IHS Markit has revised its 2018 China solar PV forecast upwards to 40 gigawatts (GW) in the wake of news that the country’s National Energy Administration is considering increasing its 2020 PV target to as much as 270 gigawatts GW.
Continuing the saga which has surrounded China’s solar industry this year, China’s National Energy Administration (NEA) held an informal meeting earlier this month in which it floated the idea that the Government was considering revising its 13th Five-Year Plan in which it had targeted installing 105 GW worth of solar by 2020. Considering that China had installed 165 GW worth of solar by the end of September this year, the 13th Five-Year Plan’s original target has been exceeded by at least 50%. A potential revision was therefore not completely out of the blue.
However, the potential range of China’s expanded target has left some concerned that annual capacity additions may still flounder. Specifically, the NEA suggested that capacity targets could increase to 210 GW or as high as between 250 GW to 270 GW. If so, annual capacity additions could range from as little as 20 GW per year to as much as between 40 GW to 50 GW per year.
However, global analysts IHS Markit believe that the expected capacity expansion is enough to strengthen 2018’s capacity additions. This follows months after 2018 forecasts were rewritten in the wake of the Chinese Government’s decision to cap 2018 solar installations and reduce the country’s solar Feed-in Tariff. Forecasts which originally predicted China could install as much as 50 GW in 2018 were slashed to as little as 28 GW.
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IHS Markit’s own revised forecasts were not quite so drastic, dropping from its original forecast of 53 GW to 38 GW, driven primarily through installations through the first half of the year.
China’s decision to rejigger its solar industry wasn’t a complete surprise to IHS Markit. “The sustainability of the market growth levels the industry has enjoyed recently have never been assured,” explained Edurne Zoco, Research Director at IHS Markit for Solar & Energy Storage, “as high levels of curtailment, severe delays in feed-in tariff (FiT) payments, a growing subsidy-budget deficit and an oversupply of electricity have cast doubt on PV demand fundamentals in China.”
That being said, “the timing, ferocity and immediate impact of this latest policy U-turn have taken the global PV industry by surprise,” Zoco added.
This week, IHS Markit’s Senior Analyst covering the solar supply chain, Holly Hu, published a short market insight which revealed the analyst’s revised 2018 China solar PV forecast, increasing to 40 GW, driven by NEA figures which showed that China had already added 34.5 GW worth of solar through the first three quarter’s of the year, and the potential of new 2020 solar PV targets.
Further, IHS Markit expects China to maintain a steady level of annual installations — marked by quarterly fluctuations shaped by policy decisions — and, by 2020, reach a cumulative capacity of 255 GW (obviously based on an expected revised target in that range, rather than one closer to 210 GW).
One key factor behind what might support a stronger-than-expected second-half of 2018 is the role of declines in solar module prices, which according to IHS Markit’s Holly Hu “has bolstered demand even more than we first anticipated, and the prospect of a new policy sets the path for continued build-out of PV in China.” Specifically, IHS Markit saw solar installations by quarter of 9.6 GW in the first quarter, 14.7 GW in the second quarter, and 10.3 GW in the third quarter.
This is also in line with IHS Markit’s June forecast for global capacity additions of 105 GW, down from its original forecast of 113 GW. China was always going to dominate 2018’s global solar capacity additions, but to what degree has been hotly contested. According to Holly Hu, China’s influence will remain through the next two years. “China is the largest solar power installation country and largest solar manufacture centre, with more than 60-70% of supply chain still in China,” she explained to me, via email. “Therefore, the demand of China for the next two years, will result in the fluctuating of supply chain price and cost trends.”