The journey of industry restructuring and transformation has just been at the beginning for China's solar PV industry.

Boosted by the country's major initiatives to develop clean energy, the sector is now facing an acute problem of overcapacity, particularly as the ongoing European debt crisis and policy changes have dampened global demand for solar PV products.

The export-oriented pattern of China's solar PV industry creates great risks for domestic solar panel producers, and Chinese manufacturers should work to expand domestic market to reduce reliance on foreign demand, according to Ding Wenwu, an official with the Ministry of Industry and Information Technology (MIIT).

-- Overcapacity triggers restructuring of China's solar PV industry
The year of 2011 has witnessed plunging product price for the solar PV industry from downstream to upstream, which has caused substantial losses to most Chinese solar PV firms and suspensions of production have spread, especially for the polysilicon plants.

Following the price upsurge in 2010, the sharp downturn has mirrored the severe overcapacity piled up by years of vaulting development.

According to the China New Energy Chamber of Commerce, total output of solar PV panels is likely to top 35 GW in China in 2011, while global demand is only around 20 GW in the year.In 2012, the global output capacity is to reach 80 GW, of which more than 50 per cent are to be produced by China, according to estimates by Joint Research Centre with European Commission.

However, the global demand for the solar PV panels is estimated at 30 GW in 2012 and 2013, according to the European Photovoltaic Industry Association (EPIA).

With the excessive production capacity unable to be consumed by the sluggish demand, the downturn of China's solar PV industry is unlikely to halt in the short time, and losses of solar PV companies may continue into 2012, according to Qu Xiaohua, chairman of Canadian Solar, one of the world's largest solar companies.

-- Solar PV power generation to embark on scale developmentOne of the bottlenecks that limits the development of solar PV power generation on a large scale has been the higher price of the electricity generated from solar PV power. As a result, the commercialization of solar PV modules has always relied on government subsidies on the solar PV power when connected to power grid.

However, the sliding prices of the solar PV products has greatly reduced the cost of solar PV power plants which will lower the price of solar PV power as well, according to Shi Zhengrong, director of Suntech Power Holdings (STP.NYSE).

The cost of solar PV modules has fallen to 0.8 US dollars per Watt currently, which can be accepted by power grids without additional subsidies and are comparable to the electricity prices in some developed countries such as the US and Italy.

For the solar PV power plant with installed capacity exceeding 1 MW in the western regions of China that have longer sunshine time, the cost of solar PV power generation has fell to 1 yuan per kWh based on the current price of solar PV modules, which can realize the large scale development of solar PV power generation, according to Qu Xiaohua.

The downturn of China's solar PV industry this year, although causing substantial losses, will force companies to further reduce costs through technology innovation and to accelerate the development of China's solar PV power generation thus increase demand for solar PV modules in the domestic market, according to statistics released by Suntech and Canadian Solar.

-- Chinese PV firms turn to emerging market for further development
The shrinking demand on the global stage due to the sluggish world economy as well as policy changes are further dimming the future of the export-oriented sector as some 95 per cent of China's solar PV products have been exported to overseas markets.
The excessive reliance on foreign market creates great risks for domestic solar panel producers, and any policy change in foreign countries will cause turbulence in the domestic industry according to Ding Wenwu, an official with the Ministry of Industry and Information Technology (MIIT).

Meanwhile, the anti-dumping and countervailing investigation into China's solar PV panels begun by the US on November 9 has sent the signal that international protectionism is on the rise in the new energy sector, and China's manufacturers should keep alert and work to expand domestic market to reduce reliance on foreign demand, Ding noted.

China's solar power installed capacity is planned to hit 15 GW, including 14 GW planned for solar PV installed capacity, and solar power generation of 20 billion kWh per year, according to the national development plan of the renewable energy industry in 2011-2015 recently unveiled by the National Energy Administration (NEA).

On the other hand, more and more Chinese firms have begun to explore new emerging markets such as North America, Japan, India, Southeast Asia, and South Africa on the shrinking demand posted by the European market and to search for new ways of investment to deal with the rising trade protectionism on the global market.

The Hoku Corp., a solar energy product company based in Hawaii in the US, started production of polysilicon in December as the first project since 60 per cent of its stock was purchased by China's Tianwei New Energy Holdings (Tianwei).

The company invests in local industries to seek win-win development with American photovoltaic companies, according to Ding Qiang, chairman of Tianwei.

Acquisitions of foreign companies provide a way for Chinese solar energy companies to avoid trade barriers, industry experts noted.

--utilityproducts.com

Related report: http://www.cri-report.com/energy-utilities/220-research-report-on-chinese-solar-pv-equipment-industry-2010-2011.html