China is becoming a solar leader by expanding its programs in the area. The nation recently announced its Golden Sun Stimulus Package, with the goal of installing 500 megawatts of solar farms across the country in the next two to three years. Through the Chinese Ministry of Finance, the government would subsidize 50% of the costs of building a solar power project, including transmission and distribution costs. The subsidy would increase to 70% for solar farms in remote areas without connections to the grid. This latest round of subsidies for solar continues China's commitment to generation targets of 10 gigawatts by 2020. Analysts predict that nearly two gigawatts of new production could be added to the grid by 2011. In March, the Ministry offered a program to subsidize rooftop and building-integrated solar power projects with as much as 20 Chinese yuan per watt.

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To qualify for the estimated $10 billion in aid, the projects must have a generating capacity of at least 300 kilowatts, with construction being completed in one year and operations lasting at least 20 years. In addition, each province can only have a total of 20 subsidized projects. The Golden Sun plan comes at a perfect time, as China tries to reduce its rapidly expanding demand for imported oil and gas and reduce its carbon footprint. The plan is meant to develop the solar industry as a new source of economic growth.

A Few Shining Picks
Beijing gave no indication that the Golden Sun project would benefit Chinese-only solar firms. However, the European Chamber of Commerce's China branch has received complaints about China's recent massive economic stimulus plan. It cited that European wind turbine producers were shut out of the $5 billion earmarked for Chinese wind projects. With that in mind, it is probably best to stick to Chinese solar companies if you want to play the Golden Sun project.

Recently, both ReneSola (NYSE:SOL) and Suntech Power (NYSE:STP) inked deals ahead of the Ministry's announcement to provide 2.3 gigawatts for provincial and city governments for 2009/2010. Additional deals should continue to flow as the plan unfolds.

Yingli Green Energy (NYSE:YGE) is one of the largest producers of photovoltaic (PV) products in China. As one of the few vertically integrated Chinese solar companies, Yingli has the ability to produce the wafers, cells and modules, and then apply them to create sun farms. As such, the company should be eligible for a number of subsidies. The company recently announced a joint venture with SDIC Huajing Power Holding Co. to produce a 10 megawatt, on-grid solar farm in Dunhuang, Gansu Province.

JA Solar Holdings (Nasdaq:JASO) and China Sunergy (Nasdaq:CSUN) offer investors a way to play the manufacturing of PV cells, step three in the solar value chain. Like any semiconductor product, PV cells go through periods of oversupply. Thanks to oil's rise to $150, which was followed by the current economic downturn, there is a glut of supply. However, the cells are a pivotal piece of the solar pie and have a high barrier to entry; they should provide nice returns once the world's economies return to "normal".

Bottom Line
With the Golden Sun Solar plan, China has made it very clear that it intends to be a worldwide solar leader. As the projects begin to take shape, the Chinese will gain valuable energy and well as economic benefits. One of the main growth stories within the solar sector has always been China and this plan is the first step toward that. Until the full details of the plan are known, investors who want to play the stimulus plan should stick to Chinese solar stocks. The picks we've examined here are good entry points into that market. (To learn more, check out Spotlight On The Solar Industry.)

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