Over the past eight years, the price of solar products has significantly dropped due to the development of solar technology in China. The cost of solar modules has been lowered to $1 per watt. The solar cells conversion rate has continued to increase, rising from 14 percent to 19 percent.

The investment return of downstream businesses - solar farms - is around 8 percent now, which is relatively good, industry players said.

Challenges ahead

Meanwhile, the challenges the wind power industry now faces could be the next hurdle for solar power development.

Roughly 25 percent of China's wind power isn't connected to the power grid due to limitations in the grids' capacity to transmit power from the distant regions where the power is generated to the power consuming areas. Also, local grids lack the ability to absorb wind-generated power, which can be quite unstable.

The less populated western part of China - which has more sunshine hours per year than other regions in the country - is the major destination for large-scale solar power projects.

In terms of installed capacity, China's top 10 solar power producers are: Qinghai, Ningxia, Gansu, Shandong, Jiangsu, Hebei and Shaanxi provinces and the Inner Mongolia, the Xinjiang Uygur and the Tibet autonomous regions. Those provinces and regions account for almost 90 percent of the country's output. Seven of those provinces and regions are in western China.

Located in Northwest China's Qinghai province, Golmud has been labeled the Photovoltaic Capital of China due to a series of large projects. One example is a 200 mW project by CPI Huanghe Hydropower Development Corp.

The province vowed to approve 1 gW of solar farms this year - one-third of the country's newly added capacity, an aggressive target that has raised concerns.

Solar power rationing has happened twice over the past year in Golmud, partly because the local grid was unable to absorb the solar-generated power, causing millions of yuan in losses for local solar farm developers.

In 2011, China's connected solar capacity was 2.12 gW, or nearly 70 percent of the installed capacity, according to the China Electricity Council.

"The grid infrastructure in the western regions is not adequate to support solar connections," said Zhang Qian, a senior official at Canadian Solar. "More transmission lines need to be built."

Electricity needs to be transmitted to the grid before being distributed, which requires companies to convert solar power into high-voltage electricity.

"This process adds more costs," said Lian of Solarbuzz.

Therefore, electrical grid companies are reluctant to connect solar power into their systems.

The central government started subsidizing grid companies in 2012 in an effort to encourage them to bring more renewable energy into the country's power system.