China to Invest $40 Billion by 2015 for Solar Development
But Lingering Challenges Continue to Cast Shadow over China’s PV Industry
By Melody Song, senior manager, SEMI Industry Research and Statistics
On September 12, 2012, China’s National Energy Administration (NEA) announced the finalized 12th Five-Year Plan for solar development. The plan sets a target of 21GW installed solar capacity by 2015, which includes 20GW PV installations and 1GW CSP installations. The plan also sets a total budget of 250 billion yuan, or about $40 billion, and expects half million people employed in the solar industry by 2015. Additionally, the plan sets a target of 50GW installed capacity by 2020.
Figure 1 – China’s Solar Installations
Historical and Official Targets
Source: SEMI and China NDRC
The new target marks the third increase of the national 12th Five-Year Plan for solar development. The initial target was only 5GW set in 2011, then was raised to 10GW in early 2012, and was raised again to 15GW in May 2012. The finalized target of 21GW solar installations by 2015 is the same as the preliminary announcement made in July.
At the end of 2011, China had about 3.5GW installed PV capacity, and about 5-6GW new installations are expected for 2012. This leaves approximately 4GW of new installations required per year from 2013-2015 to meet the target. Although the market size of 20GW is quite significant, it is much smaller than 40GW widely speculated in China’s PV industry and Chinese media in recent weeks.
According to the plan, by 2015 China will have 10GW installed capacity of large-scale PV power plants and 10GW installed distributed PV generations. Up to now, China’s PV market has been dominated by large-scale ground-mounted installations. The new plan clearly demonstrates China’s shift of focus to commercial rooftops and self-consumption, as grid integration of large-scale systems have become difficult in many places. The plan also calls for the development of micro-grid, smart grid, and 100 demonstration cities.
However, many in the Chinese PV industry are concerned that the target is not enough to help the struggling domestic manufacturing, and many believe the actual installations will exceed the official target. It was reported one day after the government release of the plan, Gao Jifan, CEO and chairman of Trina Solar, commented that he expected 10GW new installations in China in 2013.
The plan also recognizes the challenges facing China’s PV manufacturers, and emphasizes the need for additional industry consolidation and a healthy industry environment. China now hosts at least 50 percent of the global PV manufacturing capacity as a result of massive investment in this sector in 2010 and 2011 (Figure 2).
Figure 2 – PV Manufacturing Equipment
Billings and Bookings
China vs. Worldwide Total
Source: SEMI Worldwide PV Equipment Market Statistics Report
Even though the Chinese government has long recognized the danger of unsustainable investment in this sector, it appears that socioeconomic concerns, such as regional economic development, employment, social stability, have outweighed those concerns. As a result, capacity rationalization process in China has been painfully slow. To achieve a global supply/demand balance, the capacity rationalization process needs to take place in China, even permeate to the level of Chinese Tier 1 companies. There are signs that this process may be picking up. Recently, LDK, Trina, and Suntech, for example, have all gone through or have announced production cutbacks and workforce reduction. With a severe global overcapacity and declining prices, coupled with trade tariffs imposed by U.S. and the anti-dumping investigations by European Commission, things are likely to get worse before getting better.
October 2, 2012