China solar installations to slow as subsidy cuts bite: executive

FUXIAN LAKE, China (Reuters) - China’s new installations of solar power are expected to slow considerably this year and over the next five years as the industry comes to terms with a new subsidy-free era, the chief executive of a leading domestic solar manufacturer told Reuters.

FILE PHOTO - Wind turbines and solar panels are seen at a wind and solar power plant by State Power Investment Corporation (SPIC) in Zhangjiakou, Hebei province, China October 29, 2018. REUTERS/Stringer

“I think from now until 2025 we are probably looking at 20-25 gigawatts (GW) per year,” Eric Luo of GCL System Integration Technology (GCL) said on the sidelines of the Fortune Sustainability forum in the southwest province of Yunnan. “It is purely market driven.”

China’s new solar installations hit a record 53 GW in 2017, but slowed to 41 GW in 2018 after the government announced a massive scaling-back of subsidies in order to ease pressures on the transmission system and reduce a subsidy payment backlog estimated at more than 100 billion yuan ($14 billion).

New additions hit 11.4 GW in the first half of this year, and Luo said it was highly unlikely that would increase in the second half.

Most new installations in 2019 have been unsubsidized, and that was now the industry norm, he said.

Falling domestic installations have raised fears of overcapacity among solar equipment manufacturers, with volumes still rising, but Luo said the additional production could be absorbed by a 25% annual increase in overseas demand.

He estimated global demand for solar equipment would reach 115-120 gigawatts this year, including around 25 GW of domestic Chinese demand. That compares with around 80 GW two years ago.

GCL and others are taking advantage of a global boom that could bring the share of renewables in the world’s total generation capacity to 80% by 2050, according to Norwegian energy firm Statkraft.

The transformation will be driven by the shift to new energy vehicles, the spread of power transmission systems in China and elsewhere and further declines in manufacturing and installation costs, the company said in a report released on Friday.

While China, the world’s biggest energy consumer, is still building new coal-fired power stations, these concentrate emissions and allow for controls to be implemented, compared with, for example, families directly burning coal for heating, Statkraft chief executive, Christian Rynning-Tonnesen told Reuters.

They also pave the way for a switch to renewables at a later date.

GCL’s Luo said lower solar costs made solar a more feasible proposition, especially in undeveloped countries.

“There is no economic feasibility to install coal or natural gas power plants. There is a resource shortage and no one wants to invest in traditional energy,” he said.

Reporting by David Stanway; editing by Richard Pullin