China, the US and Europe are battling for marketshare amid a turbulent but growing solar energy market, writes Klaus Oehler
German solar companies are apprehensive. In the weeks before Munich-based Intersolar, which ran over three days in June, more than 30 internationally active companies and research institutions wrote an open letter to the German government calling for an industrial policy strategy for the solar industry in Germany.
According to the signatories of the letter addressed to the Federal Ministry of Economics and Technology, “A joint effort by politics, industry and research is needed to support investment in research and development and at the same time promote the demand for particularly sustainable solar products.”
German companies are not alone in this concern. Experts and politicians all over the world are also increasingly critical of the dominance that China in particular has gained in solar energy generation.
“I now also count China among the industrial nations. It is no longer an emerging market and is well on its way to replacing Germany as the leading industrial nation, above all because of solar energy, batteries and e-mobility, the main pillars of the world’s industries in the future,” said Green politician and Impact4All board member Hans-Josef Fell.
In the US and China, the renewable energy sector has long since begun its capture of market share. Solar and wind energy are now the cheapest forms of energy generation – a fact which is making itself known in these regions in no small economic terms.
However, the take up of renewables has also faced repeated hurdles, not least because of political decisions.
The withdrawal from nuclear energy, which German government under Chancellor Angela Merkel, hurriedly initiated after the catastrophe in Fukushima, Japan, is a step backwards on the way to an environmentally-friendly energy policy, warns Varun Sivaram, author of a study by the American thinktank Brookings, which explores the “dark side of the solar industry”.
Sivaram states that currently only two per cent of the world’s energy requirements are covered by solar energy, with fossil fuels still accounting for the lion’s share. Nevertheless, Sivaram sees it as ‘remarkable’ that solar energy is rapidly gaining ground in the industrial nations of the US and Australia for economic reasons, although both governments still want to fully support coal, natural gas, oil and nuclear energy and are even increasing subsidies for it.
However, the situation in the European Union and Germany is quite different. ” I was really shocked while visiting the SNEC in Shanghai this year, when I saw that Germany, which was the leader eight years ago, no longer plays a role at all in the worlds huge solar industry” Green politician Fell told Impact4All.
Eight years ago, Intersolar in Munich was the world’s leading trade fair for solar energy; today it is SNEC in China, Fell said. Intersolar is undoubtedly still important and significant, but only if the Chinese continue to take part and do not increasingly turn their backs.
Fell said: “Ten years ago, eight of the largest solar companies were German and today no German company is even among the 30 largest.”
However, all is not lost and there are signs of a turnaround. China, which now produces more than 80 per cent of all solar modules and dominates the global industry, has shown signs of wanting to limit its growth.
In early June, China’s National Development and Reform Commission (NDRC), the Ministry of Finance (MOF) and the National Energy Administration (NEA) jointly issued the 2018 Solar PV Power Generation Notice.
It announced a new policy for the PV sector with significant cuts in remuneration and a cap on PV expansion. For example, the 13,900 megawatts (MW) expansion target for large-scale PV systems set by the NEA last year for 2018 is to be cancelled.
In addition, a cap of 10,000 MW for the segment of decentralised PV systems for 2018 will be drawn in. Only the private PV roof systems for electrification in the context of poverty reduction are not included in the cuts.
Against the backdrop of China’s new solar policy, the solar market research institute Asia Europe Clean Energy Advisory (AECEA) has reduced its expansion forecast for the current year from 40,000– 45,000 megawatts to 30,000–35,000 MW. For the remaining two years of China’s 13th Five-Year Plan (2016 – 2020), AECEA expects annual expansion in China to reach 20,000 to 25,000 MW.
Within the Chinese solar industry, these government plans have caused an outcry. Eleven Chinese solar companies have reportedly written to the government to postpone the apparently unexpected cuts and mitigate capacity capping. From the companies’ point of view, the cuts in remuneration and the expansion cap will have a severe impact on the solar industry, which is already suffering financial hardship. Prices for solar modules are also expected to continue to fall in the wake of declining demand for PV projects.
Following the announcement from China that it will significantly reduce its photovoltaic capacity this year, analysts nevertheless expect little change in global demand. However, the pressure on photovoltaic manufacturers will increase significantly in view of the already existing overcapacities.
The market research institute IHS Markit has updated its outlook for 2018 following the announcement from China. The analysts assume that, despite the new Chinese policy, the global expansion will remain only eight gigawatts below the original forecast at 105 gigawatts.
According to IHS Markit, the decline in China will be partially compensated by other markets. The 105 gigawatts of newly installed photovoltaic capacity would still represent an eleven percent increase over 2018.
Additionally, the signs are also pointing to a headwind in America. US renewable energy companies have cut back investments due to import duties on Chinese solar modules.
Larger installations worth more than 2.5 billion dollars have either already been cancelled or put on hold, according to a Reuters survey of large project developers. For comparison: This sum is more than twice as high as the one billion dollars that US companies want to invest in expanding their production of solar cells.