China: solar stocks plummet as solar subsidies cut to “make electricity cheaper”

Back from travels finally. So much to catch up on.

Last week, the world leading nation in solar panel manufacturing announced big cuts to subsidies in order to make their electricity cheaper. Can you believe? The cuts are big enough for The Motley Fool to headline this “Why the Lights Went Out on Solar Today”. (h.t GWPF)

Put this in perspective — in late 2016, Scientific American declared that China Is Dominating the Solar Industry. Apparently, the Chinese forced the prices down, drove US leaders out of business, and the US could only hope to be second. Without a hint of impending doom, Scientific American went on to title one sub-part: AN INDUSTRY PROPELLED BY TAX CREDITS. The Chinese government picked a “winner”, grabbed the industry from all over the world, brought it to China, and ran with it. Now apparently rising electricity prices hurt too much. Who could have seen that coming?

“According to some veterans in the U.S. solar industry, China bought solar companies and invited others to move to China, where they found cheap, skilled labor. Instead of paying taxes, they received tax credits.”

Last week the Chinese government announced solar subsidy cuts:

[Capital Watch] Chinese regulators said Friday they were unexpectedly suspending construction of new solar panel farms and cut subsidies to the industry, sending solar energy companies’ stocks plummeting Monday.

Chinese solar stocks immediately fell:



Some media reports said this policy approach was the most austere in years, and that it indicated a more significant rollback of subsidies for industry players.

The stock price falls in a day were in the order of 13 to 31%.

Look at a few home truths from a communist giant

Using unheard of transparency in the world of renewables, a Chinese academic explains that the main reason to cut solar subsidies is to “make electricity cheaper“.

Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, said the policy will curb the fast growth of PV power bases, amid efforts by the central government to make electricity cheaper for consumers.

“This year’s government work report clearly stipulated that 2018 electricity prices will be lowered by 10 percent. But the PV subsidy comes from continuous hiking of electricity prices in the past, which was paid for by ordinary consumers,” Lin told the Global Times on Sunday,

He added that with the need to cut electricity prices, the PV subsidies must now be scaled back.

The academic also admitted that the PV subsidy is paid for by “ordinary consumers”. If only Australia could aspire to have academics so honest, open and free to speak?

Renewable subsidies were a massive $15.6 billion USD slap for Chinese electricity consumers:

Both moves are aimed at keeping in check the more than 100 billion yuan (US$15.6 billion) deficit in a state-run renewable energy fund, which is financed by a surcharge on power users’ bills.

All this and Chinese electricity consumers don’t even get meaningfully votes…

UPDATE: China is really jumping on the brakes:

h/t Pat in comments

6 Jun: Motley Fool: Travis Hoium: China Just Dealt a Massive Blow to the Solar Industry

No company will be spared from the reduction in China’s solar incentives. Out of 99 gigawatts (GW) of solar projects built in 2017, 53 GW were built in China. That bullish streak came to an end on Monday when China took steps to slow its solar industry. Feed-in tariffs that provide set prices for electric power sent to the grid will be cut and distributed generation (DG) projects will be capped until further notice. Early estimates are that solar installations will fall to around 35 GW in 2018, with a lot of that already installed. The impact of the policy changes will be widespread, and no company will be spared…

China’s National Development and Reform Commission said there would be no more planned ground-mounted solar projects in 2018 and subsidies for future ground-mounted projects would be forbidden…

Distributed solar farms were also capped at 10 GW for 2018, a level that may have already been exceeded…

Demand is going to fall and prices could go with it. Roth Capital estimates the solar market will be oversupplied by 34 GW of panels…

Even SunPower’s (NASDAQ:SPWR) premium-priced high-efficiency solar panels will have a little more competition as Chinese manufacturers look to dump solar panels on anyone who will buy them…

So if 50% of the worlds solar was being built in China and it has suddenly slammed on the brakes there will be a flood of cheap panels in the next few months but solar manufacturers will go broke as the industry adjusts, and then panel prices will recover in a smaller market.

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