As Solar Developers In China, India Face June Deadline, Module Supply, Prices To Tighten

China, which remains the heart of the solar industry worldwide, has finally seen an inching up of module prices in February, bringing some relief to its large solar manufacturers. However, the rise in prices may not be such good news for many markets where tariffs have been imposed on Chinese imports, as it was the extra low Chinese prices that allowed many of these tariffs to avoid disrupting domestic markets significantly. A sustained rise of 10 to 15% in Chinese prices could severely disrupt markets that depend on Chinese inputs, possibly even forcing a rethink on many tariffs earlier than planned, especially in India. Developers in India have regularly cited a shortage of domestically produced cells for solar modules, besides a price that is twice as high as the landed price of Chinese module imports, most of which have effectively been blocked   through the ALMM regulation for most domestic projects. India is already grappling with unsold power from auctions, and a rise in bid prices going ahead due to higher module prices will only exacerbate the situation further.

Moreover, developers in India face their own June deadline, June 30 in their case, when the 100% exemption on ISTS linked solar projects ends, shifting to 75% post June. Even as lobbying has begun to extend the deadline, developers are expected to push hard to ensure as many projects as possible qualify for the 100% exemption as well.

In China, the prices seem to have started a slow recovery after the Chinese new year holidays, besides the fact that upstream raw material firms are still operating at prices below costs, creating increasingly tremendous pressure to raise prices to staunch losses.

A Key Deadline Accelerates Solar Demand

Perhaps the biggest factor behind the small attempt to raise prices is the rush to set up projects before June 1, 2025. Post that, the Chinese electricity market will move to a more market based mechanism for purchasing power, removing the preference accorded to green power for all projects commissioned after June 1.  In effect, this is a shift to something like India’s merit order dispatch system where power is bought based on the most attractive prices for the buying discoms.

While the new rules encourage local governments to improve spot market trading rules and accelerate voluntary participation in day-ahead trading, developers are still rushing to complete projects to escape the uncertainty in assured demand they might encounter.

From 2026, China has also announced that the price of electricity generated from solar and wind schemes will be determined according to competitive auctions. These will replace the existing fixed rates solar and wind received for their power, which are tied to benchmarks for coal-fired power, with the new mechanism likely making prices for renewables much cheaper than coal. As costs of solar and wind have dropped over the years, without a change in the coal benchmark, developers saw enough opportunity to set up renewable capacity. That contributed to China achieving its 1200 GW target for Wind and solar 6 years ahead of schedule last year.

The new system will run like the  two-way “contract for difference” (CfD) mechanism used in the UK and Europe. Under this type of mechanism, power generators are paid a fixed “strike price” for each unit of electricity they produce.  If market prices for power fall below this level, generators receive the difference as a top-up payment, but they must pay back the difference if prices rise above it instead.