Two major policies in the new energy sector are sparking ongoing discussions, while the short-term demand for China’s photovoltaic (PV) storage faces challenges.
On March 20, during the Bloomberg New Energy Finance summit in Beijing, Longi Green Energy’s Vice President Zhang Haimeng highlighted the uncertainty surrounding the prediction of new PV installations in China. He noted that forecasts from various institutions for the years 2016-2023 have significantly underestimated demand, while those for 2024 have been overestimated. He expressed a cautiously optimistic outlook for 2025, stating that maintaining the levels seen in 2024 would be a positive outcome.
The introduction of two key policies, the “Management Measures for the Development and Construction of Distributed Photovoltaic Power Generation” and “Notice on Deepening the Market-Oriented Reform of Renewable Energy Grid Pricing to Promote High-Quality Development of New Energy” (referred to as Document 136), continue to impact industry trends and demand assessments. Recently, the forecast for new PV installation demand in China has become a hot topic at various related forums.
According to Zhu Daocheng, President of JA Solar Technology, domestic demand might decline by 10-20% this year. However, he emphasized that the final outcome will be closely linked to how well market-oriented transactions are executed across different provinces. He stated, “In any case, a decline is a high-probability event.”
Zhao Wei, Senior Vice President of Sunpower, added that aside from Document 136, there are more significant limitations in China’s grid construction, particularly in the northwest where solar energy is often wasted. Despite previously accumulated projects being implemented, the pace may not align with initial expectations due to these constraints. He also foresees a steady or slightly declining PV market in China this year.
In February, the China Photovoltaic Industry Association predicted that by 2025, China’s new PV installations would reach between 215-255 GW, representing a year-on-year decrease of 8.13%-22.54%. In contrast, Bloomberg New Energy Finance maintains a positive outlook for year-on-year growth in the Chinese market. Analyst Zhao Tianyi noted that the demand growth rate in China is expected to slow to 9%, reaching 302 GW, with corresponding DC-side demand around 368 GW. Following the release of the two major policies, an expected 177 GW of new centralized capacity is projected, marking an 11% increase compared to the previous year. The introduction of Document 136 is anticipated to act as a catalyst for centralized reserve projects.
According to Bloomberg’s database, there remains a substantial capacity of 280 GW of centralized PV projects that have yet to be connected to the grid between 2022 and 2024, which will bolster this year’s installations. Zhao Tianyi pointed out that Document 136 is likely to stimulate the market in regions where renewable energy has not yet been fully commercialized. He noted that the demand in the commercial and industrial markets surged in the first half of the year, leading to a significant rise in the spot prices of components.
Unlike centralized projects, commercial and industrial projects are typically smaller in scale, have lower voltage requirements for grid connection, and shorter construction periods, making them less sensitive to fluctuations in component prices. Thus, they hold an advantage in the current rush to install new capacity. The commercial sector is a crucial part of distributed PV, along with residential solar installations.
Zhao Tianyi stated, “The push for the entry of commercial PV projects is fundamentally about returning to two essentials: commercial viability and localized consumption.” He emphasized that identifying reputable companies with stable energy demands and targeting regions with higher electricity prices will be critical for investing in new commercial PV projects.
The introduction of these two new policies has led to a “rush to install” in the PV market during the first half of the year, causing component prices to rise consistently for over a month. Zhang Haimeng remarked that companies prefer stable product prices and that the current price increases are not typical events, making future price fluctuations difficult to predict. He stressed the importance of managing internal variables, including production plans, customer delivery communications, and inventory levels, to mitigate disruptions to businesses.
Zhu Daocheng noted that the industry is gradually clearing excess capacity. In this process, all manufacturing companies are keen to avoid losses and are vying for market share in the final stages. He urged leading companies and upstream sectors to maintain a shared understanding and rational approach to market changes. While Zhang Haimeng remains less optimistic about the current market clearing situation, he believes that the industry’s “cash burn” phase is nearing its end, suggesting that irrationally low pricing is less likely, though achieving a balance in supply and demand will take time.
Bloomberg’s PV analyst Tan Youru offered a conservative view on the competitive landscape. He noted that companies have extended the period of market competition through production cuts, with little capacity being cleared during this time. He stated, “PV companies are facing severe homogenization competition, and the clearing process is not proceeding as expected, with no significant mergers or acquisitions observed, indicating that the entire PV sector may experience a prolonged bottom cycle.”
In addition to challenges in the supply chain, PV manufacturers may require additional time to address pricing pressures. This year also marks the final year of the 14th Five-Year Plan. As of the end of 2024, ten provinces and regions in China have not met their installation targets. Zhao Tianyi stated, “Given the timeline for the final year of the 14th Five-Year Plan, provincial targets are clear, and there is a strong push to accelerate the deployment of new energy to align with China’s policy directive for moderately advanced construction of renewable energy supply.”
Looking globally, the growth of PV demand is also experiencing a gradual slowdown. Bloomberg noted that traditional key markets are facing increasing development bottlenecks, leading to reduced return expectations and diminished investment attractiveness for PV projects. Furthermore, emerging markets are generating limited incremental growth, failing to offset the decline in traditional markets. The agency predicts that global PV new installations will reach approximately 700 GW in 2025, representing a year-on-year growth of 17%.
During the roundtable discussion, Zhang Haimeng expressed optimism regarding the development of the Indonesian market, hoping it will become a new energy export base. Executives from both Sunpower and JA Solar Technology mentioned the Middle East, with Zhao Wei indicating that the region is striving to reduce its dependence on oil and possesses significant renewable energy advantages, particularly in solar power. Although development in this market has been relatively slow, it needs to achieve a balance from a business perspective. Since last year, the decline in PV costs has made it highly profitable. Zhao Wei stated, “For Sunpower, the Middle East will be a key market to explore, with significant potential in storage and hydrogen energy.” He noted that after securing a substantial energy storage contract of 7.8 GWh in the Middle East last year, many more orders are currently in discussions. Zhu Daocheng revealed that JA Solar Technology has also landed several major projects in the Middle East and will continue to focus on this market while also considering the future development potential in Africa.
The much-discussed Document 136 is expected to have a profound impact on the energy storage industry. Zhao Wei mentioned that the market will witness more value from virtual power plants in the future. Document 136 opens greater flexibility for the utilization of energy storage. Photovoltaic, storage, and loads can be controlled flexibly through the internet, allowing them to genuinely participate in grid regulation and become part of the grid system. Additionally, it supports grid construction, with energy storage playing a unique role in enhancing the stability and reliability of the entire grid.
Bloomberg’s energy storage analyst Zou Xiangning predicts that new energy storage installations may also see a slight decline this year. This is primarily because the installation targets for various provinces have already been achieved or are near completion ahead of schedule for 2024, which could squeeze the volume for 2025. Furthermore, due to a lack of economic viability, the excess capacity in each province is relatively limited. Regarding whether comprehensive energy storage requirements will be completely lifted and if new policies will extend to all aspects of new energy development, Zou Xiangning believes that specific implementation guidelines from each province are still awaited, with these details expected to be released gradually by the end of this year. He forecasts that by 2025, China’s new energy storage installations will reach 79 GWh, and by 2035, this figure could expand fivefold to 466 GWh annually.
