BEIJING (Reuters) - China has raised its solar power installation target for 2015 by 30 percent from its previous goal, state media reported, potentially adding to overcapacity as insufficient grid capacity remains a hurdle for the new plants to deliver power.
Solar plants can in theory delivery returns of 10-15 percent under long-term power purchase contracts with state utilities but in practice face problems of subsidy collection and panel quality, making investors wary of the sector.
China will add another 5.3 GW installed capacity of solar power stations this year, on top of an earlier national target of 17.8 GW, Xinhua reported, citing a notice from the National Energy Administration last week.
The new stations will be added mostly in Inner Mongolia and Hebei in the north and Xinjiang in the west, the report said.
The NEA required the project hosts to complete construction by end of this year and get connected to the grid by end of June next year, the report said.
China's insufficient grid capacity and overcapacity has curtailed the sector's growth. Nearly a tenth of the solar power generated during the first half of this year was unable to be delivered, according to the NEA.
China, the world's largest solar market, installed 7.73 GW capacity in the first six months of 2015, the NEA has said, which would be only a third of the new target, meaning companies would need to speed up construction significantly in the second half of the year.
China, the world's largest greenhouse gas emitter, has vowed to cap CO2 emissions by largely increasing the use of non-fossil fuel such as wind and solar, hoping for a peak in carbon emissions by 2030.
The country aims to raise the share of non-fossil fuels to 15 percent of its total energy mix by 2020 from around 11 percent at end-2014 as part of efforts to ease its dependence on coal and meet its climate pledges to the United Nations.
(Reporting by Kathy Chen and Chen Aizhu, editing by David Evans)