The distributed photovoltaic sector is currently experiencing a significant surge, driven by two new policies introduced earlier this year: the “Management Measures for the Development and Construction of Distributed Photovoltaic Power Generation” and the “Notice on Deepening the Market-Oriented Reform of New Energy Grid Connection Electricity Prices to Promote High-Quality Development of New Energy.” These policies have triggered a rush for installations, as developers strive to meet the deadlines of June 30 and May 31. As a result, there has been a notable increase in prices and shortages of upstream components such as modules, inverters, and grid connection cabinets. After falling for 30 consecutive months, component prices have finally risen, with some distributors lamenting that they cannot purchase modules and cells even with available funds.
A representative from a leading photovoltaic manufacturer informed that production capacities are fully saturated, with most companies having delivery times extended to the third quarter. The price for N-type double-glass modules, including taxes and shipping, has been quoted at 0.78-0.81 yuan/W, but this price is only valid for three days, with a delivery time of 15 days after payment. Clearly, this booming market cannot last indefinitely; once the policy window closes, the current frenzy will come to an end.
In this thriving environment, the distributed photovoltaic market is undergoing major transformations under the guidance of these policies. Forward-thinking companies are already taking action to seize opportunities in a market where electricity prices are declining and profit margins are shrinking.
The overall yield is decreasing, leading to a redistribution of profits. According to the “Notice 136,” after May 31, all new wind and solar energy projects connected to the grid—except for solar thermal and offshore wind—must enter the market. Although the policy includes a “price difference settlement mechanism” as a buffer, this is merely a transitional measure, and full marketization is inevitable. The most significant change is that distributed photovoltaics, which previously relied on policies for stability in pricing and volume, will now experience significant price fluctuations within a market mechanism, confirming a decrease in overall profit rates for power stations. This decline in yield will compel owners to tighten cost controls, significantly reducing non-technical costs.
In the past, engaging in distributed photovoltaics was highly lucrative. To quickly expand market size, various platforms raised installation fees to incentivize channel partners and sales representatives. Reports indicate that in regions like Jiangsu and Guangdong, sales representatives could earn between 30,000 to 50,000 yuan for securing a single household project. This high income attracted numerous personnel from diverse fields, leading to intense competition among platforms, which rolled out a variety of financial products and packages, resulting in multiple complications.
In early March, several regions, including Zhenping and Anyang in Henan, suspended photovoltaic development and registration due to issues like false declarations, unfair competition, malicious capacity grabbing, and chaotic personnel management. As distributed photovoltaics enter the market fully, the previous explosive growth will not recur, and the market expansion model for residential photovoltaics will require adjustment. With investment returns becoming uncertain and profit margins narrowing, investors will inevitably lower the settlement prices for platform companies, which will in turn reduce installation fees for channel partners and sales agents. The overall reduction in profits will strip residential photovoltaics of their previous “easy profit” appeal and eliminate excess from the workforce.
An industry insider noted that the previously profitable model based on high EPC fees can no longer be sustained; the focus will shift to the entire lifecycle operation of power stations. However, a number of variables remain, as the “Notice 136” only outlines broad principles, leaving the details to be determined by each province. Differences in solar irradiation, absorption capacity, and energy structures will lead to varied impacts on profitability across provinces. Thus, future returns in distributed photovoltaics may exhibit significant inter-provincial disparities, and well-planned companies will reap the most benefits.
As regulations are enforced by the end of the year, investors will gain clearer and more quantifiable investment models for distributed photovoltaics, leading to a clearer outlook for the industry.
The ability to absorb electricity will become a crucial factor influencing the quality of photovoltaic assets. The new management measures categorize distributed photovoltaics into four types. For general industrial and commercial distributed photovoltaic systems (with a total installed capacity not exceeding 6 megawatts), they can only choose between self-use and excess electricity sales to the grid. Large industrial and commercial distributed photovoltaic systems are “generally required to adopt a fully self-use model.” Unlike previous policies, where full grid access was permitted, the new regulations encourage self-consumption, indicating a government shift towards promoting local absorption and resolving consumption conflicts.
