context: The policy, dubbed ‘the most stringent solar power regulation’ yet, dealt a heavy blow to a solar industry already bruised by delayed subsidies and overcapacity. On the positive side, it will spur a new round of consolidation.

On 31 May, National Development and Reform Commission (NDRC), Ministry of Finance and National Energy Administration adjusted 2018 solar power construction quotas and on-grid tariffs, specifically

  • suspending allocation of utility-scale solar power quotas in 2018
  • allocating a quota of about 10 GW for distributed projects
  • starting 31 May 2018, reducing benchmark on-grid tariffs for newly operational solar power projects by 0.05 per kWh
  • lowering subsidies for specified distributed solar power projects by 0.05 per kWh
  • not changing subsidy rates solar projects undertaken to reduce poverty
  • allocating utility-scale solar projects through a competitive bidding processes

The new policy has sparked turmoil in the solar sector. It will shatter the solar manufacturing industry, leading to losses of more than 1 tn and 2.5 million jobs, estimates Wang Sicheng 王斯成 China Photovoltaic Society vice director. Expecting declining demand from domestic solar power producers, some manufacturers are likely to increase exports, according to China International Capital Corporation Limited.

Reduced construction quotas suggest that only around 25 GW of additional solar capacity will be installed in 2018, predicts Wang Shujuan 王淑娟 Investment Association of China expert consultant. Solar power stocks also plummeted on 4 June, reports Caixin Energy.

The policy comes after NDRC already lowered 2018 on-grid tariffs for solar power by 0.05 on 22 December 2017. Cutting tariffs twice in one year indicates that the government has broken with tradition, and more frequent revisions are possible as the government subsidy gap continues to widen, notes Wang.