China Seeks a fix For PV Overcapacity With New Norms

With its world leading PV sector hit by losses in the past year, China’s Ministry of Industry and Information Technology is focusing on what it can control, to try and nurse the sector back to health. We saw last week how export incentives on solar products were reduced last week in perhaps a signal to deter new entrants and send a signal to try and raise prices for export markets. This time, the focus is on fresh PV investment.

The Ministry has targeted internal firms by hiking the minimum capital ratio for investing in PV manufacturing projects, including silicon wafers and solar cells and modules. The new level is 30 percent, taking all parts of the solar chain to the same level as polysilicon, which was already at 30 percent. What this means is that firms have to stump up more equity capital for these projects, and count less on debt funding.

The move is expected to deter new entrants as well as existing players from expanding ‘recklessly’ ,something many believe was done more in hope than a clear business plan in many cases.

There is also a push to drive technological efficiency standards with the proviso that new P-type cells and modules manufacturing needs to deliver an efficiency of at least 23.7 percent and 21.8 percent, while the more widespread N-type cells and modules must have a minimum efficiency of 26 percent at 23.1 percent. These targets all but ensure the phase out of a generation of Mono Perc modules built to deliver upto 22-23% efficiency.  TOPCON cells, or N-type tunnel oxide passivated contact solar cells that lead the market today can go upto 25% efficiency currently.

With the high focus on domestic manufacturing in key markets like the US, India and Europe, it seemed for a little time that the Chinese would try to limit access to manufacturing technology in these markets. But now, they have clearly confident of the tech advantage their firms have to focus harder on IP and leading the next round of technology upgradation, than try to protect what could be legacy technologies in the next two years.