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From the darkness, comes light

Amid yet more uncertainty in the solar industry – fuelled by the recent policy shakeup in China and subsequent plunge in PV module prices – leading manufacturers know that the best course of action is taken with a steady hand and eyes fixed firmly on the horizon; a horizon shaped by PV innovation and quality.

Right around the time that the world’s largest solar power exhibition, the SNEC show in Shanghai, was winding down at the end of May, Chinese officials were silently preparing to drop a bombshell that was soon sending shockwaves throughout the PV world.

The country’s National Energy Administration (NEA), the National Development and Reform Commission (NDRC) and the Ministry of Finance had prepared a new policy that stated, in no uncertain terms, that the government would not approve any more subsidized large-scale PV projects for the remainder of the year, effective June 1. The government bodies also confirmed a cut in the feed-in tariff (FIT), placed a cumulative annual cap on distributed generation (DG) installations at 10 GW (previously 19 GW) for the year, and introduced a new auction mandate for utility-scale projects.

There was a lot to unwrap in this new policy. The kneejerk response among many solar analysts was perhaps overly pessimistic. Reports of module prices tumbling 34%; forecasts that China’s installation would fall by more than 20 GW to around 30 GW for the year; and even talk of 2018 H1 (First Half) coming to represent ‘peak solar’ – a watershed moment upon which the industry will look back with rose-tinted glasses, when all was well with the world of PV.

Under these new, straitened market conditions, analysts feared, Chinese PV demand would be decimated, leaving the industry in a position of chronic oversupply that could only be eased via two pressure valves: widespread insolvencies among the less-competitive companies, and sharp module price reduction on a massive global scale.

In the weeks and months that have passed since then, the industry’s leading analysts have revisited their earlier projections with a slightly soberer viewpoint. Most pertinently, the consensus now seems to be that the Chinese authorities would not purposefully force one of its leading industries – solar energy – into a controlled decline, and would find way to keep its PV fabs humming and its solar installations growing. After all, most domestic developers can source solar modules at very low prices, and secure a feed-in power purchase agreement (PPA) below $0.05/W, which means that unsubsidized solar power can still be competitive.

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