Tier-one module manufacturer Trina Solar has said it expects China to hit its 17.8GW install target for 2015.
Beijing set a quota of 14GW last year divided into utility-scale and distributed generation (DG) projects. While the utility market developed strongly, the DG market struggled despite a policy intervention in the summer to cut red tape. In February the National Energy Administration (NEA) said the country had installed 10.6GW in 2014.
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“We’re comfortable with China’s goal [for 2015],” said Teresa Tan, CFO, Trina Solar in a recent conference call to discuss quarterly results. “It was missed last year, the DG total had unclear policy at the time so it was difficult for developers but the game has changed since the policy was announced and the DG developers are very keen to take part in the market. That will make a huge difference to achieving the goal for this year and the Q1 install mean we are well on the way,” added Tan referring to the 5.04GW that China connected in the first three months of the year. It is unclear how much of that total was carried over from projects built in late 2014.
In addition to the raw deployment data, Tan also said that there were signs from the module supply side that suggested the industry had picked up pace.
“From Trina’s perspective, we’ve had best Q1 of our history and that shows how much activity there is in the market. The enthusiasm we have seen for DG will go a long way to helping China meet its target,” she said.
Boom, no bust
Tan also allayed fears raised in the conference call that there was a risk that the current surge in demand could lead to smaller manufacturers increasing production and triggering a fresh, unwelcome phase of oversupply.
“This is a concern for a lot of investors. It happened before and I know it is still fresh in everyone’s minds,” she said. “At this point we’re not concerned about over capacity because the market has already defined itself and the banks are being more careful with extending credit facilities so I think we are on the way to a healthier industry rather than going through boom and bust.”
“The tier-one firms are very much running at full capacity, 100% or even higher. We do have a segment of tier-two or even tier-three companies that are producing good products but not at the same level that tier-ones can manage in terms of efficiency and service. They are running at 60% or so and there are others running at less than 50%. Namely companies that haven’t kept up with their equipment to supply what the market wants,” explained Tan.
“We have a good balance in the market right now. With demand heating up there is incentive for companies to do expansions but if you look at the credit environment the bank are being very selective, only tier-ones, or firms with a strong balance sheet or good operations can get the support needed for expansion. Many tier-two and threes are being consolidated into tier one firms. There will be a continued concentration of well-managed companies. A lot of tier-two firms are running at a much higher costs and their profit is squeezed as a result. It’s another important factor to make it hard for tier-twos to re-enter the market,” said Tan.
