The current surge in the installation of distributed photovoltaic systems conceals three significant changes in the industry. Since the beginning of this year, two important policies regarding distributed photovoltaic energy—namely the “Management Measures for the Development and Construction of Distributed Photovoltaic Power Generation” and the “Notice on Deepening the Market-oriented Reform of Renewable Energy Grid Pricing to Promote High-Quality Development of Renewable Energy”—have been released. These policies have triggered a rush for installations.
In an attempt to meet the deadlines set for June 30 and May 31, developers are racing against time to complete projects and connect to the grid, resulting in rising prices and shortages of upstream components, inverters, and grid connection cabinets. After a continuous decline of 30 months, component prices have finally risen, with some distributors reporting that it is impossible to purchase components and solar cells, even with adequate funds. A source from a top five photovoltaic manufacturer informed Hua Xia Energy Network that production capacity among component manufacturers is fully booked, with most companies’ delivery times extending into the third quarter. The price for N-type double-glass components, 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 15-day delivery after placing an order.
It is clear that this heated market situation will not last long; once the policy window closes, the current frenzy will eventually come to an end. Amidst this intense market activity, the distributed photovoltaic sector is undergoing substantial transformations under the guidance of policy changes. Savvy companies have already begun to act, seizing opportunities in a market where electricity prices are declining and profit margins are shrinking.
The overall return on investment is decreasing, leading to a redistribution of profits. The “136 Document” states that all renewable energy projects connected to the grid after May 31—excluding solar thermal and offshore wind projects—will generally sell their generated electricity on the market. While the policy does introduce a “price difference settlement mechanism” as a buffer, this is merely a transitional measure, and full marketization has become inevitable. The most significant change brought about by the entry of renewables into the market is that the previously sheltered distributed photovoltaic systems, which relied on policies for stability in pricing and quantity, will now experience significant price fluctuations within the market mechanism. A decrease in overall yield for power plants is certain, prompting owners to exercise stricter cost control, with non-technical costs being significantly compressed.
In the past, engaging in distributed photovoltaic projects was seen as a lucrative opportunity. To quickly expand market scale, platform companies raised installation fees substantially to incentivize channel partners and sales personnel to develop the market. Reports from Hua Xia Energy Network indicate that in provinces like Jiangsu and Guangdong, sales personnel could previously earn 30,000 to 50,000 yuan for closing a deal with a farmer. Such high commissions attracted many from outside the industry, leading to fierce competition among platform companies that offered a variety of complex financial products and packages, which in turn created numerous issues. In early March, towns like Zhenping and Anyang in Henan suspended photovoltaic development and registration due to problems like false reporting, unfair competition, and chaotic personnel management.
As distributed photovoltaic systems enter the market fully, the previous booming business landscape will no longer exist, and the market development model for residential photovoltaic systems will also require adjustments. With uncertain investment returns and narrowing profit margins, investors will inevitably lower the settlement prices they offer to platform companies, which will, in turn, reduce the installation fees they pay to channel partners and sales personnel. This overall reduction in profits will strip the residential photovoltaic sector of its “easy profit” aura and eliminate inefficiencies from the workforce.
According to an industry insider, the previous model of earning quick profits through high EPC fees is no longer sustainable. The focus of profitability will shift to managing the entire lifecycle of power plants. However, many newly recruited sales personnel lack the necessary professional background, leading to significant layoffs. Nonetheless, some variables remain, offering a glimmer of hope—since the “136 Document” only outlines general directions and principles, the specific detailed regulations will be set by each province. Differences in sunlight conditions, absorption capacity, and energy structures among provinces will result in varying impacts on profitability. This means that future returns from distributed photovoltaic systems will vary significantly between provinces, with precisely positioned companies likely to reap the best rewards.
As provinces release detailed implementation rules before the end of the year, investors will gain clearer and more quantifiable investment models for distributed photovoltaic systems, allowing for a more transparent shift in the industry landscape.
With the new policies in place, the capacity for absorption will become a critical factor in determining the quality of photovoltaic assets. The management measures categorize distributed photovoltaic systems into four types. Among these, general commercial and industrial distributed photovoltaic systems (with a total installed capacity not exceeding 6 megawatts) can only choose between two modes: self-consumption and selling excess electricity to the grid. Large commercial and industrial distributed photovoltaic systems “should generally choose to operate entirely on a self-consumption basis.” Compared to previous policies, both types of systems are now restricted from full grid access; large commercial systems cannot even sell excess electricity anymore, indicating a government push to encourage local consumption and resolve absorption conflicts.
