TrendForce：China’s policy shift in 2013 to stimulate on-grid installations and address abandoned power issues

EnergyTrend, a research division of TrendForce, indicated in their “Silver Member Report” that considering China’s actual demand for solar power in 2013 (4.5GW-6GW) and demands brought by the Golden Sun Program subsidy plan as well as PV plants in Western China in 2012, the 2013 total grid-connected power could be up to 10GW. Although the government set a 10GW target at the beginning of 2013, the actual demand will be only 4.5~6GW; therefore, the Chinese market may not be able to consume 10GW modules this year.

Nevertheless, considering the global actual demand, China is still one of the world’s top three solar markets (accounting for around 17% of the global market). According to TrendForce, the Asian solar market will rise in 2013; Japan, India, and emerging countries in Southeast Asia have all showed an increase in demands, and China, with its significant potential , is more likely to stimulate demands compared with European countries such as Germany and Italy. Therefore, China’s policy shift will be the major force that affects the global supply and demand.

China’s installations from 2008-2013
 
Source: EnergyTrend

To solve abandoned power issues, the Chinese government purchases power instead of implementing the Golden Sun Program

China’s solar installation demands mainly come from large-scale solar power plants, photovoltaic buildings, and the Golden Sun Program demonstration project. Though the total demand from the above three sources could be up to 12GW, the actual demand was disappointing. Projects approved by the government are concentrated in the second half of the year when climatic factors usually affect the construction progress; the grid standard and subsidy policy were just settled in the fourth quarter of last year, which shakes customers’ confidence and hinders the business; companies did not receive subsidy after installing grid-connected systems, so they are not able to launch new projects. Due to the above reasons, grid installations in the market have been delayed.

In order to solve abandoned power issues caused by unsuccessful grid installations (installed systems that fail to generate grid-connected power), the Chinese government has currently terminated the Golden Sun Program subsidy plan (a subsidy for system construction) and instead started to purchase power with the purpose of enhancing the effectiveness of solar power systems. They plan to invest mainly in distributed systems and western large-scale power plants in 2013. On the other hand, in order to make up for the financial gap caused by previous solar installations, China's Ministry of Finance announced that starting at the end of March, they will pre-allocate subsidies for renewable energy and issue a capital of 2.43 billion RMB (16% of the total renewable power subsidy) for solar installations.

TrendForce indicated that because plans for improving solar system installations were first set in 2012, numerous issues regarding the process are yet to be resolved. In 2013, however, as supporting measures of the central policy, local governments, and grid companies become more effective, China’s on-grid installations may top their past record. In addition, Chinese government  should invest more in the supply chain by announcing market access requirement   , encouraging M&A, reducing local government intervention, and distributing capital according to the market mechanism. Only when a balance is reached between supply and demand will the global solar industry recover from the market downturn.

Top six provinces that received the greatest amount of solar power subsidy
 
Source: EnergyTrend

TrendForce further indicated that although the increased Chinese market demands have attracted more foreign companies, with the advantage of low-priced products, Chinese manufacturers still acquired most of the Chinese market. First-tier manufacturer Yingli, for example, plans to increase the number of shipments to China in 2013 by approximately 40% (accounting for approximately 23% of their total number of shipments); Trina’s shipments to China will increase from 2012’s 12.9% to 15%-20% (percentage based on their total amount of shipments); 35% of Jinko’s modules will be shipped to China. It is clear that Chinese manufacturers will still be the ones that benefit the most from the 10GW grid power demand brought by China’s policy.
 
Estimation of each company’s module shipments to China in 2013

Source: EnergyTrend