​Virus threatens to blunt China solar recovery on project delays

The coronavirus outbreak is threatening to blunt an expected recovery in China’s solar market after the government delayed new project submissions this year.

The National Energy Administration postponed deadlines for submitting new projects by more than a month due to impact from the epidemic. Projects that require subsidies will be determined by mid-June. This suggests the final 2020 policy may not be ready before then.

Analysts are now reassessing their predictions for new solar capacity in China. BloombergNEF’s Jonathan Luan said he will cut at least the top-end of his forecast of between 31 and 43 gigawatts for the year, but declined to give a new estimate immediately. CMB International Securities and BOCOM International Holdings also plan to lower forecasts but couldn’t provide details.

NEA’s move doesn’t bode well for new 2020 capacity additions although it gives developers more time to apply for new projects, Luan said. The industry will likely operate on a similar timeline as 2019, with developers having about half a year to build and leaving the rest to be included in the following year’s tally, he added.

China’s solar market has slumped for the past two years due to a policy change as the government tries to ease the industry’s reliance on subsidies that allowed the country to add more renewable energy capacity than anywhere else in the world. Solar installations fell to 30 gigawatts last year from 44 gigawatts in 2018 and a record 53 gigawatts in 2017.

Back in November, before the coronavirus began to spread, China’s main solar industry group expressed optimism that the 2020 subsidy policy would be released earlier and provide certainty needed to kick-start project construction. The association cited an industry forecast for installations to rebound to more than 40 gigawatts this year.

Then the outbreak happened, causing raw material and labor shortages across China’s solar supply chain and hampering normal operations. The group, China Photovoltaic Industry Association, appealed for support from the government, including delaying tariff cuts for solar power. It estimated late February that installations will be between 35 and 45 gigawatts this year.

The final list of projects that qualify for 2020 subsidies may only be announced late June or early July, according to Dennis Ip, an analyst at Daiwa Capital Markets Hong Kong Ltd.

This is likely to slow the construction of some projects, said BOCOM’s analyst Louis Sun. Final installations will also depend on whether the epidemic weakens global demand and if China’s power grids can absorb output from new projects, he added.

© 2020 Bloomberg L.P.

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