Monday 11 June 2018

Inside Climate News/Nicholas Kusnetz: China’s Dramatic Solar Shift Could Take Sting Out of Trump's Panel Tariffs

Inside Climate News

China’s Dramatic Solar Shift Could Take Sting Out of Trump's Panel Tariffs
Analysts expect solar panel costs to drop by a third. That could be a lifeline for U.S. developers, who sidelined billions of dollars in projects over the tariffs.
Nicholas Kusnetz
By Nicholas Kusnetz
Follow @nkus
Jun 8, 2018
China announced it was scaling back some of its solar subsidies. Analysts expect the policies to reduce the amount of solar installed in China, but increase its solar panel sales globally, lowering prices. Credit: Kevin Frayer/Getty Images

The Chinese government has announced it will halt or shrink many of its solar subsidies. Analysts expect that to reduce solar capacity growth in China this year while significantly increasing Chinese solar panel sales to the global market. Credit: Kevin Frayer/Getty Images

The American solar market may be about to get boost from an unexpected source: Energy analysts say the Chinese government's decision to dramatically cut its solar power subsidies will create a glut of solar panels and send their prices tumbling worldwide.

It comes at a crucial time for American solar installers. Falling prices could take the sting out of President Trump's solar panel tariffs, which have raised costs in the United States and led to billions of dollars in cancelled and frozen U.S. investments.

"It's changing the tone from negative to positive for the U.S.," said Xiaoting Wang, an analyst with Bloomberg New Energy Finance (BNEF).

Sign up for CLEAN ECONOMY WEEKLY

Inside the future of energy.

Last week, the Chinese government announced it would halt approvals of new subsidized utility-scale solar plants, limit the amount of smaller-scale distributed generation installed and shrink the subsidies it provides to solar generators. All told, these policies are expected to cut the amount of solar capacity installed this year in China by 30 to 40 percent, according to Wood Mackenzie and BNEF.

Because China leads the world in new solar installations, the steep drop in demand will ripple across the global market.

BNEF expects prices of some panels to fall 34 percent as result. That will bring down installation costs for new solar projects, particularly large, utility-scale systems, and spur new investment in other countries, though BNEF said that new investment is unlikely to make up for the drop in China.
Lower Prices Could Counteract the Tariffs

Morgan Lyons, a spokesman for the Solar Energy Industries Association, said it's too soon to know what the effects on the U.S. market will be, but that it will likely lead to lower costs.

The drop could also counteract the impact of new tariffs the Trump administration imposed on imported solar panels. The tariffs, which started this year at 30 percent and will decline over the next three years, gave a boost to domestic manufacturers of solar panels, who faced competition from cheap imports from China and other countries. One of those manufacturers, First Solar Inc., saw its stock price fall sharply after China's announcement because it's now expected to face lower-cost competition once again.

But the tariffs have the opposite effect on the solar installation sector, which employs far more people than manufacturing.

U.S. solar developers have canceled or frozen more than $2.5 billion in investments, Reuters reported Thursday. A report by GTM Research said the tariffs would cut solar installations by 11 percent over five years, or about 7.6 gigawatts less new capacity than previously forecast.
Why Did China Cut Its Solar Incentives?

While the announcement by China sent a shock through the solar industry, it wasn't entirely surprising, according to BNEF.

The costs of the subsidies the government provides to the renewable energy industry have been growing at an unsustainable rate, analysts said. The nation's solar producers have also had to curtail their actual output because they've grown faster than the grid's capacity. The cut in subsidies will address both of those problems by slowing growth, Frank Yu, an analyst with Wood Mackenzie in Beijing, said in a research note.

Wind energy has faced similar issues in China, and officials have discussed cutting subsidies for that industry as well.

The new policies may also spur innovation and competition, making the industry more efficient. The Chinese government said it would require utility-scale solar projects to sell their electricity through competitive auctions, a move that will likely lead to lower prices. All of this together, Yu said, will speed the adoption of solar power outside China, particularly in Southeast Asia, which may attract more investment from China and benefit from lower prices.

