China needs 200 GW of solar by 2020, say industry groups

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Three leading industry groups in China have encouraged the government to double the nation’s solar power target for 2020 to 200 GW in order to plug an expected gap in China’s power capacity.

With nuclear and hydropower forecast to miss their 2020 targets, solar power is in prime position to bridge any shortfall, asserts the China Photovoltaic Industry Association, the Chinese Renewable Energy Industries Association, and the China Renewable Energy Society.

A document seen by Bloomberg contains a written proposal by all three industry bodies for the government to boost solar installations in China – a plan that would see deployment increase sixfold and deliver welcome revenues for the country’s leading Tier 1 solar companies.

Currently, China has just over 33 GW of solar PV capacity installed cumulatively, and the National Energy Administration (NEA) has targeted an additional 17.8 GW of solar deployment in 2015. Its wider target for 2020 is for 15% of the nation’s energy to be provided by renewables – an increase on the 11% target last year.

According to the industry groups, current nuclear technology cannot guarantee the required safety standards moving forward, and the process of planning and constructing new capacity is a lengthy one. At current rates of advancement, nuclear will not meet the necessary 58 GW of capacity required by 2020, while hydropower’s progress has been even more laggard, the groups argued.

Currency devaluation shocks financial markets

On Wednesday, China devalued its currency, the yuan, for the second day running, after announcing on Tuesday a 2% devaluation. The second devaluation saw the currency hit a four-year low, seeing the yuan drop by around 4% in total over the two days.

Early concerns on financial markets were that China is about to embark on a currency war, and for the solar industry, the move was viewed as a strategy designed to improve the attractiveness of Chinese exports and reduce the borrowing costs of leading Chinese solar companies.

More than 60% of the world’s solar panels are produced in China, making the currency devaluation a potentially attractive boon for many markets globally.

However, there is concern in Europe – where Chinese solar panels are subject to minimum import pricing (MIP) set at €0.56/w – that this devaluation will serve to further harm solar’s affordability in the EU. Currently, solar panels from China are around 25% more expensive in Europe than the rest of the world.

The U.K.’s Renewable Energy Association (REA) has issued a response to the devaluation of the yuan, calling for the MIP not to be extended beyond December this year in order to maintain a competitive solar market in the U.K. and Europe.

"As the U.K. solar industry moves to a world beyond subsidies, cost reduction in the installation process has become even more important in order to reach grid parity more quickly," said REA policy analyst Lauren Cook. "MIP has prevented module costs from coming down over the past few years and this additional cost has been funded through subsidies. It is extremely important for the solar industry that MIP is not extended beyond December 2015 to maintain a sustainable industry."

In the U.S., the currency devaluation has angered lawmakers and sparked fears that the move is a brazen attempt by China to halt its declining economic momentum. The devaluation served to hit global equities and U.S. oil prices, and has hit the Australian dollar too, which fell to a six-year low against the U.S. dollar.

China’s central bank called the devaluation a one-off step, adding: "Since China’s trade in goods continues to post relatively large surpluses, the yuan’s real effective exchange rate is still relatively strong versus various global currencies, and is deviating from market expectations."