China stopped approving subsidised utility-scale PV power stations in 2018 and put a cap on distributed projects at 10GW. This shocked the stock market, with solar companies dropping by 15% in the two days after the announcement.
As global energy consultancy Wood Mackenzie reports investors did not expect this. Namely, PV projects grid-connected in China after June 1 2018 will no longer receive FIT benefits, except those approved last year which are grid-connected by June 30 2018.
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With this law, utility-scale and distributed solar segments will be affected, and especially projects expected to start in the second half of 2018.
Until now China accounted for more than half of global solar installations in 2017, so Wood Mackenzie does not expect other markets to make up for this reduction in installations.
As the consultancy said:
We expect the backlash for the Chinese industry to cause the first contraction in global PV demand since before the turn of the century.
However, this can lead to a positive change to the Chinese solar landscape. Chinese developers who want to invest elsewhere than on their country will increase competition in emerging markets. This, along with the lower cost of PV modules will reduce prices at competitive auctions and lower tariffs for solar PV are expected.
Generally during the course of time policy shakeups in renewables energy markets do not necessarily lead to crisis. Despite the shock that China’s decision caused, this could actually lead to further improvement and it can give a chance to renewables to achieve grid parity, Wood Mackenzie concludes.