models would help finance distributed projects
China has to promote innovative financing models to supply money to distributed solar, an energy source that will play a major role in the country's ambitious new energy plan, according to a report by Ernst & Young (EY) on Wednesday.
China's solar installed capacity is targeted to reach 70 gigawatts by 2017, said a national plan published in May 2014.
To realize this target, EY estimated that China needs to invest 737 billion yuan ($120 billion) during the period from 2014 to 2017.
About 528 billion yuan will have to be spent during the same period on distributed solar, which has a smaller capacity than regular solar utility but is more flexible in terms of location.
These projects are usually financed with bonds, loans, and government subsidies.
But to finance the ambitious plan, the report suggested some innovative financing models that have been used around the world, such as leasing, crowdfunding and community-funding.
Leasing reduces the cost of solar applications while crowd- and community-funding invites individual investors to help fund certain projects, experts said.
"Innovative financing models are still at a very early stage [in China] but I do think that with the right environment, these models will be adopted very quickly and on a very large scale," Alan Beebe, an executive director with EY China's advisory services practice, told the Global Times on Wednesday.
The lack of successful business models and legal constraints are behind the financing difficulty of solar projects in China, Beebe said.
"From a financial point of view, distributed solar projects, with their low rate of return and limited scale, are asking for micro-sized loans. These loans are basically neglected by financial institutions as banks in China have easier ways to make money," Zhao Zheng, a professor at Beijing Normal University and a green energy expert, told the Global Times Wednesday.
"There are already some examples in leasing. Crowdfunding could really take off if one of these big Chinese Internet firms starts to do it, and a change in the legal environment will open up a big market," Beebe said.
Solarbao, a financial product based on finance lease and developed by US firm Solar Power Inc, invites environmentally conscious investors to "own" a certain percentage of solar panels in solar projects across China and promise an annualized rate of return of 9-10 percent for their investment.
Solarbao has sold 200 million yuan's worth of products since its launch in January 20, Securities Daily reported on April 2.
To boost the development of distributed solar, there are also ways to entice traditional players, according to Zhao.
"Many new residential compounds in western China have incorporated distributed solar into its designs, and in this way the solar facilities are financed through housing loans. At the same time, having solar built together with new houses, rather than attaching solar panels to existing houses, provides a cost advantage," Zhao said.
