China putting major brakes on solar deployment as new market rules imposed

Facebook
Twitter
LinkedIn
Reddit
Email
According to previous NEA guidance, China had targeted 13.9GW of utility-scale projects for deployment in 2018. However, the issued notice Friday, highlighted that the utility-scale target for the year had been abolished, instructing all regional provinces to impose bans on all entities seeking FiT’s under any 2018 mechanism. Image: Panda Green Energy

No sooner than all of the huge exhibition stands at SNEC 2018 were dismantled last Thursday, China’s regulatory organisations overseeing the solar industry, instigated new policies Friday that could have a similar effect on the utility-scale and distributed generation (DG) markets in the country.

In a co-ordinated move, The National Development and Reform Commission, the Ministry of Finance and the National Energy Administration issued the “2018 Solar PV Power Generation Notice” imposing caps and reducing the feed-in tariffs (FiT) mechanism, while setting rules at the central government level for utility-scale projects. 

In 2017, DG projects accounted for over 19GW of over 53GW of PV installations in China, a new record high. The ‘notice’ issued by the agencies highlighted that a cap of 10GW would be imposed on the DG market for 2018, which would have needed to be grid connected by 31 May 2018. This applied to central government approved DG projects and those eligible for the central government FiT mechanism. 

In a further shift in central government policy over the DG market, the notice highlighted that “financial responsibility” for DG projects would be moved to local governments in the future. This means FiT mechanisms would be enacted at the local level. 

According to Frank Haugwitz, director of Asia Europe Clean Energy (Solar) Advisory Co (AECEA), the local government’s financial responsibilities for DG solar deployments could result in local company preference when projects are authorised. 

AECEA also noted that its own analysis of the DG market in China, put installs between January and April 2018 at around 9GW, while utility-scale deployments topped 2GW. This meant that it was highly likely that the DG cap of 10GW for the year had already been exceeded.

Utility-scale abolished

According to previous NEA guidance, China had targeted 13.9GW of utility-scale projects for deployment in 2018. However, the issued notice Friday, highlighted that the utility-scale target for the year had been abolished, instructing all regional provinces to impose bans on all entities seeking FiT’s under any 2018 mechanism.

AECEA said that this drastic measure would not only slowdown demand in 2018 but carry through to the end of the 13th Five-Year-Plan (2016-2020).

The impact should not be underestimated on PV deployments in China as almost 34GW of utility-scale projects were deployed in China in 2017.

FiT payments stopped

Compounding the caps, the notice also included changes to the FiT mechanism, which AECEA noted that outstanding FiT payments by the end of 2017 had ballooned to approximately US$17.5 billion.

The cancellation of the 2018 FiT for utility-scale projects also pushes support back on local governments to deal with the issue of outstanding payments and grid curtailments. 

Indeed, local governments were instructed not to approve any utility-scale projects until further notice. 

Poverty alleviation schemes unchecked

The FiT mechanism for ‘poverty alleviation’ schemes were not impacted by the new notice. However, AECEA noted that despite the wide government support for the successful schemes a new set of policies and targets were expected to be drawn-up in due-course.

FiT lowered

The government agencies notice also included a uniform reduction in the FiT mechanism, lowered by RMB 0.05/kWh, including a similar reduction for DG ‘self-consumption’ projects, which means surplus power would be have a FiT of RMB 0.32/kWh. 

The government agencies notice also included a uniform reduction in the FiT mechanism. Image: AECEA

Impact

The sudden and serious changes to PV deployment in China is expected to have a major effect on total deployments in 2018 and beyond. 

According to AECEA, it has lowered its previous deployment forecast for China in 2018 from a range of 40GW to 45GW to 30GW to 35GW.

However, AECEA said that this still remained an “optimistic” forecast.

From a 13th Five-Year-Plan (2016-2020) perspective, AECEA noted that total cumulative deployments could reach between 200GW to 215GW, targeting only annual deployments in a range of 20GW to 25GW over the next two years. 

The only sector so far unscathed would seem to be the rapidly growing residential market. AECEA is projecting installations could reach 5GW in 2018, up from around 2GW in 2017.

AECEA noted that total cumulative deployments could reach between 200GW to 215GW, targeting only annual deployments in a range of 20GW to 25GW over the next two years. Image: AECEA
15 September 2022
Bifacial PV modules will be the dominant solar PV technology globally within one or two years; in the utility-scale sector, their market share is already above 70%. This webinar will provide a clear view on the successful implementation of bifacial technology, maximizing system performance and minimising LCoE.

Read Next

August 11, 2022
Finlay Colville, Solar Media's head of market research, lays out the UK's path to achieving 40GW+ of solar PV by 2030 after rebounding from recent headwinds in its solar sector
August 10, 2022
OMERS Private Equity has acquired a minority stake in the Arizona-headquartered solar operations & maintenance (O&M) provider NovaSource Power Services.
August 9, 2022
The Public Service Commission of the District of Columbia (DCPSC) has approved a 15-year power purchase agreement (PPA) with renewables developer Invenergy for 73MW of solar power to meet a 5% renewables target for district’s default electricity supply.
August 8, 2022
A introduction to Yingli Solar’s new YLM 3.0 Pro 415W module for both residential installations and commercial projects
August 8, 2022
India deployed 8,359MW of solar PV in the first half of the year, marking a significant increase of 71% compared to the same period last year
August 8, 2022
Energy technology company AES Corporation is still on track to reach its target of 4.5-5.5GW in long-term renewables and energy storage contracts in 2022, having already signed 1,618MW in the year to date, according the firm’s Q2 financial report.

Subscribe to Newsletter

Upcoming Events

Upcoming Webinars
September 7, 2022
15:30 AEST (UTC +10)
Solar Media Events
September 14, 2022
London
Solar Media Events
October 4, 2022
New York, USA
Solar Media Events
October 11, 2022
Virtual event