Chinese regulators have proposed easing a major solar power subsidy policy announced last year, according to the nation’s main industry group, a move that would partially reverse rules that undercut demand in the world’s biggest user and shook the global market.
Policymakers are starting approvals again for utility-scale, ground-mounted projects that receive subsidies, which were halted in June last year, the China Photovoltaic Industry Association said on WeChat on Monday, citing a meeting between the Chinese National Energy Administration (NEA) and companies.
As part of the renewed approvals, developers of these large projects, as well as those for industrial use, would need to bid for government aid, the association said.
Shares in solar companies yesterday gained. Tongwei Group (通威太陽能公司) rose as much as 5.8 percent in Shanghai trading to a nine-month high, while LONGi Green Energy Technology Co (隆基綠能科技公司) added 4.8 percent.
In Hong Kong, Xinyi Solar Holdings Ltd (信義光能控股公司) climbed 3.7 percent. GCL-Poly Energy Holdings Ltd (保利協鑫能源), which initially advanced 2.8 percent to extend the previous day’s 11 percent increase, pared those gains to trade 1.4 percent lower.
The move last year to cut subsidies for some solar projects was aimed at forcing Chinese provinces to utilize unused capacity and reduce subsidy bills, but it also hurt demand and depressed solar material prices globally, roiling manufacturers.
The reversal discussed this week might help capacity installations in the world’s biggest solar market rebound from last year’s slump, the association said.
The changes would probably result in installed capacity rising from last year’s 44 gigawatts (GW), which was a tumble from a record high in 2017, according to the association’s estimates. It had in January forecast that additions this year could be as low as 35GW.
The capacity of subsidized projects that China would approve this year would be determined by available funds, the association said.
This year, China is likely to allocate about 3 billion yuan (US$443.3 million) of fixed subsidies for solar, Citigroup Inc said in a note.
The bank estimates capacity additions of 42GW this year under its base case, with a potential for a gain to 50GW, analysts, including Scott Chui (徐德基) wrote, adding that this would benefit companies such as Xinyi Solar and LONGi Green Energy most.
The latest changes signal the “NEA’s strong intention to smoothen solar industry development” after abruptly slowing down installations last year, Daiwa Capital Markets Hong Kong Ltd analysts said in a note.
The government is also planning a separate subsidy limit for residential solar systems.
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