This week, Chinese solar firms sent a letter to their government urging it to delay the new policies, saying they faced huge debts and needed a few more years of subsidies to be more competitive.
Turmoil First, then Grid Parity

If the policies remain as announced, the global market will face a period of turmoil first as the effects spread throughout the global supply chain. Eventually, though, Yu said they'll help solar compete with conventional power sources without the need of government support.

Already, some types of utility-scale solar projects are competitive with even the most efficient natural gas power plants.

In March, BNEF released a report saying that costs for solar, wind and batteries were falling fast enough that they're putting pressure on fossil fuels globally. In particular, it said lower battery costs mean that wind and solar facilities can now store power relatively cheaply and release it when needed.

"Some existing coal and gas power stations, with sunk capital costs, will continue to have a role for many years," the report said. "But the economic case for building new coal and gas capacity is crumbling, as batteries start to encroach on the flexibility and peaking revenues enjoyed by fossil fuel plants."
Published Under:
Clean Energy
Donald Trump
Solar Energy

    Email this page

    Printer-friendly version

About the Author
Nicholas Kusnetz

Nicholas Kusnetz is a reporter for InsideClimate News. Before joining ICN, he ran the Center for Public Integrity's State Integrity Investigation, which won a New York Press Club Award for Political Coverage. He also covered fracking as a reporting fellow at ProPublica and was a 2011 Middlebury Fellow in Environmental Journalism. His work has appeared in more than a dozen publications, including Slate, The Washington Post, Businessweek, Mother Jones, The Nation, Fast Company and The New York Times.

Nicholas can be reached at: nicholas.kusnetz@insideclimatenews.org. PGP key: http://bit.ly/2k5fncn 

Your donation powers our nonprofit newsroom.

Our stories. Your inbox. Every weekend.

ICN Videos

Most Popular
Hurricane Katia in 2011, viewed from the International Space Station. Credit: NASA
Hurricane Season 2018: Experts Warn of Super Storms, Call For New Category 6

By Bob Berwyn
Rep. Rob Bishop, a Republican from Utah, informed NRDC he would use his congressional committee to investigate the environmental non-profit. NRDC works in several countries to reduce pollution, fossil fuel use and carbon emissions that affect lives around
GOP Congressmen Launch ‘Foreign Agent’ Probe Over NRDC’s China Program

By Marianne Lavelle
Fishing on the Big Hole River in Montana. Credit: Meera Subramanian
Fly-Fishing on Montana's Big Hole River, Signs of Climate Change Are All Around

By Meera Subramanian
A new study that attempts to calculate the climate impact of different types of food across the global production system finds big differences depending a variety of things, including how the food is produced, packaged and transported. Credit: Andreas Ren
Your Food Choices Can Have a Big Climate Impact, So Be Picky, New Study Says

By Georgina Gustin
In Miami Beach, high tides are creating street flooding problems as sea level rises. It isn't just during hurricanes any more. Credit: Joe Raedle/Getty Images
U.S. Coastal Flooding Breaks Records as Sea Level Rises, NOAA Report Shows

By Nicholas Kusnetz
Key currents of the Atlantic ocean's overturning circulation. Credit: NASA
Scientists Say Ocean Circulation Is Slowing. Here’s Why You Should Care.

By Bob Berwyn
EPA headquarters. Credit: Mark Wilson/Getty Images
In Rebuke to Pruitt, EPA Science Board Votes to Review Climate Policy Changes

By Marianne Lavelle
Infrared cameras show the methane plume from the Aliso Canyon leak in California. EDF used FLIR technology to make the leak visible. Credit: Environmental Defense Fund
Arctic Methane Leaks Go Undetected Because Equipment Can’t Handle the Cold

By Sabrina Shankman
Demonstrators criticize Canadian Prime Minister Justin Trudeau over his support from the oil industry using signs that read Crudeau Oil on a fake pipeline. Credit: Tolga Akmen/AFP/Getty Images
Oil Pipelines or Climate Action? Trudeau Walks a Political Tightrope in Canada

By Nicholas Kusnetz
High tides have started to creep into the outlines of Norfolk's former shorelines, outlined in yellow and orange. These are areas that were filled in years ago and built up. Credit: Kyle Spencer/City of Norfolk
Norfolk Wants to Remake Itself as Sea Level Rises, but Who Will Be Left Behind?

