China’s solar stock was hit by a blow in June when the existing government feed-in tariff for photovoltaic industry saw its end and new rules came out, which means a painful reduction of subsidies for the industry.

According to new rules, national feed-in tariff is cut by 0.05 yuan (about 0.7 US cents) per kilowatt-hour, taking effect on June 1. A same sum of reduction in subsidies was also applied for power that is generated by distributed photovoltaic projects. However, there is no change in subsidies for county-level poverty alleviation projects.

The solar sector is feeling the pain, especially small players who have limited finance and technologies for innovation. Many companies, lured by the booming development of the sector, potential profits and government feed-in tariff, were expanding capacity without much reflection on actual situation, giving rise to the problem of overcapacity and poor quality of solar power products. The new rules are designed to encourage healthy and sustainable development of the industry by phasing out such inefficient enterprises and their low-quality products, National Energy Administration (NEA) said.

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In doing this, the government is demonstrating its determination to optimize development pace of solar power development, since subsidy can never work as a long-term solution, the root for enterprises to survive and grow is to improve structure and capacity, thereby enhancing its competitiveness.

china solar - China Changes Policy for Solar Sector to Strengthen the Industry

Workers install solar power generation panels in Dinghai district of Zhoushan, Zhejiang province[Source:China Daily]

Reduction in subsidies might downscale the sector, but can push the sector to optimize, some are quick to take measures to adjust themselves to the new rules, shifting from capacity expansion to quality improvement, combined with photovoltaic energy storage and global market exploration.

Since domestic photovoltaic market faces surplus capacity, upstream firms are encouraged to look at opportunities overseas, especially under-developed countries and regions where solar power technology has room to grow, such as Africa, and R&D countries.

Risen Energy Co., Ltd., a Ninghai-based solar panel manufacturer founded in December 2002, said, aside from markets the company has successfully got shares and presence, including the U.S. and Australia and Europe, is also actively planning on business strategies for expansion in other countries like Nepal, Ukraine, India and Cambodia.

According to NEA, China’s solar power industry has witnessed burgeoning development in recent years, with solar power generation capacity hitting 118.2 billion kilowatt-hours in 2017, an increase of 78.6 percent year-on-year, claiming 1.8 percent of the country’s total power generation. 2017 also saw the rapid development of the distributed photovoltaic sector, with its installed capacity hitting 19.25 gW, an increase of 360 percent year-on-year.

In order to keep the industry on a healthy development track, the government would not approve new solar plants that need subsidies, and China will add just another 30 gW of capacity in 2018, compared with the record high of 53 gW in 2017, the NEA said.

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