A notification released on May 31st 2018 by China’s National Development and Reform Commission (NDRC), Ministry of Finance, and National Energy Administration (NEA) provides new regulation for PV industry in China, which may influence various types of PV projects. EnergyTrend estimates that the new regulation will likely slash the domestic PV demand in China to 29~35GW. Consequently, the demand in global PV industry will drop to less than 100GW, imposing considerable pressure to the supply chain.
The notification has lowered the national PV feed-in tariff (FiT) for the quota of 2018. Particularly, FiT for both Ground-Mounted Power Plant and Distributed Generation (DG) System dropped by RMB 0.05/kWh, but there is no change to the subsidy for PV Poverty Alleviation Power Plant (Village), of which the FiT remains RMB 0.42/kWh.
DG Systems will be applicable to RMB 0.32/kWh, the new FiT, while Ground-Mounted Power Plants completed before June 30th 2018 will be applicable to the 2017 FiT.
Among the various types of projects, there is no change to the subsidy for PV Poverty Alleviation Power Plant (Village). By the end of 2017, RMB 50 billion of national PV FiT has been approved but not yet given.
Regulations for different types of projects
The notification proposes polices for all types of PV systems. The detailed contents and impacts are as follows:
Based on the information above, EnergyTrend estimates that the Chinese market still anticipates installation rushes by June 30th. However, as the notification was released only days ago, the industry does not have much time to respond, so only companies with ongoing projects will be likely to catch up the installation rushes by June 30th. After that, the demand will be considerably slashed, decreasing to less than 5GW in 3Q18 due to the new regulation. In 4Q18, the demand is expected to return to above 10GW because of the Top Runner Program, a few quotas for Ground-Mounted Power Plants of 2018, and the first batch of quota for “13th Five-Year Plan” poverty alleviation projects. For the whole year of 2018, China's PV demand is estimated at 31.6 GW, lower than previous forecasts due to the instability of general environment. The range of demand will be 29~35GW, and the major influencing factors are:
1) The quota of Ground-Mounted Power Plant for 2018
2) The supply situation of bid winners in 2017 Top Runner Program
3) Details of the regulation for DG systems (especially the distribution of quota among three types of grid-connection—for self-consumption, feeding surplus electricity to the grid, and feeding all electricity generated to the grid)
4) The development of other types of projects (quota for power plants equipped with UHV transmission lines, pilot projects for electricity trading) and unsubsidized projects.
For 2019 and 2020, China's PV demand is estimated at 30~40GW. The major influencing factors are:
1) The implementation of quota of Ground-Mounted Power Plant for 2019 and 2020
2) The implementation of projects in Top Runner Program from 2018 to 2020
3) The development of DG systems, other types of projects and unsubsidized projects.
Impact on the global PV market
China will remain the world's largest PV market despite the decreasing demand. However, due to the tightening policies in 2018, the global PV demand is expected to set back in 2018. According to the gold member report of EnergyTrend in 2Q18, the global PV demand will decline to 92~95GW due to the shrinking of the Chinese market, and will not return to above 100GW until 2019 when more new markets emerge.
As for other markets across the world, Australia witnesses booming demand this year while Europe enters a period of recovery, and MIP will expire at 9/30. India may cancel the temporary tariffs of 70%. Middle East, Morocco and Egypt in North Africa, Mexico and Brazil in South America are also expected to see relatively large growth of PV markets this year. These places may be the destinations for the extra production capacity due to China’s shrinking PV demand.
However, the oversupply will be more severe due to the shrinking of the Chinese market, so the price trend is not optimistic for the supply chain. Polycrystalline silicon suppliers in the upstream and modules makers in the downstream will all be affected.