The installation market in China was taken up nearly entirely by centralized-type power plants until 2016, when the market of distributed-type power plants began to expand rapidly.

As explained above, a rapid decline in the number of centralized-type power plants, for which the "introduction quota" was suspended following the recent policy change, was predicted before the announcement. The feed-in tariff (FIT) scheme in China after 2018 is mainly targeted at distribution-type plants, and it is can be said that the impact of the policy change had been predicted to a certain degree, excluding the scale and speed of reduction, which are more significant than anticipated.

In regard to possibilities of policy changes in China, BNEF predicted the "change of the introduction quota" will be made in 2018 and the "purchase price based on the FIT scheme" will be reduced in 2019. BNEF also predicted "control by region" and other changes without specifying the timing.

The policy changes announced at the end of May included both the "change of introduction quota" and the "reduction of purchase price based on the FIT scheme." Therefore, it is estimated that the installation market will decline more rapidly than anticipated.

The "introduction quota" for distribution-type solar power generation equipment was limited to about 10GW in total output while the quota for centralized-type plants constructed on the ground was discontinued.

In respect to the Chinese market of solar power generation equipment installed on the ground in 2018, for example, BNEF predicted that the output will be lower than the value that it initially estimated by about 1.6GW if a change is made to the "introduction quota" alone.

The reduction range in the introduction quota is estimated to be increased, and the purchase price was reduced. Because of this situation, some analysts even estimate that the installation market will shrink by 20GW from the previous year, exceeding the value estimated by the company.

BNEF's analysis showed that the risk of actual installation is higher in western regions where power transmission networks have yet to be fully developed and the demand is limited while the risk is lower in eastern regions where the networks are fully developed and the demand is high (Fig. 3).

Fig. 3: Risk arising from policy changes in China. The risks are estimated to be higher in western regions, in regard to ground-based types (right). Forecast by Bloomberg New Energy Finance (BNEF) in March. (source: Nikkei BP)

As one of the impacts of the policy changes in China, a rapid decline of solar panel prices is anticipated. It is likely that solar panels that will not be installed in China will be sold in many countries throughout the world at prices lower than before.

For example, BNEF made a correction to its estimation of solar panel prices for 2018 in July. The conventional rate of a 27% drop from 2017 was corrected to 34%, and the estimated average price of panels in the world was corrected to a decline to 24.4 US cents per watt at the end of 2018. These corrections were attributable to the Chinese policy changes, according to BNEF.

These factors will also contribute to further reduction of solar power generation cost. If the installation cost is reduced one stage further, introduction to developing countries and regions such as India, the Middle Eastern and North Africa, and Latin America, will be accelerated. Attention will also be paid to the degree of covering the decline in China by the global installation market through acceleration of expansion to these emerging markets.

Go to next page