FSLR First Solar Inc

Electricity from First Solar Inc.'s (FSLR) planned 2-gigawatt solar power plant in China's Inner Mongolia will likely be priced via a feed-in tariff structure which hopefully will be set by the end of 2009, a senior official with the U.S. company said Tuesday.

"The Chinese government is considering a feed-in tariff structure. We are certainly expecting that the feed-in-tariff will be enacted and are hoping it will be so before the end of this year," First Solar president Bruce Sohn told a media briefing.

He said the tariff level was "critical to the success of this project."

"Feed-in tariffs establish transparency and clarity for the pricing of energy for a long period of time."

China for now sets solar tariffs on a case-by-case basis, and in most cases project developers can only get clarity over tariffs well after construction has started, increasing investment risk.

The Beijing government has said it is studying a fixed feed-in tariff system, but details haven't been made public yet.

One of the largest solar photovoltaic projects to date, the First Solar project will be built in stages, beginning with 30 megawatts in phase one, construction of which will start in 2010.

The capacities of phases two, three and four are to be 100MW, 870MW and 1,000MW respectively. The second and third stages are due for completion by 2014, and the fourth is due to be ready by 2019.

The First Solar project is one of a number of China-U.S. joint ventures in the solar sector announced recently.

On Oct. 26, Duke Energy (DUK) said it had signed an agreement with Chinese energy company and solar panel maker ENN Group to develop, own and operate solar-power projects in the U.S.

Sohn said the cost of the First Solar project, to be built in Ordos City beginning in June, hasn't been finalized, but will be "somewhat lower" than the $4 billion to $5 billion that a similar project would cost if built in the U.S.

In August, China set the feed-in tariff for its first commercial solar utility project at CNY1.09 per kilowatt hour, and this may set a benchmark for future projects.

As the Chinese government's policy on solar power develops, demand for solar modules should grow, Sohn said.

"First Solar views China as potentially a very large and significant market," Sohn said. "We do anticipate that the market will continue to grow."

"The movement toward more assertive goals, the movement toward introducing a feed-in tariff in the near future...should create a sustainable and vibrant solar industry," he said.

Beijing has a target of 300 MW of annual solar power generation capacity by 2010 and as much as 20 gigawatts by 2020, but as of end-2008 capacity was under 100MW.

In July, China gave its fledgling solar power industry a boost by announcing construction subsidies for on-grid solar power plants.

On Monday, the Ministry of Finance said China will spend over CNY20 billion to subsidize 642 MW of pilot solar utility projects in the next two-three years.

Sohn also said the Tempe, Ariz., company may consider setting up manufacturing facilities in China.

"China is a very viable location," he said. "As we see the market develop and mature here, this seems like a very appropriate place to manufacture."

First Solar sources materials for portions of its supply chain outside China, he said.

Sohn was in Beijing to sign an agreement firming up details of the project, which was announced in September.

-By Patricia Jiayi Ho, Dow Jones Newswires; (8610) 6588 5848; patricia.ho@dowjones.com

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