China – Solar Energy

China has seen a huge surge of solar energy installations in 2016 which has never been seen before in the history of solar booms in the world. A massive 20 GW of solar energy capacity was put in the first half of 2016 as attractive feed in tariffs made solar developers go all out in constructing new grid connected large scale solar plants. To give you some context, India which is going to be the world’s 3^rd largest market has a cumulative installation of just 8 GW. This means that China installed 2.5x times the solar capacity in just 6 months what India has installed in its entire history. The demand in China fell post June as there FIT was reduced leading to plunging prices of solar panels as there was no other major demand center which could substitute China humongous demand and hunger for solar panels.

However with solar panel prices becoming 20% cheaper, the FIT was once again attractive for solar developers and in the last 3-4 months, another 10 GW of solar capacity has been put up. This implies that China has now installed a gargantuan 30 GW of solar energy capacity and 5 GW is still under construction. This far exceeds the ambitious targets made the country’s central policy making body. Local governments have not put a hard stop to new solar energy capacity. They have stopped accepting new applications for solar plants and have even advised new plants under construction to halt their activities. China has ambitious plans for solar energy but 30 GW in one year is unheard of. Even Germany in its peak boom times never went to more than 7-8 GW of annual installations while Italy with 30% IRR never exceeded 4-5 GW. However, China with its state planned capitalism model has beaten every country far behind by putting up 30 GW.

This will have a further negative affect on solar panel pricing which had stabilized at around 40 cents per watt in the last few months after seeing a steep plunge in July. With no demand from China, these panels will have to find a home somewhere else. Japan and USA markets are also not surging and India cannot grow by more than 100%. There is no other region which can absorb such huge quantities of Chinese solar panels. Expect more price declines and further hard times for the solar module manufacturers in the coming day.

Because total installation capacity of PV power stations and distributed PV systems newly established in China has exceeded the China government’s target by about 6GWp, many local governments have temporarily stopped accepting applications for new PV projects, according to industry sources. Some local governments have even asked that projects already approved not start construction and those already under construction stop for the time being, the sources indicated.

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