Despite all of these drawbacks, the Chinese government is funding several large-scale renewable energy projects as it faces both an energy crisis and high national levels of air pollution due to coal fired power plants. Beijing has shown plans to achieve 10 percent of its energy production from renewable resources by 2010, reaching 15 percent by 2020 through the use of wind, hydro, biomass and solar power. Multiple government incentives are being promoted to encourage growth in these areas.

A large percentage of China's renewable energy is provided by the controversial Three Gorges Dam project. It is the world's largest power plant, with an installed capacity of 22.5 gigawatts.

The latest renewable energy project is a 2 gigawatt solar power plant in Ordos City, located in Inner Mongolia. The sparsely populated region is dominated by large, flat plateaus of grasslands.  Phase 1 will begin construction by June of next year as a 30 megawatt demonstration project. Phases 2 and 3 will be completed by 2014, and Phase 4 will complete the project by 2019. The last three phases will produce 100, 870, and 1000 megawatts respectively.

While estimates of China's solar capacity total around 90 megawatts, the Chinese government has expressed a goal of two gigawatts by 2011. It is also targeting a capacity of 10 to 20 gigawatts by 2020.

All of this points to a healthy future for First Solar, the Arizona-based company which has just signed a Memorandum of Understanding to build the Ordos City project.

“This major commitment to solar power is a direct result of the progressive energy policies being adopted in China to create a sustainable, long-term market for solar and a low carbon future for China,” stated Mike Ahearn, CEO of First Solar at the MOU signing ceremony at the company's headquarters in Tempe, Arizona.

“We’re proud to be announcing this precedent-setting project today. It represents an encouraging step forward toward the mass-scale deployment of solar power worldwide to help mitigate climate change concerns.”

The cost of the project has not been disclosed, but the project will definitely be profitable due to the use of a feed-in-tariff which will guarantee premium pricing of electricity produced by the power plant. Regional power utilities will be obligated to purchase minimum amounts of power from the project. Feed-in-tariffs are being increasingly used by the Chinese government to offset the extremely cheap power from coal-fired power plants.

“The Chinese feed-in tariff will be critical to this project,” Ahearn said. “This type of forward-looking government policy is necessary to create a strong solar market and facilitate the construction of a project of this size, which in turn continues to drive the cost of solar electricity closer to ‘grid parity’ – where it is competitive with traditional energy sources.”

First Solar is considering the construction of a thin-film photovoltaic module manufacturing site in the area to support the project. A recycling plant to process used modules is also being considered.

“We are very pleased to be partnering with one of the solar industry’s global technology leaders in a project of such significance to Ordos’s low carbon future,” said Cao Zhichen, the Vice Mayor of Ordos Municipal Government.

“Discussions with First Solar about building a factory in China demonstrate to investors in China that they can confidently invest in the most advanced technologies available.”