How far is China PV from Grid Parity?

Industry Insights

At the end of 2016, China National Energy Administration (NEA) published “PV Development Program for National 13th Five-Year Plan”, aiming to make solar energy grid parity, at consumer side, by 2020.

• Based on China’s strategy and industry outlook, 2020 should mark the year when solar power gets to grid parity in China.
• However, there is a big difference between consumer side parity and on-grid parity. For the former, PV is still heavily dependent on subsidy incentives. For the latter, PV will see explosion of demand. According to development trajectory of PV industry in past years, more and more people believe solar energy would reach on-grid parity by 2020 in China.
• After all, solar can’t become mainstream energy until high capacity and cost effective energy storage technology comes into mass application.

At the end of 2016, China National Energy Administration (NEA) published “PV Development Program for National 13th Five-Year Plan”, aiming to make solar energy grid parity, at consumer side, by 2020. To achieve that milestone, it sets for PV factories to bring down solar power cost by another colossal 50% from 2015 to 2020.

The target was sort of as expected by industry people, given a number of government backed campaigns since 2015 pushing technological innovation and cost reduction across PV producers. To name some of the measures, efficiency requirement of PV components was clearly identified in subsidized projects Front Runner (FRP) and following Anti Poverty (APP), plus, tendering mechanism was introduced to both categories.

Looking to China PV industry, it’s probably under more force of self evolution, thanks to unceasing frenzy of capacity expansion along whole production chain. Of course this heat would reach every corner of this planet where solar projects are underway, given the fact that China module production can supply 140% of worldwide demand (by end of 2016). According to Bloomberg New Energy Finance, PV system cost dropped by an amazing 90% from 2007 to 2016, solar power cost went down at almost same pace. 2016 alone, PV power cost of global average dropped by 15% from $0.10/KWh down to $0.086/KWh. It predicts another 20% down of solar energy cost in 2017.

Above picture shows China’s resolution to push down FiT going forward. There is no official voice yet of FiT cuts beyond 2017 but insight people suggest it would be at least 10% cut. In consequence, an interesting situation seems to surface that despite government are likely pushing hard on solar projects with rigorous subsidy cuts, even resulting in panic and rush installation among PV producers. It turns out, however, makers are still making more profits under lower FiT rates, thanks to more cost cuts along the production chain. For 2017, people are expecting demand and price fall after 630 deadline, as what happened in 2016. Many factories have set up outlook of prices and profits along the chain at lowest point 4Q2017:

Poly, $10.6/kg (GM 10%), wafer $0.424/pc (10%), cell $0.17/wp (11%), module $0.30/wp (12%), BOS/EPC $0.60 (13%), LCOE: $0.075/KWh (11%).

This is almost same as average electricity price $0.075-0.081/KWh (mainly coal and hydrogen generation), consumer side, across the country. As national level electricity price is almost fixed along the time, we could find consumer side grid parity of solar power reached within 2017. Going further, it’s projected that solar power cost for next years until 2020 will be: $0.056/KWh*2018, $0.045*2019, and $0.038*2020. Annual reduction rate stays at range of 15%-25% with marginal effect at latter years, substantially lower than 10-15% of annual FiT cuts projected by government. As result, the whimper and panic coming out across the industry whenever a new FiT cut is announced would sound groundless. In fact, given the fact that coal power plant on-grid price is at range $0.037-0.050/KWh in China, and shouldn’t change, 2020 is highly likely to see solar power parity with coal energy at on-grid side.

Looking to global market, we increasingly hear low price bidding for solar projects around the world. By end of 2016 and 1H2017 some sizeable projects in Middle East, India and south America have reached price range $0.03-0.05/KWh. Last Month, Jinko, the biggest module maker in the world (Bloomberg 2016) won a project of 1177MW in Abu Dhabi with price $0.0242/KWh.

It seems we are just stepping into a new space of market, whose dimension would make existing capacity look near to infancy. NEA record shows solar power output was 662milKWh in 2016 in China, only accounting for 1.1% of total generation. China’s 13th Five-Year plan aims to achieve 15% non-fossil energy generation by 2020, and 20% by 2030. However, as solar power, and other sort of renewable energy, hit grid with exponential growth of capacity, more and more people have come to cognition that the last stop to be completed is not cost, but energy storage technology.

By Xiaodong(Bond) Wang. Xiaodong is a solar energy enthusiast and a regular contributor.
Disclaimer: The views above are strictly those of the author and do not reflect those of any other organisation or individual or this publication.




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