CHINA has cut a subsidy for solar projects under a demonstration program this year by more than 20 percent to reflect falling costs of photovoltaic system installations.

The government will offer 5.50 yuan (87 US cents) per watt for the combined capacity of 1.71 gigawatts approved for this year under the Golden Sun program, according to a statement on the central government's website yesterday. It earlier proposed to offer 7 yuan per watt this year.

"This is a bit surprising," said Liu Wenping, an analyst at investment research firm Pacific Epoch. "The lower subsidy may reflect that developers had been very enthusiastic in applying for projects while the government's total subsidy was already set."

Engineering, procurement and construction contractors typically ask for 8 yuan to 10.50 yuan per watt for solar projects today, Liu said.

Governments globally are slashing benefits enjoyed by solar installers as panel prices fall because of slowing demand in traditional markets like Europe.

Golden Sun was launched in 2009 to facilitate the development of China's solar power industry and aims to cover 50-70 percent of the investment in solar installations. Developers must meet certain requirements in capacity, scale and capital to qualify for the subsidy.

Meanwhile, Cao Min, chief financial officer of Nasdaq-listed JA Solar Holdings, yesterday said the solar industry may see improved prospects in the second half of 2012 or the first half of next year due to industry consolidation and improving demand.

JA Solar signed a strategic R&D tie-up yesterday with the Shanghai Institute of Technical Physics of the Chinese Academy of Sciences.

In January, the National Energy Administration said China plans to double its solar power capacity in operation by installing 3 gigawatts this year.

Source:shanghaidaily.com