Chinese Solar Giant: “The Party Is Definitely Over”

By Tim Daiss

Solar panels

Just like in most things energy related, including crude oil imports, natural gas and LNG imports, coal usage and even nuclear power, China’s massive population and its economic heft also extends far and wide into global solar markets. China is the largest solar-market in the world, home to almost a third of the world’s cumulative installed solar capacity of around 130 GW, far greater than the U.S. at around 60 GW, and Japan’s roughly 46 GW.

However, last summer the Chinese government pulled state support for solar power companies. Beijing indicated at the time the curtailment was aimed at “promoting the solar energy sector’s sustainable development, enhancing its development quality and speeding up reduction of subsidies.” The move caught many by surprise, but may best be explained, at least in part, as Beijing’s response to a 30 percent tariff put in place last year on Chinese solar equipment by President Trump. The president’s decision was a response to several American solar companies claim that China’s solar subsidies were allowing its solar companies to undercut U.S. solar manufacturers.

Speeding up reform

By September, even as trade relations between the U.S. and China worsened, Beijing sought to speed up its efforts to ensure its wind and solar power sectors could compete without subsidies and achieve what new energy regulatory draft guidelines called “grid price parity” with traditional energy sources like coal. All the while, China needs a strong solar sector as Beijing tries to diversify its energy mix away from dirty burning coal used for power generation to renewables as well as natural gas and LNG, the cleanest burning fossil fuel.

State support for solar on such a massive scale not only brought concern from foreign solar manufacturers but was also a large burden on state coffers that ran in to the billions of dollars annually. Just by mid-2018, China owned some $17.46 billion in subsidies to solar companies. Beijing’s withdrawal of support caused global solar panel prices to fall around 30 percent last year – a boon for companies that needed to invest in solar infrastructure but caused headwinds for manufacturers, especially some smaller manufactures in China that almost went bankrupt.Related: Gasoline Overproduction Leads To Negative Margins

We are primarily funded by readers. Please subscribe and donate to support us!

Following Beijing’s solar subsidy withdrawal plans in a controversial move in September, the European Commission decided to end EU anti-dumping and anti-subsidy measures on solar PV cells and modules from China. The subsidies came into force in December 2013 for a period of three years and were extended further than the original deadline. China’s Commerce Ministry said at the time that the move restored EU-China trade of photovoltaics to a normal market condition and provided a more stable and predictable business environment for cooperation between the two sides.

The party is over

Now, a major Chinese solar player, Eric Luo, president of China’s GCL System Integration Technology Co, a top-10 maker of solar panels, said yesterday at the World Economic Forum in Davos that the global solar power industry is about to lose a major competitive windfall as prices for Chinese solar panels are poised to recover from a price plunge last year.

“The party if definitely over,” he said.

Luo added that solar panel prices were already stabilizing and that he expected them to rebound by 10 to 15 percent as the Chinese industry consolidates over the next year or two. A Reuters report said given that panels represent close to half of a solar farm’s installation costs, that threatens to eat into the returns of investors.

By Tim Daiss for Oilprice.com

 

Views:

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.