Feb 14, 2019 08:30 PM

Fading Solar Subsidies Scorch Manufacturers’ Bottom Lines

Workers inspect equipment at a floating solar power station in Anhui province on Oct. 15, 2018. Photo: VCG
Workers inspect equipment at a floating solar power station in Anhui province on Oct. 15, 2018. Photo: VCG

Even as industry experts forecast brighter times for China’s solar industry, several panel producers have released profit previews for last year that reveal bottom lines were badly burned by the sudden loss of industry subsidies.

Generous government subsidies designed to develop China’s already globally-dominant solar industry continued to drive strong growth in the first half of 2018, but thunderclouds appeared on May 31, when the government unexpectedly pulled the plug on further support. This threw several solar-panel producers into disarray, and cast a shadow over the industry’s prospects.

Annual result previews of several companies released in the last month now give a fuller picture of how the removal of subsidies, known as the “531” policy, burned panel producers. The Shanghai-listed Longi Green Energy Technology Co. Ltd. said in January it expects net profit attributable to shareholders to be between 2.44 billion yuan ($360.3 million) and 2.54 billion yuan, a year-on-year fall of at least 26.58%.

Similarly, solar-panel manufacturer Risen Energy Co. Ltd. said it expects net profits attributable to shareholders to fall to between 250 million yuan and 350 million yuan, down by as much as 61.52% year-on-year. The same goes for Sungrow Power Supply Co Ltd., down at least 17%, and Jolywood Sunwatt Co. Ltd., down 41.99% year-on-year.

While several Chinese media outlets claimed that the China Photovoltaic Industry Association said 60% of Chinese solar panel companies had worse results in 2018 compared to a year earlier, the association told Caixin this was untrue.

Several of China’s largest solar panel producers have not yet published reports for 2018. However, five analysts polled by Yahoo Finance believe that Canadian Solar Inc., the world’s sixth biggest solar panel producer, will see earnings fall by 32% compared to a year earlier. On the other hand, the world’s biggest solar panel producer — JinkoSolar Holding Co. Ltd. — is expected to see earnings triple in 2018, which perhaps reflects its dominance in global exports.

Despite a tough year in 2018 experts anticipate brighter prospects for solar-panel makers and solar-power producers in 2019. The country’s top economic planner, the National Development and Reform Commission, is launching a major audit of the country’s power grid in a move that is likely to help pass the lower cost of renewable energy transmission on to consumers.

The government is also promoting subsidy-free renewable projects as part of a pilot program that should cut the costs for buyers of solar power, increasing the industry’s competitiveness and therefore increasing demand for solar panels.

“From now on, grid parity [pricing with other forms of power generation] will become the key driver of the sector globally, rather than any government subsidy,” said Alex Liu, an equity research director focusing on renewables at UBS AG. “Therefore, the change of subsidies in the future won’t impact the sector as much as it used to be. Yes, those companies with larger global exposures will be better positioned in 2019.”

Contact reporter David Kirton (

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