Annual capacity additions for solar PV in China in 2019 were significantly lower at 30.1GW compared with 44GW in 2018.
Installations for solar PV in the first three quarters of 2019 were approximately 16GW. Over 14GW was added in the last quarter, of which 10GW was installed in December alone. Solar PV capacity additions declined for the second year in a row due to delays in China’s policymaking to transition towards the subsidy-free market.
Annual capacity additions for solar PV in China declined as no new subsidised projects were approved between May 2018 to July 2019 due to the National Energy Administration’s (NEA) decision.
PV additions declined mainly in the first half of the year due to the lack of clarity on subsidy policy. Delayed policy introduction, comprehensive bidding policy, lack of bidding understanding and insufficient project preliminary preparation resulted in many projects still remaining in the early stages of development. These are some of the main reasons for low capacity additions in 2019.
In 2018, the government was forced to suspend all new subsidised solar capacity approvals after a record 53GW capacity increase in 2017, which left it with a backlog of at least CNY120 billion ($18 billion) in subsidy payments.
Power from wind and solar projects was wasted due to grid issues related to low network capacity, which caused transmission and distribution problems. In 2017, 12% of wind generation and 6% of solar power were wasted due for the same reason.
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The 531 policy introduced in 2018 imposed caps on market scale, accelerated subsidy cuts and lowered on-grid tariffs to reduce the financial burden and solve curtailment difficulties. The policy aims to phase out outdated and subsidy-dependent enterprises by imposing different regulations on solar power projects.
In January 2019, China revealed new solar and wind policy for subsidy-free projects. The policy was introduced to take advantage of a rapid fall in construction costs and to resolve a payment backlog issues and grid logjam.
Solar PV curtailment fell to 3% in 2018. In May 2019, the grid parity projects with a total capacity of 20.76GW were approved, of which 14.78GW were for solar PV. In July 2019, the country released results for its first nation auction for solar PV projects that were looking for subsidies. NEA approved 22.78GW of solar capacity with the lowest bid at CNY0.2795/kWh ($0.041).
China’s solar PV industry reached an important milestone in 2019 as its cumulative installed capacity exceeded 200GW and ended the year at approximately 204.8GW. The key reason for the success of the solar PV industry in China can be attributed to the introduction of the feed-in tariff (FIT) mechanism in 2012.
The launch of the new mechanism resulted in China becoming the largest PV market in terms of annual additions in 2013 and further placed China as the largest PV market in terms of cumulative PV capacity from 2015. China not only maintained its lead in terms of annual installations in the last eight years but also established itself as the largest manufacturing hub for PV equipment.
There is no doubt that 2019-2020 are the years of transition for the solar PV sector in China from a subsidy-driven market. During the transition phase, the country is home to both subsidy-free and FIT-supported projects. China will become a subsidy-free market from 2021 by eliminating FITs for wind and solar PV. Chinese PV market aims to stop its decline in annual additions in 2020. China’s annual additions in 2020 for solar PV are expected to remain flat.