Photographer: SeongJoon Cho/Bloomberg

Out of China’s Dusty Northwest Corner, a Solar Behemoth Arises

  • Solar farm to cover equivalent of 7,000 U.S. city blocks
  • Minsheng New Energy managing $2.3 billion project in Ningxia

As China adds record amounts of renewable energy, a solar farm under construction in the Ningxia region of the country’s northwest takes efforts to a new level.

The project, being developed in phases by the clean energy unit of China’s biggest private investment group, will cover 4,607 hectares, or slightly more than 7,000 U.S. east coast city blocks. It will boast capacity of 2 gigawatts when complete, surpassing the scale of photovoltaics in place in Thailand at the end of 2015. The 15.6 billion-yuan ($2.34 billion) plant will need about 6 million panels and will be the biggest the world has ever seen.

All this from a company that didn’t exist two years ago.

“The opportunities are huge” for solar development in China, said Wang Jian, executive vice president of China Minsheng New Energy Investment Co., the company responsible for the Ningxia solar project.

Minsheng New Energy’s Ningxia plant is emblematic of China’s clean-energy ambitions. China’s solar installations more than doubled to 50 gigawatts in the two years through 2015. More growth is in store, with Bloomberg New Energy Finance estimating installations will more than double again to 109 gigawatts by the end of 2018. By comparison, the U.S. is expected to have about 41 gigawatts of solar by the end of this year.

Company’s Origin

Minsheng New Energy was established in October 2014 by China Minsheng Investment Corp. to develop clean energy. The unit has said it plans to invest 100 billion yuan in the next five years to boost its photovoltaic power generation capacity to 12 gigawatts, four times the capacity it expects to reach this year. By comparison, the U.K. is expected to have about 11 gigawatts of installed solar by the end of 2016, according to Bloomberg New Energy Finance data.

"Such a gigantic plant shows that China is actively supporting clean energy and it can serve as the kind of landmark that private companies can use to demonstrate to their shareholders that they have the ability to do such projects,” said Wang Haisheng, executive general manager of the equity division at Ping An Securities Co. “But it will also increase their risks given the size.”

As of June, China Minsheng New Energy had finished half of the Ningxia project and some 380 megawatts of capacity has been connected to the grid, said Fan Cheng, deputy head of CM Guangfu (Ningxia) Investment Company, a unit of Minsheng New Energy. The completed project is expected to generate 2.73 billion kilowatt-hours of electricity annually, or the equivalent of the power produced by a 400-megawatt coal-fired plant, according to London-based BNEF.

One reason Minsheng hopes the sheer scale of the project will work to its benefit: the decreasing price of solar panels, which account for a majority of total investment in the farm. Solar panel prices have averaged about 3.85 yuan a watt since construction began, but have fallen about 12 percent to 3.4 yuan a watt currently, according to Fan.

Cost Cutting

We’ve "reduced costs through economies of scale and advanced technology," said Wang. "Currently our financing costs can be on par with those of state-owned companies."

To gain the support of the local government where the project is being built, Minsheng New Energy says it has leveraged the project as a tool to help the poor in the area.

Shade provided by the project’s panels helps reduce evaporation, allowing some plants to be grown for feed on land that was otherwise barren and largely lifeless because of the area’s dry, dusty conditions, said CM Guangfu’s Fan. Project maintenance and farming have created jobs for 2,000 people, or about 12 percent of the population in the town of Gaoshawo where the project is located, he said.

Meanwhile, some earnings generated by another nearby project in Yanchi county with capacity of about 233 megawatts will be used to aid local development, said Fan.

Idle Capacity

One issue Minsheng must face is idled capacity. China’s rapid growth of renewable power has seen grids struggle to absorb the influx of electricity from new sources. About 20 percent of solar power sat unused in Ningxia in the first quarter, according to National Energy Administration data.

Minsheng “may want to seize the resources first, with an expectation that the problem can be eased in the future," said Yvonne Liu, a Beijing-based analyst at BNEF.

The company factored the idled capacity question, along with other factors such as a delay in subsidy payments from the government, into its investment decision, said Wang.

The Ningxia region accounts for more than 90 percent of the company’s total investment, said Bai Ruiping, chairman of Minsheng New Energy.

Poverty alleviation is one way the company can "gain a foothold in the long run and win the market," said Bai. "It’s possible other businesses that grow out of power generation will create new cash flow for us."