Highlighting the global solar industry’s reliance upon the Chinese market, a decision by the country to curtail solar development in 2018 in an effort to prevent oversupply has resulted in significantly revised forecasts for the Chinese and global solar market in 2018 and expectations that solar module prices will fall by 35%.
In late April, China’s National Energy Administration announced that the country had installed an impressive 9.64 gigawatts (GW) worth of solar through the first quarter, and many analysts would have looked at their 2018 forecasts with glee. After installing 98 GW in 2017, many analysts predicted that the global solar market would breach the 100 GW mark, and even make it into the 110 GW mark.
However, these forecasts have been brought back to earth due to an announcement from China’s National Development and Reform Commission (NDRC), the Ministry of Finance, and National Energy Administration (NEA). The new “2018 Solar PV Power Generation Notice” effectively imposes a cap on new solar projects for 2018 and a reduction in the solar Feed-in Tariff (FiT), adding that there will be “no new general solar capacity planned” for 2018 except that which is specifically directed towards projects designed to lift poverty in rural areas.
The move is being made to curtail oversupply and has immediately trashed analyst forecasts. The Asia Europe Clean Energy (Solar) Advisory (AECEA) has downgraded its original forecasts for Chinese solar additions in 2018 from in the range of 40 to 45 GW down to between 30 and 35 GW. And while the AECEA and Jefferies Financial Group both noted that the reduction in China’s FiT mechanism was well within expected measures, it has nevertheless hit the market with a shock.
GTM Research and parent company Wood Mackenzie are now projecting that China’s capacity forecast could drop by as much as 40%, down to 28.8 GW from an original prediction of 48 GW — that’s a drop of 20 GW.
Bloomberg New Energy Finance is now predicting that solar module prices in China will fall around 35% in 2018, and another 10% to 15% in 2019. Yvonne Liu, Yali Jiang, and Xiaoting Wang of Bloomberg New Energy Finance (BNEF) wrote in a note on Monday that they do not believe China will get close to their record 2017 numbers, and analysts around the world are taking note, cutting their forecasts for China and the global sector. This will result in manufacturing overcapacity which is driving the talk of module price cuts.
“Analysts are saying prices for panels in America will continue to fall,” said Dan Whitten, vice president of communications for the Solar Energy Industries Association (SEIA). “We are evaluating the impacts on the U.S. industry and on the overall price of panels in light of the trade tariffs, and we will have a better sense of the affects from this Chinese policy late this year and early next.”
James Watson, CEO of Solar Power Europe, also chimed in, explaining:
“Last year we predicted that in 2018 we would see around 107 GW grid connected in our medium scenario in the Global Market Outlook we produced in June 2017. Over the course of the remainder of 2017 we revised this up very slightly.
“Despite the news from China we are not panicking and dropping the expected level of grid-connected solar in 2018 by much – our current estimates suggest we are on track for about 102 GW grid connected in the world. So between our forecast from last year and our expectation today we see only a small decrease. This would also be more than last year where we saw 99 GW grid connected.
“If the price of solar does fall so much this will make many projects in India, the Middle East, SE Asia, Latin America and Africa realizable and hence demand will pick up and replace the slow down in China. Obviously we don’t see any major increase in our forecasts for Europe and the US as both markets are hampered by trade measures so the price drop cannot be passed on to companies and consumers. But the rest of the world can and will benefit.”
The hit to China’s forecasted capacity expansion will definitely take a bite out of predictions, but the long-tail effect seen in solar prices might make up for China’s decision and see an increase in solar expansion elsewhere. In more ways than one, the solar industry will be vitally important to watch this year.
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