Chinese Reduce Their Solar Target

The Chinese solar market demand has become the biggest factor behind the fortunes of the global solar manufacturing industry. Most of the manufacturing takes place in China, so it is fitting that the Chinese market determines the fate of the solar manufacturing industry. However, the Chinese market has seen a major boom and a resultant bust in 2016. The country installed a mind boggling 20 GW of solar capacity in just the first 6 months of 2016, driven by high feed in tariffs which gave a high return to solar developers. This was followed by a major bust in July as the tariffs were reduced. To further compound the problem in the Chinese market, grid connectivity has become a major hindrance as there is no transmission capacity to move power form the western region to the main eastern consumption regions. China is now seriously thinking of not only reducing its feed in tariffs for solar energy come 2017 but also its overall solar installation target.

China all said and done is a heavily centralized economy and most of its industries run based on central targets and policies. The apparatchiks in Beijing determine the fate of every industry and can turn off an industry almost in an instant. This is the reason why the rumors of NDRC reducing the solar target from 150 GW to 110 GW by 2020 is a major concern for all major solar panel makers.

Also read Overcapacity in solar leads to production cuts amongst Solar Panel Makers.

The industry is already reeling from a major overcapacity and low prices. 76 GW of solar capacity has been installed in China by November 2016. This means that over the next 4 years, only 34 GW or 8 GW per year will be installed as per the target. This implies that from around 30 GW in 2016, the solar installation target will go down drastically. While I don’t think such a huge reduction will happen, even if it goes down to 15 GW that will be a huge shock for the industry. There is no country in the world that can absorb these kinds of quantities. Countries like India and USA can manage around 10-15 GW at most. With Trump being very anti climate change, USA might not be the best growth market for solar panels going forward.