REGULATION | Staff Reporter, China

Shift to feed-in tariffs hits Chinese solar manufacturing hard

New installations are expected to be limited to 30GW in 2018.

China’s move to replace the feed-in-tariff (FiT) mechanism with a bidding process as its new renewables policy is expected to dampen the installation of new solar projects to a capacity of 30GW in 2018 as well as prompt a sharp decline in new solar additions, according to credit rating agency Fitch. 

Also read: China's NDRC cuts solar subsidies to avoid industry overheating

Unless the suspension on utility-scale projects is lifted later this year, around 20GW in new projects are left to be constructed as almost 10GW has already been installed in Q1 prior to the shift to the bidding mechanism.

For solar power, a halt has been placed on new utility-scale farms for the year, except for distributed projects and those that qualify under "top runner" and "poverty alleviation" programmes. FiTs for solar projects still to be connected have been lowered by CNY0.05/kWh, and future projects will have to be allocated through the bidding process.

On the other hand, wind power is expected to emerge relatively unscathed compared to solar as most wind farm projects that have not received approval will be allocated through a bidding process, with prices not allowed to exceed current FiTs.

This comes as more than 70GW of new wind capacity that has already been approved still qualify for the current FiT, suggesting a limited short-term impact on wind power equipment manufacturers.

Also read: China grants priority access to new grid capacity to renewable energy firms

“In contrast, solar equipment manufacturers along the polysilicon to product module chain are likely to be hit by a sharp drop in demand and prices as solar capacity additions start to fall,” Fitch said in a statement.

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