China’s dual-control on energy intensity target to hit PV supply chain in Q4

China’s National Development and Reform Commission (NDRC) published a notice on “Dual-Control Policy of Energy Consumption and Intensity” recently, specifying the energy intensity target set for the country, and directs each province (including autonomous region and special municipality) the target for the next five years.

Under the policy, Yunnan Development & Reform Committee has imposed silicon metal production control on Sept. 11. Coupled with less rain than usual during the raining season in southwestern region, manufacturers are panic buying silicon powder, while sellers are reluctant to sell, sending prices as well as manufacturing costs of polysilicon up.

Supply shortage of materials in the upstream has placed huge pressure on the PV supply chain this year. Now, the introduction of the dual-control policy for energy intensity, posts bigger threat to the supply chain. Examining the barometer of energy intensity target status in each province in the first half of 2021 published by the NDRC, not only Yunnan but other provinces where PV manufacturing facilities are based could be impacted by the production control.

Review on the capacity expansion in each province has become stricter, and the scale of production control continues to expand in the fourth quarter. This has caused impacts on the whole PV supply chain, adding uncertainties to modules supply in the final quarter of the year.

In the face of high costs, manufacturers have planned to lower utilization rates. It is reportedly that some polysilicon and module manufacturers, as well as bill of material suppliers start to control production volume and lower utilization rates due to the dual-control policy. The scope of impact remains to be monitored and evaluated. Against this backdrop, it’s likely that the production reduction across the supply chain may make some projects unable to complete installation on time in the fourth quarter, worsening the industry chain that has been dealing with high prices this year. The whole industry watches closely the development of this issue.