A key topic of debate during SNEC 2014 in Shanghai has been the concern over meeting Chinese government targets for distributed generation (DG), which are becoming seen as increasingly over ambitious.
China has not only become the dominant manufacturing base for the PV industry over recent years, it also became the largest downstream market in 2013, with installations topping at least 11GW, according to market research firm, NPD Solarbuzz.
The Chinese government is not only supporting its domestic PV supply chain after several disruptive protectionist actions in the US and the EU, China is facing chronic pollution issues in major cities in its western regions, forcing greater support for renewable energy sources and a need to reduce reliance on coal-based electricity generation in these regions.
Earlier this year, China’s National Energy Administration (NEA) raised PV capacity quota targets from 10GW to 14GW for 2014, enabling permitting of installations that would receive new FiT payment structures.
However, the major change was the inclusion of DG and the allocation of 8GW to this virtually non-existent market, leaving only 6GW allocation for ground-mount utility-scale market, which dominated installations in 2013.
Concerns have mounted in recent months that the overall 14GW quota-based target approved by the NEA would not be met as the complexity on a number of issues, not least the basic financial returns of RMB42c/kWh FiT but the significantly more technical undertaking of commercial rooftop projects that can also include multiple counterparty aspects, leading to people indicating to PV Tech that 1GW of DG installations is a more reasonable target assumption in 2014.
However, in a SNEC conference session, “Global PV Market – Outlook and Development Strategies,” both BNEF (Bloomberg New Energy Finance) and IHS market analysts guided China to remain the largest PV market in 2014.
According to Ash Sharma at IHS, China installations would reach 13.2GW in 2014, indicating that despite DG worries the 14GW quota could continue to be dominated by ground-mount projects.
Indeed, several major PV module manufacturers with growing downstream PV project pipelines primarily focused on China, told PV Tech that permits for large-scale projects, though complex and time consuming are finally being issued and that permission on ground-mount projects, which make up the majority of project work this year are being approved.
PV Tech was told that adjustments to 2014 quota-based targets could be announced by authorities around mid-year, providing greater transparency on helping authorities and companies meet suggested overall installation targets.
Companies told PV Tech that in-depth discussions have been ongoing with authorities on identifying and detailing the complexities of the DG market and the significant difficulties of meeting the DG quota.
The recent commitment by the Chinese Government through the National Development and Reform Commission (NDRC) to increase the PV installation target to 70GW by 2017 includes 35GW of expected DG installations, higher than previous goals as the country tackles air pollution.
Therefore the DG target for 2014 could be relaxed if this means the challenges of the DG market are understood and overcome with the added incentive that the DG market is being positioned even more as the market the government wants authorities and industry to serve.