Chinese government to limit expansion of solar power industry
June 12, 2018 Category China News Round-up, Weekly
The Chinese government plans to rein in the expansion of the solar power industry by suspending the construction of new farms and cutting subsidies. As a result of the decision, the shares of solar power companies, including Sungrow Power Supply and GCL-Poly Energy Holdings, dropped on China’s stock exchanges. Sungrow Power’s stock dropped by 23% over the past seven days. In a joint statement, the National Development and Reform Commission (NDRC), the Ministry of Finance and the National Energy Administration (NEA) said the allocation of quotas for new projects had been halted until further notice, and tariffs on electricity generated from clean energy will be lowered by CNY0.05 per kilowatt hour, a cut of 6.7% to 9% depending on the region, effective June 1.
After the announcement, Dennis Ip, head of Hong Kong and China utilities, renewables and environment at Daiwa Capital Markets, slashed his forecast for solar power installation in China to 30 gigawatt (GW) from 45 GW this year. Installation rose to a record 53 GW in 2017. The subsidized installation volume for so-called distributed solar farms – rooftop panels at factories and buildings whose owners can sell volumes in excess of their own consumption to grid operators – will be capped at 10 GW, according to the statement. The solar industry will endure a painful reshuffle before leading players can benefit from consolidation in the long run, said Kai Wenming, Analyst at New Times Securities. “The contraction in the photovoltaic industry will intensify competition in the short term because of the policy’s sudden brake,” said Gong Yongfeng, Analyst at Citic Securities. “The prices of the industry chain will come under big pressure. Industry consolidation may last for six to 12 months.”
The announcement is the most aggressive paring back of state support for solar power, and follows another policy announcement last month that the awarding of all new wind farm development rights would be subject to competitive bidding. Both moves are aimed at keeping in check the more than CNY100 billion deficit in a state-run renewable energy fund, which is financed by a surcharge on power users’ bills.
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