RAY OF LIGHT
- An Expert's Opinion -
#5: Eye on China by Franck Haugwitz (part 2)
Frank Haugwitz is the founder of solar consultancy, Asia Europe Clean Energy (Solar) Advisory Co. Ltd. (AECEA). In Issue 569 published on 7 Oct 2021, he shed light on the situation surrounding the solar industry in China and The “Dual Control Policy” that is currently being enforced. This time, he delves deeper into this hot topic and the repercussions on the solar industry.
Updates on the Power Restriction situation in China
Overall, the power restrictions imposed by now 20 out of 30 provinces and regions are subject to different deadlines, i.e. it ranges from just 1-2 weeks, to several months or even until September next year. Currently it is unclear whether in the coming days or weeks PV manufacturer shall be exempted from power restrictions, given its overall strategic relevance and importance. Against this background, according to the Ministry of Industry and Information Technology (MIIT), responsible for implementing the “Industrial Green Development Plan 2016-2020”, released the 5th batch of nationally approved 719 green factories and 1073 green products in Oct 2020. Although, PV related products are included, but it appears that less than a dozen of solar PV manufacturer have made it on to the national list. Provincial lists of Jiangsu and Zhejiang, both home to hundreds of solar companies, do contain in total 98 and 79 companies respectively, but similarly, each list contains just around a handful of solar companies.
To date, whether these “green factory lists” will be taken into account when determining PV companies shall be exempted from power restrictions remains to be seen. One example which indicates that PV companies can be exempted is after Inner Mongolia was named and shamed for having failed to meet its 2019 energy targets in February 2021, govt officials quickly ordered countless companies to either reduce or stop producing altogether. However, after a local solar wafer company argued that industries of strategic importance should be exempted, they were allowed to resume production.
Unfortunately, in addition to the double carbon/dual control policies, the forthcoming “Autumn and Winter Air Pollution Comprehensive Plan for Key Areas 2021-2022” could add further pressure on various industrial sectors including solar PV. A first draft just released by the Ministry of Environment and Ecology (MEE) is aiming at 60 cities (previous plans merely covered 28 cities) and could result in significant production restrictions and therefore could as well further negatively impact the overall PV supply chain. A more of doubling of targeted cities might be the result of China being the host of the approaching Winter Olympics starting early February next year. Eager to ensure blue skies throughout the games, hence measures designed to realize these ambitions could not only be far-reaching, but could as well strictly enforced.
Lower solar manufacturing output and price hikes
Taking into account the high-price regime, manufacturers have lowered production output, according to various industry sources. For instance, in early October, out of 26 module and 52 cell production lines, the average capacity factor was 46% and 43% respectively. However, prior to the national holiday week the average capacity factor of cells lines was almost 30% higher (see table 1).
Since early 2018, the price for polysilicon kept falling before reaching an all-time low level of RMB 56/kg in April/May 2020. Since then, prices continuously increased and latest transaction price amounted to RMB 270/kg. The latter represents an increase of 13.2% compared to before the National Holidays this year.
Consequently, given the price increase for raw materials, which translates to higher prices for polysilicon, EVA, backsheets, aluminum frames, solar glass, junction boxes, etc., prices for solar panels have reached a level not seen in the past 12-18 months. Latest bid prices for a 60 MW public solar module procurement tender were on average at RMB 2.1/W with the highest reaching RMB 2.208/W.
A Near-Term Outlook
Regardless of the impact of the double carbon and dual control
policies, since August for the past eight weeks straight poly-silicon prices kept increasing currently reaching RMB 270/kg. Over the past few months transitioning from a tight to a now short of supply situation, causing existing and new companies announcing to add or to build new poly-silicon production capacities. Latest estimates, provided all 18 poly projects currently planned will be executed, suggests a total of 3 Mio tons/a by 2025-2026.
However, in the near-term, poly-silicon prices are expected to
stay high, given the limited additional supply coming online in the next couple of months and due to a massive shift of demand from 2021 into 2022. Past few weeks, countless provinces have approved double-digit GW solar project pipelines, the overwhelmingly majority scheduled to be connected to the grid by December 2022.
This week, during an official press conference representatives of China’s NEA announced that btw. January and September in total 22 GW of new solar PV capacities were installed, representing an
increase of 16% YoY. Taking into account most recent developments, AECEA’s estimates that in 2021 the market could grow between 4-13% YoY (50-55 GW), therefore crossing the 300 GW mark.
**AECEA encourages feedback.
For an introduction to recent power restrictions in China, see Frank’sprevious piece
Asia Europe Clean Energy (Solar) Advisory Co. Ltd. (AECEA)
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