The gross profit margin is estimated at 20 to 30 percent for solar panel manufacturers in China and 50 to 60 percent for downstream companies focused on solar plants, said Han Qiming, an analyst with Solarbuzz, a division of United States-based market research company The NPD Group Inc.

Homemade PV power station in Zhejiang

China to build more solar power stations

But while the government expects a lot from distributed solar projects, industry insiders still have their concerns.

The China Renewable Energy Engineering Institute on Monday said that the number of new distributed solar plants grew very slowly in the first quarter. Compared with large-scale solar power stations, the economic returns of distributed solar plants are "less attractive". Moreover, in some regions, it's still hard for distributed solar plant developers to get financing, locate appropriate roofs and connect to the state grid, the report said.

For example, installations in Zhejiang province during the first quarter accounted for less than 5 percent of the annual target. In Shandong province, first-quarter installations of distributed solar facilities were just 0.42 percent of its annual target.

"We seek out appropriate clients mainly in east China, including Jiangsu province, Zhejiang province and Shanghai. In those areas, government policy is clearer and subsidies are paid on time. In some other regions, connections to the grid and subsidy payments don't go smoothly," said Wang Hongbo, project business development director of Hong Kong-listed Boer Power Holdings Ltd. It's often difficult to identify appropriate roofs, Wang said. Residential use isn't yet that common and "we have to educate people. On the other hand, the property ownership of commercial and industrial buildings is usually complicated," he added.