In the photovoltaic industry, many companies are pursuing similar profit models. Yingli, for example, plans to install between 13 to 15 GW of ground-mounted solar power over the next five years, along with 2 GW of distributed generation and direct investments exceeding 10 billion yuan. Based on the requirement of 10,000 square meters per 1 MW, the total area needed for these projects will surpass 150,000 mu in the coming years.
Shunfeng Optoelectronics has signed contracts for a total annual design capacity exceeding 1,079 MW, while its solar power stations under construction and operation have a combined designed production capacity of more than 600 MW. These are expected to be connected to the grid by early 2014, and Windwind is planning to build 3.4 GW of photovoltaic power stations that year.
TBEA expects to handle 500 MW of photovoltaic EPC this year, potentially increasing to 1 GW next year, with explosive revenue growth anticipated. Zhejiang Zhengtai has already developed and constructed over 900 MW of photovoltaic power plants, including projects in the U.S., Bulgaria, South Korea, Italy, and various locations in China such as Shizuishan, Golmud, and Dunhuang. The value of these assets is estimated at around 100 billion yuan.
From 2005 to 2010, numerous photovoltaic companies expanded rapidly, following similar strategies and scaling up simultaneously. Whether small or leading firms, many misjudged the market and were tempted by short-term profits, which led to widespread overexpansion during that era.
According to the Ministry of Industry and Information Technology’s “Twelfth Five-Year Development Plan for Solar PV,†China's photovoltaic cell output grew at an average rate of over 100% during the “Eleventh Five-Year Plan†period, ranking first globally for four consecutive years from 2007 to 2010.
However, since 2011, the industry faced a transition, marked by severe overcapacity and a declining European market. This led to continuous losses for manufacturers, and companies realized that the crisis would persist until the end of the Twelfth Five-Year Plan. As a result, many companies shifted their focus from component manufacturing to power plant construction, investment, or EPC services, signaling a move away from traditional profitability models.
Today, many top Chinese photovoltaic companies claim that over 50% of their income will come from power plant development. Each company is actively seeking projects, financing, and building power stations, all chasing the same dream. In July, the State Council issued guidelines encouraging healthy development of the industry, aiming for a total installed capacity of 35 GW by 2015. However, current approved capacity has already reached 19 GW, and with strategic agreements with local governments, China's potential may exceed 35 GW.
Despite the transformation, the industry risks creating new bubbles if the shift becomes too uniform. With everyone building power stations, demand could become oversaturated, grid connection issues may arise, and subsidies could face tighter control.
Ultimately, the photovoltaic industry relies heavily on state subsidies. While companies remain optimistic about future growth, their main goal is to capture government funding. Under current conditions, where the cost of solar energy hasn’t seen a breakthrough, most revenues still depend on subsidies, and the government tightly controls project approvals.
Thus, the success of companies in the future won't be measured by how many power stations they build, but by how many “slots†they secure from limited government quotas. When all companies transform, it's unlikely that any single firm will dominate the quota landscape.
Additionally, central government-backed new energy companies and major power generation groups hold strong financial resources and better access to the grid, giving them an advantage over private enterprises. Unless policies are fully implemented, most private plans may remain on paper.
China’s photovoltaic power plants cannot generate significant profits from the market directly; they rely on subsidies. The government allocates a fixed amount of funding annually, limiting the market to around 10 GW of installations. Private companies’ market share remains minimal unless they can secure subsidies.
Large-scale ground-mounted power stations receive higher subsidies, but grid connection issues have been criticized. If annual installations stay around 10 GW, ground-based systems will dominate. If they exceed 10 GW, the industry must rely on distributed systems for growth.
Distributed photovoltaics in China are still in early stages, with low residential electricity prices. Unlike foreign markets, where residential electricity is more expensive, China's residential rates are half of industrial ones, making it harder to promote consumer adoption. Most projects are limited to industrial parks with higher electricity costs, exposing them to risks related to uncertain usage patterns.
Policy is not law. Although the photovoltaic market has great potential, private investors like insurance and pension funds remain cautious. They rely on stable returns, but without policy legalization, key issues like full power purchase, timely subsidy distribution, and fixed subsidy durations remain uncertain.
Without legal backing, the risk of bubbles increases. Japan may adjust its domestic policy before April 2014, and China may also reduce subsidies in the coming year, significantly lowering returns. Despite this, companies continue to build large-scale projects—raising questions about long-term sustainability.
China’s photovoltaic policy appears to be improving, but it remains uncertain. Until the capital market trusts the industry, meaningful development will be difficult to achieve.
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