The big news at Solarcon China 2013, held in Shanghai from March 19 to 21, was the bankruptcy of Wuxi Suntech Power Co., Ltd, the PV module manufacturer based in Wuxi, Jiangsu province, and the main subsidiary of U.S.-listed Suntech Power Holdings Co. Ltd.
As reported, it is widely expected that Suntech will not disappear completely, but undergo a thorough restructuring to emerge as a leaner player, most likely with more local government involvement in its management and control.
The companys downfall will affect other Chinese top-tier manufacturers, which up until now could point to their top-tier status and prominent stock market listing in New York as indications that they were very bankable as suppliers to PV markets around the world.
Of course, the steep slide in stock market valuations, along with increasing reports from PV auditors that module production facilities of top-tier manufacturers are not necessarily superior to the workshops of lesser known manufacturers, have already tarnished some of the sheen of these celebrity manufacturers.
While it is hard to predict the medium- to long-term impact of the Suntech crisis, the restructuring of Chinas PV manufacturers will now enter a critical phase, with some players emerging as the new leaders and others, like Suntech, emerging with new owners and a very different range of assets and liabilities.
As became clear at Solarcon China this week, the Chinese PV market is mirroring this shake-out among its manufacturers and going through its own significant restructuring.
If Suntech is the big victim on the manufacturing side, Golden Sun will most likely be the victim on the PV policy front later this year. Already on March 18, at this years PV Project Implementation Conference China, part of Solarcon China, and organized jointly by Solarpraxis AG and SEMI China, Wang Hai Sheng, Chief Analyst, Minsheng Securities, told the audience of Chinese and foreign PV professionals that "it is very likely that Golden Sun will be cancelled soon."
This was echoed on March 21 by NPD Solarbuzz analyst Qiming Han at a separate event organized by econet china, part of the German Chamber of Commerce in Shanghai who also sees an end to this program later this year. Han mentioned, however, that Golden Sun would likely remain as a Ministry of Finance new energy subsidy program, though rather than supporting PV projects, it would instead back other forms of renewable energy, such as solar thermal.
Shifting policy models
At the Solarcon China 2013 Symposium on Green Energy, Power Grid, Policy and Market on March 20, Wang Sicheng of the Energy Research Institute, part of Chinas top economic planning authority NDRC (National Development and Reform Commission), talked about a paradigm shift from a capacity-based PV subsidy model (Golden Sun), to a performance-based PV subsidy model.
According to Wang, by making "the principle of stable income" the key driver of PV subsidies, "low cost and high quality" PV installations will be encouraged. Conversely, with the generous up-front subsidies awarded by Golden Sun, project developers have little incentive to build robust PV systems with little degradation over a lifetime of 20 or more years.
While this shift to performance-based subsidies should be a good thing for Chinas PV development as is the restructuring and consolidation of its bloated manufacturing base many players in Chinas PV market are not thrilled by the prospect of Golden Sun ending.
As Wang of Minsheng Securities pointed out at the PV Project Implementation Conference China, Golden Sun developers have enjoyed a return on investment (ROI) of 19.1%, which is more than 12% for large-scale ground-mounted plants and much more than 5.7% for distributed PV projects.
The "principle of stable income" advocated by NDRCs Wang calls for an ROI of 8% over 20 years, which might be the lucky number in China (the Chinese word for 8 sounds similar to the Chinese word for wealth), but is a far cry from the 19.1% earned under the Golden Sun program.
While the future of Golden Sun at least for PV in China is not golden, distributed PV should get a big boost in the course of this year. In keeping with "the principle of stable income," the likely subsidy for distributed PV projects will be RMB 0.35/kWh (around US$0.056, 0.044), on top of the savings of the local electricity tariff, which can range from RMB 0.4/kWh to RMB 1.4/kWh, depending on the location in China.
Distributed PV is premised on the self-use of the PV power generated, so the higher the electricity rate in the location the PV system is being installed, the more attractive the ROI of such distributed PV projects.
As Han of Solarbuzz made clear at yesterdays econet china event, any excess power sold to the grid is only compensated at the regular electricity rate for desulfurized power, which is in the range of RMB 0.3 to 0.4/kWh.
Han further pointed out that these subsidies are still preliminary and that there are efforts underway, also from his organization, to improve the "stable income" of distributed PV, for example, by adding RMB 0.2 to the desulfurized rate to make the revenue stream of the feed-in part more attractive.
Whether the restructuring on the PV manufacturing side will have an impact on NDRCs PV subsidy overhaul this year remains to be seen. However, it would be surprising if the two processes developed completely independent from one another.
If one other big theme at Solarcon China 2013 the imposing and comprehensive European Union trade tariffs on Chinese PV products turns out to be a major burden on Chinese manufacturers this year, we can be sure that NDRC will tweak its subsidy regime to further boost the attractiveness of the domestic PV market.
This applies also to the countrys PV feed-in tariff (FIT), which is also poised for an overhaul in the coming months. Instead of a single nationwide rate, the new FIT will be based on four irradiation levels with the highest subsidy going to areas with an irradiation below 1,050 kWh/sqm followed by the tiers 1,050 to 1,400 kWh/sqm, over 1,400 to 1,750 kWh/sqm and over 1,750 kWh/sqm. The FIT rates proposed in the current draft are RMB 1, RMB 0.95, RMB 0.85 and RMB 0.75 for these four tiers.
Perhaps it is the uncertainty on the regulatory side that is making industry insiders and observers skeptical that the official government PV installation target for this year of 10 GW can be reached. The uncertainty on the supply side with the crisis at Suntech and other Chinese manufacturers will only make matters worse.
So instead of confirming this very ambitious target, which would almost certainly turn China into the worlds largest PV installation market this year, Bohua Wang, Secretary-General of the China Photovoltaic Industry Alliance, only mentioned 8 GW as the likely figure for this year in his keynote address at this Mondays PV Project Implementation Conference China.
During the same conference, Minsheng Securities Wang delivered an identical forecast, which he broke down further into 3 GW Golden Sun projects, 4 GW large-scale ground-mounted projects and only 1 GW distributed PV plants. And yesterday, Han from Solarbuzz was even more cautious with a prediction of 7 GW for this year.
2013 will undoubtedly go down as a year of uncertainty and painful restructuring. However, many participants at Solarcon China 2013 are optimistic about 2014, especially regarding Chinas domestic market and the anticipated rise of distributed PV.
Edited by Becky Beetz.