Policy Change Causes A Sharp Decrease In Solar In China

Dec 21, 2019 03:53 PM ET
  • China has transitioned to auctions from the feed-in tariff system. These changes have resulted in a decrease in installations throughout the country.
Policy Change Causes A Sharp Decrease In Solar In China
Image: saurenergy.com

The country has implemented a policy that requires it to transition to auction from the old feed-in tariff system. This has resulted in a sharp decline in installations across China. According to a solar market analyst Rishab Shrestha, the change has led to a drastic decrease in installation.   

In the first 9 months of the year, about 15.00 GW was installed. In the last quarter, only 4.6 gigawatts were installed. This is lower than the 2017 quarterly peak of 18.6GW. 

According to this analysis, it is clear that solar developers are becoming cautious because of the reduced returns on investment. Besides, the reduction in subsidies that came in to effect in May 2018 has increased the cost considerably. For instance, the utility-scale solar PV hit an all-time high of USD61.2 MWh. This is higher than the USD 56/MWh average utility bid price. This has increased the government's renewable fund deficit to billions of renminbi. It implies that subsidies are even going to delay and hamper capacity growth. 

Only 93 % of the large scale grid solar projects that were subsided auctioned targeted Q4. The projects are targeting to produce 28 GW but some of them risk being delayed. According to WoodMac, only 23 % of the projects will miss the deadline. This will result in more subsidy cuts. The risk of the projects being canceled is also quite high.

WoodMac revealed that it had downgraded the annual installation to 30.5 gigawatts in its recent research findings.  Out of this, 14.4 GW was expected in the last 3 months of 2019. The pipeline in eastern, central and southern China will help boost the installation. But if more projects are delayed it is certain that there will be a drop of around 20 gigawatts.  

In summary, China remains attractive with its 5-year plan 2021- 2025 highlighting subsidy-free development and the 20 years PPA with utilities. According to WoodMac, about 32.2 GW of solar installation is expected in 2014. But more traction is expected in tertiary and secondary provinces. 



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