Energy & Chemicals Industry Analysis

Analysis on Status Quo and Policies of China Photovoltaic Power Generation, 2018

According to the National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration, the standard on-grid power prices of photovoltaic power station newly put into running will decrease by 0.05 CNY/kWh. Ordinary photovoltaic power stations except those connected with the grid before May 31 will no longer obtain subsidy this year. The subsidy policy for distributed photovoltaic power generation has also been tightened with an annual upper limit of 10GW.

This policy accelerated the decline of photovoltaic industry subsidy, and photovoltaic enterprises cannot count on subsidy any longer. Many photovoltaic enterprises plan to cut their staff and production. CRI holds that the reduction of government subsidy is not a bad thing. After all, no industry’s growth depends on subsidy. The turning point of the photovoltaic industry is about to come with mergers and acquisitions.

The aforesaid “5.31 New Policy” is called as “the tightest policy for the photovoltaic industry” in the history.

Related report: Research Report on China’s Photovoltaic Industry, 2018-2022

In recent years, excessive reliance on government subsidy has become common in the industry. According to China’s Renewable Energy Law, grid-connected generation by renewable energy is encouraged. China has prioritized the development and utilization of renewable energy in the development of energy development and set the volume target and taken measures to promote the establishment and development of the renewable energy market. Institutions and individuals are encouraged to install solar energy utilization systems such as solar energy photovoltaic power generation system.

Since 2006, a large number of private enterprises have set foot in the field of photovoltaic power generation. At the very beginning, the cost was 4 to 5 CNY/kWh with high subsidy. However, the cost per kilowatt on the market was just a few cents. The government made great efforts to boost new energy development. At present, the cost per kilowatt is CNY 0.4 to 0.5,, 1/10 of the previous one. The cancellation of government subsidy has such a great impact on the photovoltaic industry that many enterprises may cut production and even go bankrupt but it is beneficial to the industry development.

Related report: Research Report on China’s Photovoltaic Industry, 2018-2022

Data shows that from 2015 to 2017, the total installed capacity rised rapidly from 0.86GW in 2010 to 77.42GW in 2016, and the newly-added installed capacity in 2016 was 34.54GW. China ranked top in the world in both total and newly-added installed capacity of photovoltaic power generation. Because of the on-grid power price adjustment and other factors, the market size of photovoltaic power generation experienced rapid expansion in 2017 with newly-added installed capacity of 53.06GW and total installed capacity of 130.25GW. From Jan. to Apr. 2018, newly-added installed capacity reached 8.75GW.

In the first half of 2016, photovoltaic power resources abandonment was a serious problem in Northwest China. A total of 3.28kWh, about 19.7%, was abandoned. Xinjiang and Gansu met more difficulties in photovoltaic power generation, with abandonment rate of 32.4% and 32.1% respectively. In the first quarter of 2016, the abandonment rate in Xinjiang even reached 52%. In 2016, the average abandonment rate in Northwest China was up to 20%. In 2017, about 10 billion kWh photovoltaic and wind power was abandoned in Inner Mongolia. In the west of Inner Mongolia, 7.1 billion kWh wind power was abandoned, with a proportion of 17%, and 400 million kWh photovoltaic power was abandoned, with a proportion of 11%.

China’s photovoltaic industry subsidy mainly comes from the government. However, the government also has a financing gap. By the end of 2017, the gap in renewable energy subsidy had reached CNY 100 billion. Therefore, the market regulation policy for the photovoltaic power generation was significantly changed. Industry transformation must be made through technological reform when subsidy is not available.

Related report: Research Report on China’s Photovoltaic Industry, 2018-2022

As regards to China’s photovoltaic power generation, the newly-added installed capacity has ranked top in the world for 5 consecutive years, and the total installed capacity has ranked top in the world for 3 consecutive years. With global-leading innovations and breakthroughs in photovoltaic technology, China has built a complete industry chain. And Photovoltaic power generation has played an important role in energy transformation.

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