As the end of 2012 approached, the polysilicon market remained in a bleak state. The latest price offered was around $18 per kilogram, which fell below the production cost. This marked a drop of over 90% from $400 per kilogram three years prior. In China, 90% of polysilicon companies had shut down their operations.
In a market once filled with rapid growth and government-subsidized support, the photovoltaic (PV) industry now faces a harsh reality. Once thriving on foreign demand, it hit a wall when European and American markets declined. Companies that rose quickly and created wealth myths are now struggling. In China, no other industry reflects the hopes and challenges of emerging sectors and green energy policies as clearly as PV.
On December 19, the State Council held a meeting to address policies promoting the healthy development of the PV sector. Beyond traditional subsidies, the government emphasized using market forces—such as mergers and acquisitions—to reduce reliance on government intervention and eliminate local protectionism. The move aims to tackle long-standing industry issues. Can these measures clear the haze over the PV sector?
In Hefei, a city known for its solar power industry, the winter brought tough times. At the end of November, near Mingzhu Avenue, one of the city’s most remote areas, the wind carried dust and sparse yellow grass, creating a cold atmosphere. Here stood two of Hefei's largest PV companies.
At LDK Solar’s Hefei factory, the area was clean and well-organized, but the gates were closed. Few vehicles passed by, and the once-busy shuttle buses had vanished. Nearby, employee dormitories sat empty. “It’s a holiday now,†said the guard. When would they return? “Probably March next year.â€
In early November, LDK canceled campus recruitment. Recently, the company announced a countdown to nationalization, involving the SASAC of Jiangxi Xinyu City. Earlier, the Ministry of Commerce and 36 banks met with PV firms to “support the big ones,†with LDK among the six major players.
A few hundred meters away, another top-tier PV firm, JinkoSolar, seemed less affected. Its offices were busy, machines roared in the workshop, and visitors arrived regularly. A recent quarterly report showed that shipments from key credit-guaranteed companies had doubled.
JinkoSolar’s General Manager, Cao Mingjing, told reporters, “The rise of the domestic market is good news for us. We expect a full recovery in 2013.â€
With overseas demand shrinking, Jinko’s increased domestic share became a bright spot. U.S.-listed Yingli Green Energy also reported a jump in Chinese revenue, from 14% to 28% in the third quarter.
Since August, the Chinese government introduced several policies to boost domestic PV demand, including raising generation targets, ensuring credit for key enterprises, and offering power subsidies.
However, policy support couldn’t solve the problem of overcapacity. Cao admitted financial pressure, citing debt, extended downstream investments, and delayed repayments. Resolving inventory was the top priority.
Many companies turned their eyes to Africa, but the real battle over excess stock remained at home. Haitong Securities noted that current domestic PV capacity reached about 30 GW, while the 12th Five-Year Plan aimed for only 15 GW. Analysts warned that the industry relied heavily on subsidies from Europe and the U.S., which have since been cut.
Cao said, “The U.S. and EU situation is serious, but it hasn’t impacted us much. We hope the market will naturally select the fittest, matching demand and output. That’s what the State Council refers to as the ‘forced mechanism.’â€
Back when PV dreams first took root, local governments competed fiercely to attract investment. Within a few years, 20 PV industrial parks emerged nationwide, 18 provinces established new energy bases, and hundreds of cities made PV a pillar industry. Now, the situation has changed dramatically. How do local governments respond?
“Without local support, many PV companies would go bankrupt, passing risks to banks and society,†an analyst said. Some cases involved nationalization, while others saw rumors of fiscal aid or credit relief.
For large-scale projects like Jinko and LDK in Hefei, provincial and municipal leaders personally recruited them. Both companies were established around 2010, during the peak of China’s PV boom. Plans included building “China’s First Photovoltaic City†in five years, with massive investments and high tax expectations.
Despite initial optimism, both companies struggled to meet tax targets. However, Hefei did not give up. Jinko shifted from solar cells to modules, with strong local support. “We needed 2 billion yuan for the component chain, and the headquarters allocated 10 billion. The local government helped us secure 10 billion,†said a company executive.
Now, the entire industry is looking toward photovoltaic power plants for a new wave of growth. Banks are shifting focus from products to power stations. But Cao admitted, “The cost of building a power station is too high for manufacturing companies.â€
Meng Xianqi, vice chairman of the China Renewable Energy Society, noted that only large state-owned enterprises could access national tariffs, while private firms faced barriers. Rooftop PV projects also posed challenges due to planning and construction costs.
In Hefei, the Golden Sun project aimed to complete a 200 MW roof PV plant by the end of the 12th Five-Year Plan. However, limited roof space and poor solar conditions—only 1 kWh per watt compared to 3–4 in western regions—posed constraints.
Some analysts believe that while local governments may not find power stations the best option, they can help companies absorb excess production. Despite these challenges, the dream of PV development continues. For companies facing a harsh winter, the road ahead remains uncertain, with fierce competition and new pressures from central authorities.
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