Inner Mongolia is a backwater region of China, but it's about to become a world-class location for solar power. On September 8, leading solar panel maker and solar power plant integrator First Solar (FSLR) signed a multi-billion dollar agreement with the Chinese government to build a two gigawatt solar plant on the windy steppes of Inner Mongolia, far from the bright lights of Beijing and Shanghai, according to the Cleantech Group.

To put this in perspective, three years ago China was also building the largest solar power plant in the world, according to Red Herring. But it was only 100 megawatts -- one-twentieth the size of this one. The First Solar plant, to be completed by 2019, will dwarf all other solar plants, both existing and planned. The agreement comes after vocal criticisms by U.S. and European green energy companies that they were being intentionally shut out of bidding processes for large projects by the Chinese government.



A number of major foreign clean energy players have built factories in China to comply with laws mandating that a high percentage of components and the final product itself be built in the Middle Kingdom, the New York Times reports. The First Solar installation at Ordos could mark a turning point, or it could be a one-time aberration. China's own energy companies need to have access to foreign markets to grow and China is heavily subsidizing its cleantech sector. This has caused a huge plunge in solar panel prices that is impacting non-Chinese companies more due to the refusal by Western governments to subsidize the production side of the solar boom.

That said, the agreement does follow a familiar pattern of a large Western company signing a deal with the Chinese government and agreeing to share its technology. In many past deals like this, the Western companies have ended up competing against Chinese companies using similar or allegedly identical technology. First Solar is a leader in so-called thin-film solar panel technology. Thin-film panels are cheaper to make and lighter than standard photovoltaic panels. While several Chinese companies make thin-film panels, none are considered to have technology on par with that of First Solar.

Motives aside, the size and ambition of the plant is emblematic of the new China. The Chinese government is aggressively pursuing green power as a means of furthering the country's goals towards both a cleaner environment and energy independence.

Inner Mongolia is home to a number of energy-intensive heavy industries such as steel production and aluminum smelting. So the need for cheap, reliable and fixed-cost power in this region is even more acute for many Chinese resource companies that cut back production when commodity prices fell in the past year.

Of course, enormous government subsidies for solar power plants is another big reason why the biggest plants are showing up over there and not in the U.S. or Europe. According to Cleantech, the Chinese government will subsidize as much as 70 percent of solar projects that produce more than 50 megawatts of juice. With this kind of incentive to build, China is well on its way to becoming the biggest producer of solar power on the planet, surpassing the cash-strapped developed world in a headlong race for green energy superiority. First Solar, one of the few solar panel makers to have prospered in the current glutted market, is apparently going along for the ride.



Alex Salkever is a senior writer at AOL Daily Finance. He can be reached at alex@dailyfinance.com.






Increase your money and finance knowledge from home

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

Add a Comment

*0 / 3000 Character Maximum