As such, it is anticipated that three categories of distributed photovoltaics will be favored by investors in the new energy market: Firstly, small-scale industrial and commercial projects and villas will be highly sought after due to their stable electricity demands, ensuring basic returns for power stations. These will become key development focuses in the near future. Additionally, many challenging scenarios with absorption capacity that can provide stable returns are likely to be discovered by the industry. Secondly, regions in eastern economic provinces are expected to accelerate the development of distributed photovoltaics due to their stronger absorption capabilities. The focus of distributed development will continue to shift southward, diminishing the positions of traditional northern provinces like Shandong and Hebei. Thirdly, the integration of energy storage with distributed photovoltaics will become increasingly important, with a growing willingness to adopt storage solutions. Historically, integrating storage with photovoltaics was not economically viable, but as small-scale industrial and villa projects gain traction, storage can mitigate the instability of photovoltaic generation and smooth out price fluctuations in market transactions, stabilizing investment returns. The combination of distributed photovoltaics and energy storage can facilitate new business models, enhance absorption, and improve investment yields.
As early as May 2021, the National Energy Administration issued a notice encouraging residential photovoltaic projects to integrate storage solutions, provided safety is ensured. Preliminary statistics show that at least nine provinces have released policies supporting energy storage integration for distributed photovoltaics, particularly in regions with well-developed photovoltaic resources and markets like Shandong, Jiangsu, and Zhejiang. With more regions supporting energy storage integration, the combination of distributed photovoltaics and storage is poised to become a lucrative business opportunity.
The rapid expansion phase of distributed photovoltaics is coming to an end, ushering in an era of meticulous operations. Over the past few years, various platform companies have built their own brands and established comprehensive business models, from project planning and construction to post-operation and maintenance, capturing significant market share within the distributed photovoltaic sector. As market dynamics shift, these companies will transition from large-scale expansion to a phase focused on refined service delivery. “Previously, the emphasis was on explosive growth; now, it’s about endurance and fine management skills,” stated an insider from one of the platform companies.
Recently, companies have been seeking solutions to adapt. This includes enhancing design efficiency, standardizing construction processes, and simplifying acceptance procedures to lower costs and improve efficiency across the board. By focusing on these details, overall expenses can be significantly reduced. Moreover, refined operations will be crucial for maximizing power station profitability. Over the long lifespan of power stations, the earnings gap between meticulously managed operations and those with inadequate oversight is substantial. Essential tasks such as necessary personnel investment, regular module cleaning, timely equipment fault detection, and ensuring stable operations must be diligently performed. Companies with strong operational capabilities will be increasingly sought after, and specialized operation and maintenance firms will also gain prominence.
Additionally, the adoption of digital and intelligent tools will become essential for enhancing quality and efficiency, necessitating increased investment in these areas to save on labor costs. Furthermore, the green value of distributed photovoltaics will be explored as a viable direction for future profitability. Companies capable of analyzing electricity market dynamics will gain more substantial growth opportunities. Following the issuance of Notice 136, the role of “electricity traders” has become highly desirable within the industry. Reports indicate that various platforms are competing to hire electricity traders, with salaries rising from around 10,000 yuan to 30,000 yuan per month.
As market mechanisms evolve and competition intensifies, the industry may enter an “elimination phase.” Smaller platforms, due to limited financial strength, service capabilities, and brand reputation, will find it increasingly difficult to compete with larger platforms. Companies unable to swiftly adapt to new market changes are likely to be phased out, leading to a significant increase in market concentration. Notably, some leading firms have already begun restructuring and consolidating. For instance, Trina Solar has proposed a new network model that integrates customer demand, photovoltaic asset construction, financial service solutions, long-term operational services, and electricity trading into a cohesive framework. Additionally, Skyworth Solar is enhancing its expansion into upstream equipment manufacturing, having recently reorganized to consolidate its module and inverter manufacturing into a dedicated division, signaling a desire for greater synergy.
As competition intensifies within the distributed photovoltaic market, the industry is poised to embark on a more mature and healthier development trajectory.
