China's solar notice on Friday will have a significant impact on both utility-scale and distributed generation (DG) solar photovoltaic (PV) demand, according to Asia Europe Clean Energy (Solar) Advisory Co Ltd (AECEA).
In response to the notice, the advisory firm cut its forecast for annual PV installations in China for 2018 to 30 GW-35 GW from 40 GW-45 GW previously. The outlook for 2019 and 2020 was also lowered to 20 GW-25 GW in both years.
The notice, issued by the National Development and Reform Commission (NDRC), the Ministry of Finance and the National Energy Administration (NEA), addresses a number of issues. It sets a cap of 10 GW for DG projects in 2018 and says that DG projects connected to the grid by May 31 are eligible for feed-in tariffs (FiTs) from the central government, while those not recognised by the central government will need to seek support from local governments, AECEA explains. The firm estimates that with 9 GW of DG projects installed in January-April, the 10-GW cap would have probably been reached.
In a move seen by AECEA as "drastic", the notice also cancels the utility-scale solar target for 2018 and tells provinces to suspend projects seeking 2018 FiTs. In July last year, NEA announced a utility-scale project target of 13.9 GW for 2018, AECEA notes.
According to the firm, the FiT reduction in the notice of about 6%-9% will have a minimal effect.
The measures come after 19.4 GW of DG deployments and 33.62 GW of utility-scale installations last year. According to AECEA, the step is motivated by ballooning outstanding FiT payments on central level. It says that the shift of financial responsibilities to local governments suggests that the means to deal with these ballooning payments on the central level might have not been found yet.
The firm further commented that the question now will be on how Chinese upstream companies will react to falling demand in terms of reducing prices and adjusting capacity expansion plans.
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