News out of China last week, mostly interpreted by the local Asia Europe Clean Energy Advisory group (AECEA), is that China will order more solar than expected during 2019. This is likely to still represent a fall of something close to 5% from last year, but the way this has happened does not mean that future years will be similar.
As we have said in the past, the first half up to May the Chinese National Energy Administration was really trying to get as much solar to come in at unsubsidized rates, and so left subsidies until later. Fresh subsidized auctions have now been completed around a feed-in tariff averaging $0.048 per kWh, which should lead to some 22.8 GW of solar to be built out in the second half of 2019. Add that to the 5.2 GW in the first quarter and an earlier round of commitments for grid parity deals announced in May of 14.8 GW, and discount this somewhat for any that cannot get built out during 2019, and we have AECEA raising its guidance for China solar installation to a range of 38 to 42 GW. The top end of that estimate would be barely 5% down on last year’s 44.3 GW and there is every chance that it could even be exceeded.
Critically most of this was apparently made up of contracts in utility scale projects – about 366 projects, making up over 18 GW – with very few being distributed installations – around 560 MW, with another 4.1 GW in self-generation and excess capacity projects.
Compare that with last year, when the split was close to 50% Utility and 50% distributed, and it looks like China Administration’s plan has worked, and it has received bids from major developers at lower feed-in tariffs than those in the distributed community. There were 3,921 projects announced in total that had approval, out of some 4,338 projects worth which were submitted for approval.
We understand that the top ten companies in the Chinese feed-in tariff auctions were the Chinese State Power Investment Corp, Sungrow, the China General Nuclear Power Group, China Datang, Tongwei, Guangzhou Development, Jinko Solar, China HuaNeng Group, China Energy Conservation, and Singyes Solar.
Does this set the scene for China to radically increase capacity next year in 2020? We have to answer yes. As solar is more able to match gas and coal on an unsubsidized basis, then more and more of the total market will become available to wind and solar – and instead of waiting for the Administration’s rulings on subsidies, more will happen up front.
All of the major solar panel makers are upping their capacity by an order of magnitude, and those panels have to go somewhere. The availability of cheap investment money throughout China has made this possible. And although many fresh parts of the world are opening up to mass utility solar, the Chinese market still has to grow in GW terms in order to simply stand still in dollar terms.
Investors are always keen to “knee jerk” reactions to the share prices of panel developers and a global market that is dominated entirely by a single controlled economy, always makes forecasting solar a potential hazard.
Potentially China must try a different approach next year to create that same kind of anxiousness among distributed solar players, to balance the marketplace.
Meanwhile Bloomberg New Energy Finance, this week published a report showing that renewable energy investment in China plummeted 39% in the first half of 2019 to $28.8 billion, the lowest figure for any half-year period since 2013, but much of that can be put down to China’s Q1 activity.
BNEF highlighted the financing of a 950 MW, $4.2 billion solar hybrid complex in Dubai, and two offshore wind arrays on the coast of Taiwan of 640 MW and 900 MW respectively. But China, the US and Europe all experienced H1 downturns, off by 39%, 6% and 4% respectively.
On the solar side, forecasts earlier in the year suggested shipments (GW) would be up 25% in 2019 globally and a new report out this week came from Taiwan’s EnergyTrend suggests that it will still reach 125.5 GW, a rise of 16% year-on-year, which should repeat through 2020 with module demand expected to become more geographically diverse.
The EnergyTrend report pointed out that Chinese manufacturers shipped almost double the number of modules to non-Chinese customers, while Europe is expected to recover almost immediately with a leap of 10 GW from 2018 to 2019 to reach 21.8 GW. The removal of European Minimum Import Price trade barriers, overnight opened up an export channel for Chinese suppliers and the Trump tariffs on solar panels turned out not to apply to Bifacial solar panels.