China added 24.3 GW of solar PV capacity in the first half (1H) of 2018. This takes China’s total installed solar PV capacity to 154.51 GW, out of which 112.6 GW comprise of utility-scale PV power projects with the remaining 41.9 GW coming from distributed generation (DG) projects, according to the data provided by China’s National Energy Administration (NEA).
There was a remarkable 72 percent year-over-year (YoY) increase in the DG installations, which accounted for 12.24 GW, approximately half of the total installations in 1H of 2018.
However, during the same period, utility-scale capacity declined by 30 percent YoY with a total of 12.06 GW installed in the first half of 2018.
The installation levels were similar to the 24.4 GW installed in the same period last year. The Asia Europe Clean Energy (Solar) Advisory (AECEA) forecast lowered China’s solar capacity addition for 2018 from 40-45 GW to 30-35 GW. Other analysts like Roth and Daiwa Capital have also reduced the 2018 forecast to 30-35 GW. If these predictions hold up, China is expected to install only 5-10 GW in the second half of 2018.
In 2017, China was the largest solar market in the world with 53 GW of solar installed. The 24.3 GW of solar installed in the 1H of 2018 is roughly equal to total solar installations in India to date.
In June, China’s National Development and Reform Commission (NDRC) imposed a cap of 10 GW on the DG projects for the year 2018. Approximately, 7.68 GW of distributed solar capacity was installed in the first quarter of 2018. The 1H numbers for 2018 show that the figure has already been breached.
Only DG projects that achieved grid connection by May 31, 2018 were eligible for feed-in tariffs (FiTs). This was necessitated by the massive 360 percent increase in DG installation year-over-year.
The government has also asked states to eliminate the utility-scale target for the year, and all regional provinces have been instructed to impose ban on all entities seeking FiTs under the 2018 mechanisms.
These changes, made effective as of May 2018, are expected to halt the growth in solar PV installations in the second half of 2018 leading to oversupply of solar components manufactured in China.
Since the Chinese government announced plans to control the country’s PV installations from June this year, PV module prices have crashed due to lack of demand. According to the China Photovoltaic Industry Association (CPIA), many small to medium sized manufacturers have suffered operating losses and first-tier manufacturers are exporting as much as 70 percent of their output.
Tepid demand at home, record production, increased competition, and a fall in prices make India a natural export destination for Chinese solar manufacturers. According to Mercom India Research’s India Solar Market Leaderboard 2018, top there solar module suppliers to India were Chinese manufacturers in 2017.
However, the Indian government imposed a 25 percent safeguard duty on imported solar panels from China and Malaysia, effective July 30, 2018. This move is expected to slowdown Chinese exports to India in the short-term.
“Solar installations in the second half in China will be closely watched around the world to see if the Chinese government relaxes the DG cap. The policy decisions made by the Chinese government will affect every solar company in the world,” said Raj Prabhu, CEO of Mercom Capital Group.