First Solar to Build World's Largest PV Solar Farm for China

firstsolar1If there are two groups that together make a natural team to build the world’s largest solar photovoltaic plant, it’s the Chinese government and thin-film solar darling First Solar (s FSLR). Few other duos have their combination of international scale and aggressive support of renewable energy. This morning the Chinese government and First Solar announced that they plan to build a massive 2 GW, 16,000-acre solar PV plant in the Mongolian desert. That’s a world record, as the PV plant that First Solar is building for PG&E (s PCG) (bought from OptiSolar), which previously topped the list, will deliver the equivalent of 550 MW.

The solar farm, which will be located in Ordos City, Inner Mongolia, is expected to cost between $5 billion and $6 billion to build, though the final cost of construction depends on what happens to China’s solar feed-in tariff. The plant will be built in phases, including a 30 MW demo project starting next year, expanding to hundreds of MW over the next few years; it’s expected to be completed by 2019. First Solar is also considering building a manufacturing facility in China to meet the demand of the project.

The deal demonstrates several interesting trends, notably that the Chinese government is getting ever more aggressive when it comes to turning the country into a substantial solar customer, as opposed to its current role as primarily a solar panel supplier to developed countries.

In March the country approved a subsidy for building-mounted photovoltaic systems, which could pay up to 20 Chinese yuan (about $2.93) per watt for those larger than 50 kilowatts. For ground-mounted projects (like the Mongolian project announced today) the government plans to pay a feed-in tariff for the electricity generated, instead of a subsidy based on the projects’ capacity. The government also has one of the most aggressive renewable portfolio standards in the world, aiming to get 20 percent of its electricity from renewable sources by 2020, with some 100 GW of wind capacity and 1.8 GW of solar.

China in general is swiftly looking to be the world leader in renewable energy technology, which is something that’s making U.S. leaders increasingly nervous. Not a week goes by without an op-ed — including columns by the New York Times’ Tom Friedman, Kleiner Perkins investor John Doerr and GE’s (s GE) CEO Jeff Immelt — decrying how the U.S. will lose the competitive greentech race to China. If the 2 GW of solar panels, which will likely be owned and run by a Chinese utility and using Chinese contractors, reports Green Inc., come from Arizona-based First Solar, perhaps that will ease some of the fears that the U.S. is losing out on the intellectual property race. That debate, however, could also depend on how much of the project’s manufacturing is done in First Solar factories in China.

The last point I want to raise about the deal is that winning over a project of this size is the latest signal that First Solar is the go-to player for utility-scale PV. See this chart of deals in the U.S. that First Solar has signed, in addition to its European wins. While the China project is only in the initial phase — the memorandum of understanding signed this morning needs to be finalized and negotiated in further detail — this kind of deal is the equivalent of opening up a whole new marketplace for the American solar maker.