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1 July 2021

China’s domestic solar takes off

China’s record-breaking 2020 performance of 10.1 GW domestic installations will be surpassed this year, according to the strategy of the National Development and Reform Commission (NDRC) which intends to see 15 GW commissioned or at least equaled this year. With 4.16 GW already installed in the first five months of the year, perhaps as much as 15 GW may be commissioned in 2021 – impressive given higher module prices and lower subsidies at just $4.6 per MWh. Despite those headwinds the payback period of domestic photovoltaics remains under 10 years.

The 2020 domestic installation figure, 65% of the distributed total, was more than the previous four years combined, and saw domestic capacity in the country double to 20 GW. As China’s developers gear their offerings more toward the domestic segment and the middle class continues to grow, this trend will only strengthen.

While direct subsidies have ended for other types of solar and onshore wind in China, subsidies are still in place for domestic solar and offshore wind in 2021. That means the domestic solar sector is about to have a strong year. Just like 2020, there will be another last-minute rush to connect solar projects to the grid in Q4 and especially December, but this time the rush will not be so overwhelmingly utility-scale.

This shift from utility-scale and C&I projects toward domestic reflects a shift in Chinese government policy, putting a bit less emphasis on national targets and a bit more on market forces. For the solar power companies, this means their products have to be less about deploying cheaply and swiftly, and more about brand reputation.

For rooftop installations, module cost is relatively less important, and the owner cares more about quality, reliability and maintenance – the latter of which sometimes vanishes into thin air when requested of certain shoddy Chinese installing companies. On the developer side, domestic installations require more manpower and public-facing roles.

This pro-rooftop policy environment is also affecting the prevalence of thin-film technology a little. First Solar is not quite the only Cadmium Telluride photovoltaic manufacturer in the world – there’s also the much smaller Zhongshan Ruike New Energy in China. Because of the thin, light nature of its panels, it is benefiting disproportionately from the rooftop situation, having built its first 100 MW production line in 2018. Heterojunction may be another beneficiary.

This last year of subsidy for domestic installs is national policy, but the specifics have been delegated. The past week has seen a flurry of provincial announcements regarding these “pilot project” promotions of distributed photovoltaics. Inner Mongolia, Shanxi, Xinjiang, Hebei, Jiangsu, Liaoning, Henan, and Shanghai are among those announcing a wide-ranging list of requirements for municipalities seeking associated funds – ranging from relevance to local business development, to space on the local grids. In the case of incentivized domestic solar in rural villages where the grid is weak, once enough rooftop solar is installed, town-level battery energy storage projects may become necessary. Another half-dozen provinces already made their announcements earlier in June.

These provinces are from all across China – ranging from the desert to the cloudy south, from rustic to urban. But it is the wealthy coastal provinces which see the most activity – Shandong Province accounted for 47% of China’s new domestic solar installations in 2020.