China – The Largest Global PV Market in 2012?
Domestic PV demand in China grew to 2.75 GW in 2011, according to the latest research featured in the Solarbuzz Marketbuzz report. This growth elevated China to the third largest PV market globally in 2011, with Germany and Italy taking the top spots. However, with significant uncertainty over policy and demand in Germany and Italy, will China soon become the largest PV market globally in 2012?
All indications suggest that China is set for another year of strong PV growth, following impressive 470% growth during 2011. Latest forecasts from Solarbuzz suggest that the PV market in China will almost double in 2012, to around 5 GW, with an upside potential to exceed the 6 GW-level. This upside potential clearly elevates China PV demand to top-tier status, if not the #1 position by year-end. It also provides a significant addressable market for the upstream domestic PV capacity installed during 2010 and 2011.
Policies Driving PV Growth in China
PV growth in China has been supported by a positive policy environment that is now acting as a solid foundation for increased PV adoption. Key incentive policies within China include both feed-in-tariff (FiT) mechanisms and government rebate programs. In fact, the central government is continuing to work on new incentive schemes like the Renewable Portfolio Standard Management Measures and Distributed Generation Management Measures, which could be rolled out during 2012.
The national FiT rate for 2012 is CNY 1.0/kWh, which is equivalent to $0.136/kWh after VAT. With PV system costs in China among the lowest in the world—and still decreasing—this FiT rate should justify project development based purely on IRR calculations. Several provincial governments, such as Shandong and Liaoning, are even offering higher FiT rates to stimulate further demand locally.
Government rebate programs, especially the Golden Sun Program and the Solar Rooftop Program, are also important drivers to the Chinese PV market. It is anticipated that projects totaling about 1 GW will be approved through the Golden Sun Program and 150-200 MW will be enabled under the Solar Rooftop Program during 2012.
Over 25 GW Within China’s PV Project Pipeline
Through these incentives, the PV project pipeline within China has been increasing rapidly. Analysis contained within the Solarbuzz China Deal Tracker categorizes details of over 25 GW of projects in the pipeline through the end of February 2012.
Matching the optimism generated by this growth potential, both domestic and international system developers have recently announced aggressive plans to expand across China.
Domestic PV Manufacturers Adjust Growth Strategies
Following strong upstream investments across the entire c-Si value chain during 2010 and 2011, the opportunity to supply into a large, local end-market is now impacting the near-term strategies of c-Si manufacturers in China. While the immediate benefit is an addressable market to consume locally-produced PV modules, a more strategic trend emerging in 2012 is the active downstream participation of upstream manufacturers through involvement in systems business.
These dynamics are set to have a profound impact on the PV industry, and not just from a domestic supply and demand perspective. The potential for over-capacity, which has had a strong impact globally over the past 2-3 years, has been minimized within China. With the threat of import duties also weighing heavily on Chinese c-Si producers, domestic market growth is coming at a very opportune time.
With strong growth projected for 2012, PV demand in China now represents a key driver within the PV industry.
Figure 1: China PV Market Demand
Source: NPD Solarbuzz, March 2012