22 September 2018

Solar recovering, but too soon to call it a victory

Helped by a slew of supportive policies, China’s photovoltaic industry has been gradually coming out of its dark phase. Newly installed capacity of photovoltaic power plants in the country this year is expected to reach 8.5 to 9 gigawatts, potentially the most in the world. The corresponding figure in Germany will be around 3.5 to 4 gigawatts, according to the nation’s environment ministry.

Outlook for the sector has improved drastically after Beijing threw its weight behind the solar players with a stimulus plan in July and subsidy details in the following month.

Two months after the fresh support, the price of polysilicon is said to have gone up more than 8 percent, from 122,500 yuan (US$20,106) a ton to 132,800 yuan a ton, cheering up the upstream and midstream suppliers. Lured by tax and tariff incentives, companies are indeed stepping up investments. But there are some short-term issues that could cloud the picture, at least temporarily.

One of them is subsidy uncertainty. The National Energy Administration (NEA) is planning to put a cap on the subsidy amount in order to control the outlay, according to a National Business Daily report, which cited He Yongjian, deputy director at NEA’s Department of Development and Planning.

The State Council has an ambitious plan to expand the country’s installed solar power capacity to 35 GW by 2015, or about 10 GW of new facilities a year, which is going to cost lot of money in terms of subsidy. The burden could be too much to bear.

Excess supply is another potential threat. During the industry downturn, uncompetitive players were forced to exit. But as product prices pick up, companies have already, or are planning to, put their idle production lines back into action, the National Business Daily noted.

Wang Bohua, general secretary of the China Photovoltaic Industry Alliance, told the newspaper that there are over 300 photovoltaic industry parks across the country, with all kinds of local government supportive policies distorting the market.

Wang believes that excess capacity will re-emerge in the first and second quarters next year, and that the industry still has a long way to go before a full recovery.

Solar shares have been popular trading targets in recent months. Yingli Green Energy Holding (YGE.US), one of the industry leaders, for instance saw its share price more than double at one point since early July.

But in its third quarter report, the company revealed that it continued to lose money, albeit on a lesser scale. The counter has been retracing in recent weeks and dropped more than 10 percent following the disappointing results.

– Contact the writer at [email protected]


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