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Impact of Chinese FiT Policy on Global Module Availability

Sep 02, 2013 Hit: 48 Written by 
Impact of Chinese FiT Policy on Global Module Availability

SPVI Research Director, Dr. Jason Tsai, sees shortage of modules from tier-1 companies during Q4, 2013


Shanghai, September 2, 2013. The new FiT policy is separated into two parts: ground-based PV stations and distributed PV power generation. In the case of the ground-based PV stations, the subsidy is divided into three zones by the level of irradiation. Most of the hot west lands belong to the 1st zone, which will get 0.9RMB/kWh FiT. And the north and some other west land cities are the 2nd zone, with 0.95RMB/kWh FiT. The others are 1RMB/kWh.

The distributed PV power generation subsidy is for all the electricity, regardless of whether it is consumed or sold to the grid. For consumption, the subsidy is set at 0.42RMB/kWh. If it is sold to the grid, the selling price is equal to the standard purchasing price of coal-fired electricity, which varies according to the province.

Both of the subsidies are paid by the renewable energy fund, which just raised its income from 0.008 RMB/kWh to 0.015RMB/kWh from the electricity surcharge on conventional electricity sales.

The policy will be executed from Sept. 1, 2013, but there is a construction buffer time until the end of this year for those projects, which has applied before Sept. 1. The subsidy will remain for 20 years, but there is also a possibility for the government to address the time period if the situation changes.

Effects

For the ground-based PV station, there should be a construction rush before the end of this year. Most of the projects in progress are located in 1st and 2nd resource zones. In our calculation, there are currently more than 12GW of projects in construction progress. The subsidy will make those projects’ progress accelerate, and it is expected that about 6.2GW have a chance to rush through during the second part of the year.

Besides China, just like last year, Japan will get hotter in the fourth quarter because the country will start to discuss the FiT reduction for Q1, 2014. We expect about a 400MW demand per month from Japan for Chinese makers in Q4. During H1 of 2013, deliveries to Japan equaled 1.6GW.

India, the US, and South Africa will also have a high demand in Q4. The EU is expected to rebound through the end of Q4. There will be about an 8GW demand for the Chinese modules during Q4, 2013. H1-2013 Chinese global deliveries were about 9GW.

 We can easily see there should be a supply shortage in Q4, especially for modules from the tier-1 manufacturers: Yingli Green Energy Hold. Co., Ltd. (ADR)(NYSE:YGE), Trina Solar Limited (ADR)(NYSE:TSL), Canadian Solar, Inc.(NASDAQ:CSIQ), JinkoSolar Holding Co., Ltd.(NYSE:JKS), and ReneSola Ltd. (ADR)(NYSE:SOL). Most are running between 80% to full capacity already; some have sold out their capacity for the rest of the year.

The second effect is, after the grace period, the rate of development of large-scale ground station will fall into a bottleneck, mainly due to price hikes. It will take some time to re- depress the price, but even the western regions tariff of 0.90RMB/kwh is still quite satisfactory in terms of the developers.

Distributed PV

The subsidies for distributed PV plants are a major highlight of this policy. All of the photovoltaic power generation (whether for personal use or access) subsidies are to be 0.42; this way, commercial roofing projects will become very attractive. In Beijing, conservative estimates see cost recovery only after five years. Shanghai is slightly worse due to sunlight, where it will take six years to recover the initial investment. Another benefit is increased level of residential users, but distributed subsidies are also attractive to industrial users.

 

 

Last modified on Monday, 14 October 2013 14:01
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