Market researchers are in a rush to lower their solar capacity addition forecasts for this year after China surprised everyone by announcing it will not issue approvals for any new solar power installations this year and will also cut the feed-in tariff subsidy that has been a major driver of the solar business in the country that accounts for as much as 50 percent of capacity.

Reuters reports that companies including IHS Markit and Wood Mackenzie have already revised their solar additions forecasts for the year. IHS analysts slashed their projections by between 5 and 10 GW of new additions, although in China alone, they saw a potential reduction in new solar capacity of up to 17 GW. Earlier this year, the firm had forecast Chinese solar capacity additions of 53 GW.

Wood Mackenzie, for its part, expects new Chinese solar capacity to be 20 GW lower than earlier forecast, which was 50 GW.

GMT Research also reduced its China new solar capacity additions forecast by as much as 40 percent to 28.8 GW, with one analyst saying, “When the industry talks about China, it’s always about how demand in the region exceeds expectations. That is not going to be the case anymore.” Related: Elon Musk Survives Attempted Coup

Although surprising, the Chinese planning commission’s move makes sense: subsidy costs have been swelling at a fast rate and have become difficult to manage. Greentech media reports that in 2017, these hit US$15.6 billion (100 billion yuan) and the government has still not paid these in full. At the rate of new solar capacity approvals from the last few years, subsidy costs would have reached US$39 billion by 2020, according to Wood Mac estimates.

As for the global consequences of the change, Chinese solar makers already took a hit on their stock prices, and now solar panel prices will likely take a dive, too, although this dive would spur demand for the panels outside China. This, in turn, will likely increase international competition in solar panels, analysts cited by Reuters said.

By Irina Slav for Oilprice.com

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