InfoLink Consulting Co., Ltd.

Solar Topics & Issues

China extends grid-connection deadline amid ceaseless solar price hikes

July 21, 2021 PV InfoLink

CN TW EN

China’s consumer price index (CPI) in May hit a 12-month high, rising by 1.3% year-on-year due to surging commodity prices. Producer Price Index (PPI) increased 9% year-on-year and 0.7% from April, coming in beyond expectation for a 8.5% gain.

In response to inflation, China’s State Council announced to offer subsidies to small- businesses to cope with increasing costs of raw materials. The State Council also imposed new restrictions on commodity futures trading to avoiding speculation. To keep more commodities in China, the government raised export tariffs on certain iron or steel products.

During an executive meeting held on May 19, Premier Li Keqiang of the State Council urged government officials to “tighten regulations to guard against market monopolies and hoarding activities, and reinforce market supervisions.”

In the supply chain, companies with fewer bargaining chips bear more cost. In China, these companies are those at earlier stages of supply chains, who tend to have less negotiating power than retailers and consumers. On that account, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the State-owned Assets Supervision and Administration Commission, the State Administration for Market Regulation, and the China Securities Regulatory Commission held a meeting with key companies with greater market influences in ore, steel, copper, and aluminium industries, such as China Iron and Steel Association and China Nonferrous Metals Industry Association, for discussions on recent price hikes.

To mitigate impacts of raw material price hikes on the PV sector and help developers struggling with high costs, China’s National Energy Administration published a notice in mid-May, ruling that projects failed to be connected to the grid within the year would be administered by each provincial energy bureaus and included in the guaranteed grid-connected capacity in the following year.

InfoLink pointed out that China has evolved from a subsidy-driven market to one driven by grid-parity projects. As a result, demand in the second half of the year mostly comes from grid-parity projects and residential projects. However, power stations in the Chinese market saw IRR drop to 5.5-5.6% in June, thanks to price hikes across the supply chain that pushed up module prices and worsened inverter and steel shortage.

Given policy goals, only some projects have been deferred to 2022 thus far, despite one-year extension. Prices in the midstream start to slip presently, and the Chinese market is sustained by 15-17 GW of residential demand, as estimated according to subsidy quota. Against this backdrop, InfoLink lowered forecast for China demand from 55 GW to 50 GW.

Join Us

This article is only available to subscribers. Sign up now to get passes for all regions.

Member Login

Account

Password

Forgot your password?Click here

Contact

The article is made available to members of InfoLink only. Register immediately to get full access to analysis and reports provided by InfoLink.

Contact now
© 2019 PV InfoLink. All rights reserved.   Webdesign-GRNET