Big solar plant planned for northwest China

QAIDAM BASIN, CHINA - Two Chinese companies announced plans to build a solar power plant in northwestern China that could one day be the largest photovoltaic solar project in the world.

The news helped spur a rally in shares of solar power companies that was also underpinned by higher oil prices and a strong rise the broader market.

China Technology Development Group Corp and privately held Qinghai New Energy Group will begin building a 30 megawatt solar power station in China's Qaidam Basin this year with an initial investment of $150 million, they said in a joint statement.

The project, which will combine thin-film and traditional silicon-based technologies that turn the sun's rays into electricity, ultimately will produce 1 gigawatt of power, the companies said, without giving a timeframe.

According to Raymond James analyst Pavel Molchanov, the largest photovoltaic solar project announced to date is the 550 MW deal between closely held thin-film company OptiSolar and California utility PG&E Corp.

"The initial phase of the project is... itself one of the largest solar farms ever announced in China," Molchanov wrote in a client note, adding that the Chinese government is beginning to offer more incentives for solar power projects.

"While PV demand has been historically driven by a small number of key countries, the demand profile should become more geographically diverse over time," Molchanov added.

The news was a welcome reprieve for investors in solar power companies, which have been hard hit by a lack of funding for new projects, a drop in prices on solar panels as supplies have jumped and a dramatic drop in oil prices that has tempered investor appetite for renewable energy.