By Nicholas Kusnetz

Learn more about ICN's environmental journalism institute

Our Sponsors
View all sponsors
Follow

    facebook.com/insideclimatenews
    twitter.com/insideclimate

Related
President Trump's 30 percent tariff on foreign-produced solar cells and modules will not be as devastating a blow as he could have dealt.
While It Could Have Been Worse, Solar Tariffs May Hit Trump Country Hard

By Marianne Lavelle
Solar panel installers at work in Washington, D.C. Credit: Alex Wong/Getty Images
Suniva Solar Tariff Case Could Throttle a Thriving Industry

By Gloria Dickie
Abengoa's Solana solar thermal power plant in Gila Bend, Arizona, uses mirrors to concentrate the sun's rays and produce enough energy to power 71,000 homes. Credit: Department of Energy
A Renewable Energy Battle Is Brewing in Arizona, with Confusion as a Weapon

By Nicholas Kusnetz
Installers add solar panels to a home in San Rafael, California. Credit: Justin Sullivan/Getty Images
In a First, California Requires Solar Panels for New Homes. Will Other States Follow?

By Dan Gearino
Crescent Dunes Solar Energy Project. Credit: SolarReserve
24-Hour Solar Energy: Molten Salt Makes It Possible, and Prices Are Falling Fast

By Robert Dieterich

Subscribe to Clean Economy Weekly

Want More Stories Like This One?
Contribute To Our Staff
Donate Now
More Clean Energy
Power plants outside Jacksonville, Florida. Credit: A. Davey/CC-BY-ND-NC-2.0
Few Southeast Cities Have Climate Targets, but That’s Slowly Changing

By James Bruggers
North Carolina Wind Power Hangs in the Balance Amid Natural Security Debate
North Carolina Wind Power Hangs in the Balance Amid National Security Debate

By James Bruggers
An environmental group installed solar panels atop Faith Community Church to sell the church cheap, clean electricity. Credit: NC WARN
How Solar Panels on a Church Rooftop Broke the Law in N.C.

By Dan Gearino
More on Clean Energy
Subscribe to InsideClimate News Email Newsletters

    Articles & Investigations
    Today's Climate
    Clean Economy
    Week in Review

Subscribe
More From The Author
China announced it was scaling back some of its solar subsidies. Analysts expect the policies to reduce the amount of solar installed in China, but increase its solar panel sales globally, lowering prices. Credit: Kevin Frayer/Getty Images
China’s Dramatic Solar Shift Could Take Sting Out of Trump's Panel Tariffs

By Nicholas Kusnetz
In Miami Beach, high tides are creating street flooding problems as sea level rises. It isn't just during hurricanes any more. Credit: Joe Raedle/Getty Images
U.S. Coastal Flooding Breaks Records as Sea Level Rises, NOAA Report Shows

By Nicholas Kusnetz
Demonstrators criticize Canadian Prime Minister Justin Trudeau over his support from the oil industry using signs that read Crudeau Oil on a fake pipeline. Credit: Tolga Akmen/AFP/Getty Images
Oil Pipelines or Climate Action? Trudeau Walks a Political Tightrope in Canada

By Nicholas Kusnetz
More by Nicholas Kusnetz

    Whistleblowers Jobs & Freelance Privacy Policy & Legal Our E-Books

Keep Environmental Journalism Alive
Donate Now

    News Investigations Topics Today's Climate Clean Economy Videos Infographics

No comments: