Policy changes driving Chinese panel prices down are increasing solar uptake across Asia

Asia Finance:

China’s solar panel manufacturers must be wondering where the next glimpse of sunshine is going to come from.

As recently as a couple of years ago, the industry was earmarked as a shining example of China’s move up the value chain in technology that would help underpin Beijing’s commitment under the Paris climate accord.

China is the world’s largest manufacturer of solar panels, with a 1.4 million strong workforce in 2017 accounting for 37{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} of global installation, according to the International Renewable Energy Agency.

But in recent months, regulatory manoeuvres at home and abroad have put the industry in sharp decline.

Of particular concern was India’s announcement on July 30 that it would slap a 25{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} tariff on imports of Chinese solar modules in an attempt to protect its domestic industry. That followed hot on the heels of a June 4 decision by the Chinese government to cap the total size of all new solar projects this year at 10 gigawatts (GW) – compared to the total of 19GW of solar capacity installed nationwide last year.

At the same time, Beijing scrapped its feed-in tariffs – the rate developers are paid for solar power sent to the grid putting immediate pressure on companies’ top line.

Most major stocks in the solar industry experienced double digit drops on June 4, with the largest solar player by global shipments, Jinkosolae, falling by around 34{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974}, according to data from Bloomberg.

“The name of the game for them is to stay afloat,” one industry insider told FinanceAsia. “That’s why we’ll see (Chinese) panel manufacturers continue to do what it takes to keep their foothold in the all-important Indian market.”

Ironically, it may well be India’s solar plant developers who benefit most from the misfortune of China’s solar manufacturers.

The near-term fall in demand in China and over-production globally has lead to a glut in supply, forcing prices down. With prices at historic lows, this will hurt the margins of Chinese manufacturers, but help the uptake of solar technology, especially in Asia, where electricity demand is rising fast.

And it may well help India reach its 2022 target of 100GW.

More: Clouds gather for China’s solar manufacturers