The Last Frenzy in Photovoltaics: As the countdown begins, a surge in installations and skyrocketing module prices emerge in the photovoltaic (PV) industry. This frenzy has reached unprecedented levels, especially as we approach the deadline for installations. The first manifestation of this madness is the rapid increase in the prices of PV modules. Last year, some were jokingly comparing the price of solar panels to that of tomatoes, with prices dropping to a level where they were cheaper than the produce sold in supermarkets. Now, however, the price of solar panels has risen to the level of cherries, and the critical issue is that they are in short supply. Just last week, the price of photovoltaic modules surged to over 0.70 yuan per watt, inching closer to 0.80 yuan. Major manufacturers have raised their quotes, with increases ranging from 0.06 to 0.07 yuan per watt, and contract prices now hover between 0.72 and 0.75 yuan per watt. To put this increase into perspective, at the end of last year, a project company even set a maximum bid limit of 0.6313 yuan per watt during a tender. This means that just after the Spring Festival, the price of PV modules has surged by 20%, leading to an increase of over 500,000 yuan in the component costs for a 5MW project. Moreover, there is a shortage of panels available for purchase. The queue of trucks waiting to collect goods outside photovoltaic factories is longer than those waiting for photos with characters at Disneyland. Is this the last flicker of light for the photovoltaic industry?
01. Frenzy of Installations
How intense is the madness surrounding the rush to install photovoltaics? Besides the rising prices of components, the hiring trends within the photovoltaic factories tell a different story. Before the New Year, the prevailing theme among major PV manufacturers was layoffs and extended holidays. In late November last year, a chairman of a photovoltaic company made a surprising statement: “I propose that photovoltaic companies and their workers take a one-month holiday during the Spring Festival to rest and clear out inventory!” This statement has now come true, as the inventory has indeed been cleared. The installation rush has exceeded expectations. Industry insiders had predicted that this surge could reach 15-20GW, which is roughly the typical inventory of the top five photovoltaic companies. Not only have major manufacturers emptied their stocks, but even second-tier companies are struggling to fulfill orders. A self-media blogger revealed that a large photovoltaic manufacturer in Jiaxing brought in 500 people for interviews, and even the local fried rice vendors saw a surge in business. However, a painful reality is that the probation period for new hires is notably set to end on May 31st.
The hiring frenzy is described by a workshop manager in a promotional article from a photovoltaic company: “Currently, the workshop is operating at full capacity, 24 hours a day. Orders are scheduled well into April, and we are coordinating all company resources to meet production deadlines and ensure we fulfill our delivery obligations.” On the side of photovoltaic distributors needing stock, the situation has become surreal. Signed contracts have become worthless as manufacturers raise prices on the spot. One major manufacturer was exposed for raising the price by 0.05 yuan per watt after receiving full payment for an order that was originally agreed upon at 0.68 yuan per watt, citing “cost overruns” as a reason. A distributor shared the frenzy of obtaining components: trucks are lining up at the gates of photovoltaic factories, and they must take a number to collect their goods. Some have reported waiting over 1,000 numbers, with truck drivers waiting two days and nights without being called. Even more shocking, obtaining goods now often requires leveraging personal connections to cut in line. Who would have thought that by 2025, the longest queues would be for photovoltaics? This unprecedented madness has permeated the entire photovoltaic supply chain. Prices are rising not just for photovoltaic modules, but for upstream materials as well. On the construction side, projects are bustling with activity. Even inverters are now sold out. Aside from the trust crisis stemming from abrupt contract terminations, the rush to complete photovoltaic projects is creating potential safety hazards.
On March 12, the Energy Bureau of Yulin City in Guangxi issued a risk warning regarding the development and construction of distributed photovoltaic projects, highlighting safety concerns in areas such as construction quality, equipment, and site design. This is a precaution against potential safety risks like electrocution and falls during the rush to install distributed photovoltaics by April 30 and May 31. The entire photovoltaic industry seems to be dancing frantically as the countdown reaches its end.
