Photovoltaic industry threshold raises urgent need for financial support

How does the price commitment land?

While domestic photovoltaic companies are preparing to return to the European market, some people in the industry have new concerns.

Li Hongbo, vice president of Hairun Solar Technology, calculated that in accordance with the price commitment program, the lowest price of China's PV exports to the European Union is 0.56 euros/watt. In fact, China's photovoltaic production cost has been compared with Japan, South Korea, China's Taiwan, and Southeast Asian countries. Almost the same, and these countries and regions export to the EU price can be 0.53 euros / watt or even 0.52 euros / watt, EU importers are likely to place purchase orders to suppliers outside China.

Zhang Youbing, Senior Director of Suzhou Atos Global Market, has the same concern: “Your price is 0.56 Euro/Watt. Why should EU consumers insist on your goods?”

Since the implementation of the price-compensation plan on August 6, almost no PV companies in our province have received new EU orders. Zhang Bingbing told reporters, "We only sent goods in small quantities to explore the road to see how the road to the EU under the new mechanism should go."

An industry official admits that price promises are good in the short-term but not necessarily in the long-term. The photovoltaic products exported to the European Union during this period are basically items that have not been completed in the previous period, and the effect of price commitments in the end will depend on whether new orders can be received. "If we take the price of 0.56 euros/watt to compete with other countries, there are two possibilities: First, to give importers a commission of 0.06 euros, which is equal to the price of competitors; First, to take our PV products to a third country. And then exporting to the EU at competitive prices - both of these practices have made price commitments less meaningful."

A few million net profit a day, did not switch to the "second peak"

The ups and downs of the photovoltaic industry, a profound revelation for China's emerging industries is that industrial development must strive to achieve orderly and sustainable development.

"In 2010, when the photovoltaic industry reached its peak, our company's net profit for the day was more than 5 million yuan." Ding Yongming, deputy general manager of Gaojia Solar Energy Co., Ltd., said that at that time, buyers often paid for the goods at the company.

Almost at that time, Wuxi Shangpin Solar entered the photovoltaic industry from the textile, printing and dyeing industry. Zhan Qijiang, deputy general manager of the company, said that the new project was initiated and invested several hundred million yuan. It was withdrawn in a year or two. “The international market has changed its face since the industry chain was extended and new equipment was installed. The result was a new plant and new instrument. The equipment is idle for more than a year."

“In the photovoltaic industry of the past few years, the threshold for entry was too low. As long as there was money, almost anyone could do it. Moreover, if a product came out, it would make money,” said an industry insider. The impulse of investors has led to excess production capacity and disorderly competition. Coupled with the double reduction of foreign demand and trade protection, in just a few years, the domestic photovoltaic industry has rapidly dropped from its peak. The price of silicon materials and photovoltaic modules has ebbed away, and the quartz sand has dropped from more than 3 million yuan per ton to the current 16th. Million yuan, the export price of solar cells has changed from 24.5 yuan per piece to about 6 yuan, and it is difficult for "good days".

The future of photovoltaics depends largely on the industrial order.

"Industry development has two peak periods of 'barbaric expansion' and 'fine expansion'. The former is due to high profits and the first stage of development. The latter is the connotative development after industrial maturity and focuses on technological innovation." Qian Zhixin, a professor at the university, believes that switching from the first peak to the second peak depends mainly on the market. The government should do much to create a level playing field.

The First Difficulty for PV Companies
Right now, the biggest problem PV companies face is capital. A few years ago, the photovoltaic export market was booming, with fast return payments, and banks rushed to lend. Now, it is very difficult for PV companies to get new loans, and some banks also have to collect loans in advance.

“In the past days, our company was close to 2 billion yuan by the bank. Although there are now more than a dozen billion yuan on the company's account, we are afraid to use it – worrying about the sudden repayment of loans by banks someday.” A company official is helpless. It is said that it now bears double costs. On the one hand, more than a dozen million dollars are shelved to increase financial costs; on the other, it is necessary to finance the fund companies and pay more or even a dozen points of financing costs.

The opening of the domestic application market has enabled China's PV production capacity to have new channels for the elimination of energy. However, the transfer of PV products from abroad to domestic PV power plants can also not solve the financial problems.

Taking Wuxi Zhenfa New Energy, a leading domestic photovoltaic power generation, as an example. The company recently completed the grid-connected 100 MW photovoltaic power station in Jinchang, Gansu Province, with a total investment of about 1 billion yuan and a designed annual power generation capacity of 170 million kWh. Qian Zhongyan, deputy general manager of the company, said that the company’s innovative invention tracking technology has set a maximum record of 86 degrees per day, but under normal power generation conditions, considering weather conditions and other factors, the company’s on-grid tariff in the western region was 1 yuan per unit. According to calculations, it takes 6-8 years to recover the investment. “The long investment return period is hard for banks to be tempted.”

Experts said that as a renewable energy source, photovoltaic solar energy still has a strong vitality. An important reason why the EU adjusted the PV subsidy policy is also limited by the carrying capacity of the grid. Now that the power grid bottleneck is eliminated, the next step may be to usher in the opportunity to build a rooftop power station, and its subsidy policy has also changed from making up the power generation to making up for electricity. “For China, the key is to form an orderly photovoltaic industry environment and effectively increase the application of the domestic market. In particular, we must change the general policy to support key enterprises and encourage the improvement of core technological innovation capabilities.”