DAVOS, Switzerland (Reuters) – The global solar power industry is about to lose a major competitive windfall as prices of Chinese-made solar panels begin to recover after a collapse last year, the leader of one of the world’s top manufacturers said on Thursday.
“The party if definitely over,” said Eric Luo, president of China’s GCL System Integration Technology Co, a top-10 maker of solar panels, feeding the fastest-growing renewable power sector.
Solar panel prices tumbled around 30 percent last year after China, the world’s largest producer, cut subsidies to shrink its bloated solar industry, pushing smaller manufacturers to the brink of collapse.
To raise cash and stay afloat, manufacturers cleared inventory and diverted sales offshore, sending prices into a downward spiral – offering up a windfall for solar power generators and investors in solar farms.
Luo, speaking to Reuters at the World Economic Forum in the Swiss ski resort of Davos this week, said GCL’s vertically integrated business model cushioned it from the downturn in prices as its solar farms benefited from cheaper panels.
The pain will mostly be felt by smaller Chinese producers, which lack international supply chains, triggering industry consolidation or forcing them to close, he added.
Luo said solar panel prices were already stabilizing and he expected them to rebound by 10 to 15 percent as the Chinese industry consolidates over the next year or two.
Given panels represent close to half of a solar farm’s installation costs, that threatens to eat into the returns of investors.
China is home to almost a third of the world’s cumulative installed solar capacity and its manufacturers dominate the industry, despite being slapped with anti-dumping tariffs and getting caught up more recently in the U.S.-China trade war.
In September, the European Union ended restrictions on the sale of Chinese solar panels but Washington continues to impose an anti-dumping duty. They are also subject to President Donald Trump’s more recent hike to general tariffs on Chinese imports.
GCL still counts the United States as a major market but is expanding rapidly in other markets, following in the wake of Beijing’s huge Belt and Road international development program, Luo said, adding that overseas business would account for 75 percent of GCL’s solar panel shipments this year.
At home, Luo said China was rapidly nearing the point where the solar industry could operate without any form of subsidy. He said northwest China, where sun was more plentiful and land less expensive, had already reached that milestone.
Most of the rest of the country would follow this year, before the age of subsidies ends completely in 2020, he said.
“If you need subsidies (at that point), you just stop.”
Editing by Elaine Hardcastle