Factories suffering from rationed grid electricity could help drive a boom in on-site solar systems, and recent moves to mandate the retrofitting of PV on existing buildings could also lift the market, as analyst Frank Haugwitz explains.

There have been a range of measures taken by the Chinese authorities to achieve emission reductions，one immediate impact of such policies is that distributed solar PV has gained significant importance, simply because it enables factories to consume, on-site, their locally generated power, which often is significantly more affordable than grid-supplied power – in particular during hours of peak demand. Currently, the average payback period of a commercial and industrial (C&I) rooftop system in China is approximately 5-6 years.Furthermore, deployment of rooftop solar will help reduce manufacturers’ carbon footprints and their reliance on coal power.

In late August China’s National Energy Administration (NEA) approved a new pilot program specifically designed to promote the deployment of distributed solar PV. Accordingly, by the end of 2023, existing buildings will be required to install a rooftop PV system.

Under the mandate, a minimum percentage of buildings will be required to install solar PV, with the requirements as follows: government buildings (no fewer than 50%); public structures (40%); commercial properties (30%); and rural buildings (20%), across 676 counties,will be required to have a solar rooftop system. Assuming 200-250 MW per county, total demand deriving from this program alone could be in the order of between 130 and 170 GW by the end of 2023.

Near term outlook

Regardless of the impact of the double carbon and dual control policies, over the past eight weeks polysilicon prices have been increasing – to reach RMB270/kg ($41.95).

Over the past few months, transitioning from a tight to a now-short-of-supply situation, the polysilicon supply crunch has led to existing and new companies announcing their intention to construct new polysilicon production capacities or add to existing facilities. According to the latest estimates, provided all 18 poly projects currently planned are executed, a total of 3 million tons of annual polysilicon production could be added by 2025-2026.

However, in the near-term, polysilicon prices are expected to stay high, given the limited additional supply coming online in the next couple of months, and due to a massive shift of demand from 2021 into next year. Over the past few weeks, countless provinces have approved double-digit-gigawatt scale solar project pipelines, the overwhelming majority scheduled to be connected to the grid by December next year.

This week, during an official press conference, representatives of China’s NEA announced that, between January and September, 22 GW of new solar PV generation capacity was installed, representing an increase of 16%, year on year. Taking into account the most recent developments, the Asia Europe Clean Energy (Solar) Advisory estimates that in 2021 the market could grow between 4% and 13%, year on year – 50-55 GW – thereby crossing the 300 GW mark.

Frank Haugwitz is director of the Asia Europe Clean Energy (Solar) Advisory.