The China government recorded a retraction in the activations of new photovoltaic energy systems for the fourth consecutive monthly period. Official data shows that capacity additions fell 12% in April compared to the same period last year. The decline consolidates a slowdown in the pace of expansion of the largest clean energy market on the planet.
Essa loss of traction reflects the physical and regulatory bottlenecks faced by local distribution companies. The transmission infrastructure has not kept up with the volume of generation, which forces authorities to limit new projects to avoid overloading regional networks. The movement raises an alarm in the global supply chain, which is highly dependent on Chinese domestic demand.
Administração Nacional of Energia points out retraction in connections to new panels
Energia’s Administração Nacional revealed that the country added a smaller amount of gigawatts to its electricity mix during the fourth month of the year. The performance extends the downward trajectory observed since the beginning of the January period, frustrating the projections of manufacturers who were betting on a quick resumption of orders after the Ano Novo Lunar holiday.
China’s domestic market consumes most of the panels produced by local silicon industries. The continuous contraction generates an accumulation of stocks in automakers’ yards, forcing cuts in the sales prices of modules abroad. Esse commercial mismatch accentuates the profitability crisis affecting large conglomerates in the photovoltaic sector based in industrial provinces in Chinese territory.
Analistas from the international financial sector point out that the prolonged decline has no recent precedent in the China history of the energy transition. The last time the country recorded such a long sequence of negative monthly results was before the wave of state subsidies that boosted the segment from the last decade. The consolidated numbers for the first four months indicate a challenging scenario for meeting the annual targets set by Pequim.
Infraestrutura saturated network restricts expansion of photovoltaic plants in provinces
The main obstacle to continued accelerated growth lies in the inability of local transmission networks to absorb the electricity generated at the time of peak sunshine. Diversas provinces in the interior of China, especially those located in the north and northwest regions, began to record high rates of energy disposal due to the lack of drainage lines.
Para To contain the chronic waste of resources, electrical system operators decided to tighten the approval rules for new large-scale projects. The restrictions directly impact the plans of state-owned energy companies, which had been leading the construction of megaprojects in desert areas.
The most serious structural problems are concentrated in specific points of the distribution model adopted by China’s state-owned companies:
- Falta of large battery systems coupled to regional substations to store daytime surplus.
- Excessive geographic Distância between the highest consumption centers on the east coast and the high-insolation areas in the interior.
- Rigidez in interprovincial supply contracts, which prevents the agile trade of clean energy between neighboring borders.
- Saturação of secondary distribution transformers in rural areas with a strong presence of residential ceiling systems.
Overcoming these obstacles requires billion-dollar investments in network modernization and digitalization technologies by State Grid Corporation of China. However, civil engineering works for new ultra-high voltage lines require long execution times, which prevents an immediate solution to unlock the residential and industrial market in the short term.
Queda in input prices erodes Chinese manufacturers’ profit margins
The retraction in domestic demand occurs at a time of uncontrolled expansion of the production capacity of local factories. The result of this combination is a severe price war, which has pushed the prices of polysilicon and solar cells to historic lows.
Leading companies in the segment operate with zero or negative financial margins in an attempt to maintain their market share and avoid job losses. Pequenas and medium-sized industries have already begun to suspend operations or declare bankruptcy due to lack of working capital.
The delicate financial situation of companies reduces the capacity to invest in research to develop more efficient technologies. State-owned Bancos of China, which historically financed the expansion of the sector without major requirements, began to adopt strict criteria for granting new structured loans. The brake on credit aims to prevent the worsening of the overcapacity crisis that threatens the stability of the national industrial park.
Exportações face trade barriers and increase pressure on domestic consumption
With the domestic market weakened, China producers tried to sell surplus production to foreign markets. Essa’s strategy comes up against increased customs barriers imposed by Western governments, which accuse Pequim of carrying out illegal subsidies to stifle global competition.
Os Estados Unidos implemented new tariffs on electronic components, while União Europeia opened detailed investigations into the commercial practices adopted by Chinese brands. Emerging markets on América Latina and África recorded growth in purchasing volume, but the total revenue from these operations does not compensate for the closure of traditional trade channels in the northern hemisphere.
Manufacturers now depend on a reformulation of the central government’s public incentive policies to revive domestic consumption in the coming quarters. Market expectations are focused on the announcement of new economic guidelines focused on the modernization of urban substations and the granting of subsidized credit for residential storage projects. Sem a coordinated state intervention in the distribution infrastructure, the photovoltaic segment will continue to operate below its productive potential.