Transformation Of The Solar Photovoltaic Market In China

Over the past decades, many countries, including the U.S., Japan, Germany and China, have issued a series of policies to support the development of solar energy, and the photovoltaic (PV) industry in particular. The development of the PV industry in China has been particularly important. In 2015, the accumulated capacity of China ranked second in the world. From 2013 to 2015, the newly installed capacity of China ranked at the top globally. However, despite these dazzling achievements, several problems have arisen, including subsidy arrears, discarding power, subsidy policies with little flexibility, etc. This thesis evaluates the changes that have occurred in China over recent years in the solar energy industry, addressing the technological approaches adopted by Chinese companies; changes in the photovoltaic (PV) industry structure; and governmental policies supporting the development of the industry. Analytically, the analysis utilizes a leveled cost of electricity (LCOE) model to calculate the domestic cost of PV electricity in China. Based on actual technology costs and China’s solar resources, the LCOE from PV is estimated to be RMB 0.82/kWh for the year 2015, with scenario results ranging from RMB 0.66-1.07/kWh. To test the result’s robustness, a sensitivity analysis was also conducted. It suggests that the LCOE of grid-connected PV systems is already well below the level of the Feed-in-Tariff (FiT) support policy, which indicates that the expected investment rate of return reaches nearly 21% in Hangzhou -and potentially even higher in the western provinces. This level of investment return has triggered massive amount of capital flooding into the PV industry, and has caused redundant capacity in Gansu and Xinjiang provinces (introducing the problem of curtailment). Also, the results successfully explain why the market price of tendering approvals has been excessively high. The analysis therefore implies that China policymakers need to adjust the FiT to better reflect technology costs, and should establish a more flexible and coordinated mechanism to support the sustainable development of the PV industry.