02. The Countdown to Two “Deadlines”
The madness stems from the announcement of two significant policies: On January 17, the National Energy Administration officially released the “Management Measures for the Development and Construction of Distributed Photovoltaic Power Generation.” Before April 30, commercial distributed photovoltaics can connect to the grid for full net metering; after this date, small commercial projects can only self-consume their energy, while large commercial projects must use all their generated power or participate in spot trading. On February 9, the National Development and Reform Commission and the Energy Administration jointly issued a notice on “Deepening the Market-oriented Reform of New Energy Grid Pricing to Promote High-quality Development of New Energy,” which made a clear distinction between old and new projects. Before May 31, existing projects can continue under current supportive policies, but after this date, all new projects will enter the market for trading. These two dates have become critical reminders for those in the photovoltaic sector this year, circulating widely online.
The memo circulating among photovoltaic professionals explains that projects that connect to the grid before May 31 will still enjoy a “guaranteed price,” ensuring a degree of revenue protection. However, starting June 1, they will face a completely market-driven environment. The construction of a photovoltaic power station typically involves three stages: filing, construction, and grid connection, which usually takes about 30 to 45 days. With only over 70 days remaining until May 31, time is running out for developers. Without guaranteed pricing, the revenue from photovoltaic power stations could potentially turn negative.
One clear manifestation of this situation is the well-known “duck curve” that represents the net load of the California power system. This curve is evolving into a steeper “gorge curve.” The “duck curve” illustrates the variation in electricity demand met by generation throughout the day, caused by the increasing solar output that reduces net electricity demand during peak sunlight hours, while demand surges in the evening as the sun sets. This trend poses a challenging issue for the growing photovoltaic installed capacity. If we look at California’s solutions, they include increasing flexible adjustment resources, importing power, and using pumped storage, along with battery discharges. However, without the fixed price and fixed quantity revenue model, the revenue model for photovoltaic projects post-June 1 remains uncertain, leaving the future of photovoltaic power stations shrouded in fog.
03. A Cycle of History
In fact, the surge in installations driven by policy changes is not new to photovoltaic companies. The “630 Frenzy” of 2016 had a remarkably similar narrative: In December 2015, the National Development and Reform Commission issued a notice to improve the benchmark electricity pricing policy for onshore wind and solar power. This notice specified that in 2016, ground-mounted photovoltaic power stations in resource categories one and two would see price reductions of 0.10 and 0.07 yuan, respectively, while category three would decrease by 0.02 yuan. However, the notice stipulated that projects registered after January 1, 2016, would follow the 2016 benchmark pricing. Projects registered before 2016 but not fully operational by June 30 would still be subject to the previous pricing. This policy led to a rush of installations in the first half of 2016, with the National Energy Administration reporting that the newly installed photovoltaic capacity reached 7.1GW in the first quarter alone, nearly half of the total installed capacity for 2015.
The second half of 2016 saw even harsher trends in module pricing, reminiscent of the story from 2018. On June 1, 2018, the National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration jointly issued a notice that accelerated the reduction of photovoltaic subsidies, lowering the subsidy intensity. Because the document was dated May 31, it became known as the “531 New Policy.” The new policy allowed only one month of buffer time, where projects registered in 2017 or earlier could still enjoy previous pricing if they connected to the grid before June 30. This triggered a final surge in installations, but despite the frantic pace, the new installation capacity dropped significantly, with only 43GW installed that year, an 18% decrease year-on-year. The entire supply chain saw a dramatic price drop, leading to widespread layoffs, production halts, and bankruptcies in the industry. Many companies disappeared, and those that survived suffered severe losses until the next cycle of recovery.
The term “531” has since become a scar etched in the minds of those in the photovoltaic sector, evoking feelings of survival after a disaster whenever mentioned. Will we witness a repeat of this scenario in 2025? For photovoltaic companies currently facing substantial losses, the pressure two months from now is less significant than the immediate need to stem losses: they are determined to act now. However, reflecting on the past, each policy cycle essentially represents a phase of explicit or implicit subsidy reduction. Although direct subsidies have dwindled in recent years, support mechanisms like guaranteed pricing still exist, indicating that while the market is moving towards full marketization, it is not entirely there yet. As the electricity market inevitably transitions to a fully market-driven model, the most important challenge for new energy companies is to learn how to thrive in a no-safety-net environment. Only by addressing this issue can they hope to escape the absurd cycle of “installation frenzy – oversupply – clearance.”
