IEEE Power & Energy Magazine - May/June 2020 - 57

policies provide the PV industry with a good external
macro environment.
Promotion of Electric Power System Reform

In March 2015, China promoted a new round of electric
power system reforms and proposed clear requirements for
transmission and distribution prices, construction of the
electricity market, establishment and operation of trading
institutions, and loosening of planning controls in power
generation and use. In particular, reforming market trading mechanisms and electricity prices provides an effective
method to solve the renewable energy consumption problem,
and it is conducive to renewable energy's priority development and fair participation in market transactions.
Broad Global Market

With the general trend of global energy systems undergoing
a low-carbon transformation and the increased competitiveness of China's PV industry, broad international markets
have become available, with huge opportunities in developing countries, such as those in Latin America and Africa.

Threats
Widening PV Subsidy Gap

The need for renewable energy subsidy payments to be made is
increasing rapidly. The financial gap between the true costs and
revenues of PVs has widened, cumulatively exceeding roughly
US$15 billion by the end of 2017 due to delays in receiving
subsidy payments. This creates cash-flow issues for PV companies, which recognize that future policy changes reducing
subsidies are potential threats to their business models.
Capital Volatility and Financing Difficulty

With the decline in China's PV subsidies and the lower
limits on PV construction, the profits of some companies
will decline. Further declines could occur because of the
large subsidy gap and long cost-recovery period for fixed
investments in centralized PV power stations. Banks and
other investment institutions recognize that PV power
station projects pose an increased risk, rendering financing difficult.
Trade Risk

The 2012 antidumping and antibribery investigation and
subsequent Sino-U.S. trade war demonstrated the significant risk in international trade.
Missing Distributed-Power Retail Market

Direct transaction is the primary mode whereby distributed
power-generation participates in the market. However, in
China it is still impossible to conduct electricity transactions
between a distributed power-generation project and users in
neighboring networks. The lack of such transactions hinders
the development of distributed PV systems.
may/june 2020

Future Trends and
Development Prospects
Given the history of the worldwide PV industry and considering the advantages, disadvantages, opportunities, and threats
that China's faces, a policy, enterprise, technology, and market analysis is presented in this section to predict the sector's
development path.

Policy
During the next few years, the government will strive to promote PV grid parity.
✔✔ Further decline in PV subsidies: Undoubtedly, direct
PV and electricity price subsidies will decline, and the
construction quota for centralized PV power -stations
will be further limited, which is the most direct and
effective policy that the government can implement
to regulate domestic industrial development. The government may propose the requirements of PV grid
parity and initiate a number of pilot projects at some
future time.
✔✔ Promoting PV power consumptions: To ensure the
priority and effective utilization of PV-generated electricity, grid-parity, and low feed-in tariffs, provincial
power-grid enterprises have signed contracts with project developers for the long-term purchase and sale of
electricity at fixed prices to reduce financial risks. The
government will strengthen the full-amount indemnificatory-purchase policy by requiring grid companies to
guarantee power and energy payments to PV generation
stations. In addition, the government will require support for priority power generation in the case of power
rationing and allow compensatory incomes to be obtained by trading (transferring) generation rights. The
government can also encourage power-grid enterprises
to develop interconnections that ensure that PV systems
can operate upon the completion of construction.
✔✔ Financial policy support: The government will introduce policies to encourage financial institutions to
support the construction of unsubsidized PV powergeneration projects, appropriately increase the scale
of credit funds for the PV industry and promote innovative financial services, and support new power
generation for achieving grid parity. Moreover, it will
introduce policies to encourage and support the initiation of eligible power-generation projects by facilitating the issuance of corporate bonds and accelerating
the bond-review process.
✔ ✔ Optimization of the assessment and supervision
mechanism: As long as a province fulfills the nationally set energy-consumption goal, its renewableenergy use exceeding its planned quota will not be
penalized when the central government assesses the
total energy consumption and energy-consumption
intensity. This policy will promote the construction
of subsidy-free PV power-generation projects. With
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IEEE Power & Energy Magazine - May/June 2020

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