Based on these changes, Hua Xia Energy Network anticipates that three types of distributed photovoltaic systems will become particularly attractive to investors: first, the value of small commercial and villa projects will be highly sought after in the industry. These projects have stable power demands that can ensure basic returns for power plants, making them a focus for development in the near future. Additionally, many challenging yet stable-return scenarios with absorption capacity are likely to be identified by industry players. Secondly, in terms of regional distribution, the development of distributed photovoltaic systems in economically robust eastern provinces is expected to accelerate. These regions are characterized by a concentration of commercial activities and stronger absorption capabilities, with the focus of distributed development likely shifting further south, diminishing the status of traditional northern provinces like Shandong and Hebei. Lastly, the integration of energy storage with distributed systems will become increasingly essential, with a noticeable rise in the willingness to self-configure storage solutions. In the past, photovoltaic energy storage lacked economic viability, leading to an “unused storage” issue. As small commercial and villa photovoltaic systems gain ground, energy storage will not only address issues of inconsistent power generation but also stabilize market pricing fluctuations and investment returns. Distributed photovoltaic systems combined with storage can also explore new business models related to power sales, charging, swapping, and load management, enhancing absorption capabilities and improving returns on investment.
In fact, as early as May 2021, the National Energy Administration issued a notice encouraging suitable residential photovoltaic projects to incorporate energy storage solutions as long as safety is ensured. According to incomplete statistics, at least nine provinces and twenty regions have introduced policies for integrating energy storage with distributed photovoltaic systems, primarily in regions like Shandong, Jiangsu, Zhejiang, and Hebei, which have well-developed photovoltaic resources and markets. As more areas support the integration of energy storage, the combination of distributed photovoltaic systems and storage is set to become a lucrative business opportunity.
With the end of rapid expansion, the era of meticulous operation has begun. In recent years, the explosive growth of distributed photovoltaic systems has led various platform companies to establish their own brands, developing a full-chain business model from project planning and construction to subsequent operations. However, as the market dynamics shift, these companies will transition from extensive expansion to a phase focused on refined services. “In the past, it was all about explosive growth; now it’s about endurance and precision management,” shared an insider from one platform company.
Recently, companies have begun seeking breakthroughs. This includes everything from enhanced design efficiency and construction standardization to streamlined processes and online acceptance, all aimed at cost reduction and efficiency improvement. By meticulously addressing these details, overall expenditures can be significantly lowered. Furthermore, refined operations will be crucial for maximizing power plant profitability. Over a longer lifespan, the disparity in returns between well-managed and poorly-managed power plants is substantial. Therefore, essential investments in personnel, regular cleaning of components, timely equipment fault inspections, and ensuring stable operations are fundamental responsibilities of operation and maintenance (O&M). The value of O&M will further increase, with companies excelling in this area becoming highly sought after, and specialized O&M firms gaining prominence.
Additionally, the adoption of digital and intelligent tools will be essential for enhancing quality and efficiency, prompting major platform companies to increase their investments in these areas to save on labor costs. Moreover, exploring the green value of distributed photovoltaic systems, which were previously overlooked, will now become a viable avenue for profit. For platform companies, those capable of making informed judgments about electricity markets will find greater opportunities for growth.
It’s worth noting that since the issuance of the “136 Document,” the role of “electricity traders” in the industry has become highly coveted. Media reports indicate that platform companies are competing to recruit electricity traders, with monthly salaries rising from around 10,000 yuan to 30,000 yuan. As market mechanisms advance and competition intensifies, a survival of the fittest scenario may commence. Smaller platforms, unable to compete with larger ones in terms of financial strength, service capabilities, and brand reputation, will find it increasingly difficult to survive. Companies that cannot quickly adapt to new market changes may face elimination, leading to a significant increase in market concentration. Notably, some leading companies have already begun making adjustments and consolidations. For instance, Trina Solar has proposed a new networked model that integrates customer demand, photovoltaic asset construction, financial service plans, and long-term O&M services into a cohesive whole. Similarly, Skyworth Photovoltaic, which has ventured into this market, is enhancing its expansion into upstream equipment manufacturing. Reports indicate that Skyworth recently reorganized its operations to specifically consolidate the manufacturing of components and inverters into a dedicated “Components Division,” indicating a strategic focus on creating a unified force.
As competition within the distributed photovoltaic market intensifies and the principle of survival of the fittest takes hold, the industry is poised to evolve into a more mature and healthier development trajectory.
