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Industry adjusting to market-based future as subsidies expire

By Zheng Yiran | China Daily | Updated: 2019-02-12 10:29
An employee inspects a photovoltaic cell at a solar energy company in Jiangxi province. [Photo/Xinhua]

Domestic photovoltaic enterprises are confident about the industry, despite a rollercoaster year in 2018.

Niu Xinwei, executive president of JA Solar Holdings Co Ltd, said in an interview with China Daily: "After years of development, China's photovoltaic industry made great progress in its core technology and manufacturing ability. It is entering the global market as a 'calling card' for China's high-end manufacturing industry."

"We are confident that with the government's policies, the industry will embrace new opportunities. The future is promising," he said.

Last June, the Chinese government slashed its subsidies for solar power and also halted all subsidies for utility-scale solar projects.

However, on Aug 31, the European Commission announced it was removing restrictions on the sale of solar panels from China, which had been in place for five years.

Further good news followed. On Nov 2, the National Energy Administration held a forum to announce that the government will continue to support the development of the photovoltaic industry, as a key area of the nation. On Jan 7, the National Development and Reform Commission and the NEA issued a guideline to promote solar grid parity without subsidies, ushering in readjustment but new growth potential for the industry.

Facing policy adjustments, many photovoltaic companies' operations were impacted. According to a survey conducted by business news outlet Yicai, among 14 listed photovoltaic companies, over half experienced net profit declines for the first three quarters of 2018, while four of them had negative net profits during the period.

"The decision to phase out solar power subsidies has brought problems for the industry. Listed new energy companies have been facing severe losses and saw their market value fall by over 300 billion yuan ($44.8 billion). Many companies were forced to cease operations," Liu Hanyuan, chairman of solar power company Tongwei Group, told Yicai.

"Non-technical factors raised the cost of China's photovoltaic power generation, and the subsidy delinquency is generally more than two years, adding to enterprises' pressure. Besides, industry policies cannot meet the nation's demand for energy transformation," Liu added.

Zhou Dadi, a senior researcher at the China Energy Research Society, said: "During the past two years, China's photovoltaic industry has made great progress. Newly installed capacity reached over 40,000 megawatts and 50,000 MW in 2018 and 2017 respectively, which was unexpected."

"The development brought technology advancement in the industry, production costs declined, and the quality of the photovoltaic modules became world-leading," he said.

"Enterprises should be prepared to survive without subsidies and accept the reality that the industry is undergoing restructuring. It is also important to eliminate outdated technology. Therefore, the main focus for companies should be to lower costs and improve technology.

"For the government, it should not let the subsidy cut limit the development of the photovoltaic industry, as industry development is beneficial to low carbonization and improving the energy structure. It should support both distributed and centralized photovoltaic power stations, remove the subsidy gradually, ensure grid parity, and promote the conversion of power generation capacity."

Market insiders said recent industry fluctuations reflected simply the industry transitioning from being subsidized to being more market-based. They predicted the photovoltaic industry will enter a market regulation stage, and although there will be more fluctuations, they will be more regular and more moderate.

"Facing the new situation, photovoltaic companies should actively adapt to the trend and enact reforms, to grasp opportunities and meet the challenges," Niu said.

"With the introduction of policies from the central and local governments, the popularization of intelligent manufacturing in the industry, the launch of efficient products, the photovoltaic industry will launch more diversified application, gradually realize grid parity, and benefit more people," he added.

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