In December 2012, the polysilicon market remained in a bleak state. The latest price offered was around $18 per kilogram, which was below the production cost. This marked a drop of over 90% from $400 per kilogram just three years earlier. As a result, 90% of China’s polysilicon companies had shut down operations.
Amidst the booming market and government subsidies, the photovoltaic (PV) industry once enjoyed rapid growth. But as global markets in Europe and the U.S. faced turbulence, the sector hit a wall and returned to reality. What once seemed like an endless source of wealth now found itself in a difficult situation. In China, no other industry better reflects the hopes and challenges of strategic emerging industries than photovoltaics.
On December 19, the State Council held a meeting focused on policies to promote the healthy development of the PV industry. Beyond traditional support and subsidies, the meeting emphasized using market-driven "forced mechanisms" to encourage mergers and reorganizations, reduce government intervention, and eliminate local protectionism. It highlighted the need to address deep-rooted industry issues—could this finally clear the haze over the PV sector?
In Hefei, the winter felt particularly harsh. At the end of November, near Mingzhu Avenue, one of the city's most remote areas, cold winds stirred dust and sparse yellow grass, adding a chill to the air. Here stood two of Hefei’s largest PV companies.
The clean and modern factory area of LDK Solar Hefei Co., Ltd. was eerily quiet. Few vehicles passed by, and the once-busy shuttle buses were long gone. Nearby, employee dormitories stood empty. “It’s a holiday now, no one’s here,†said the guard. When would they return? “Probably in March next year.â€
In early November, LDK canceled its campus recruitment. Recently, the company announced a countdown for the nationalization of its Hefei plant, involving the SASAC of Xinyu City, Jiangxi. Earlier, four ministries and 36 banks met with PV companies to "support the big ones," with LDK among the six major players.
A few hundred meters away, another "Big Six" PV giant—Jingao Hefei—was faring slightly better. Employees were still busy, machines humming in the workshop, and visitors were arriving. A recent quarterly report showed that domestic shipments of key credit-guaranteed PV companies had doubled.
"The rise of the domestic market is good news for Jingao," said General Manager Cao Mingjing. He predicted that by 2013, JA Solar would turn around completely. While overseas demand shrank, the increase in domestic market share became a bright spot. Even Yingli Green Energy, listed in the U.S., reported that its revenue from China rose to 28% in Q3, up from 14% in Q2.
Since August, the Chinese government introduced several policies to boost domestic PV demand, including raising generation targets, ensuring credit for key enterprises, offering power subsidies, and facilitating grid connections.
However, policy support couldn’t solve the problem of overcapacity. Cao admitted that financial pressure remained, with debt, extended capital investment in downstream power stations, and delayed repayment periods. Resolving these pressures required inventory digestion.
Many companies turned their attention to Africa, but the battle over excess inventory was still 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 of installed capacity. Analysts warned that the industry had relied heavily on European and American subsidies, which were now being cut, further shrinking demand.
"We all talk about how serious the U.S. and Europe are, but it hasn’t affected us much," said Cao. "We hope the market will select the fittest and balance supply and demand. That’s exactly what the State Council meant by the ‘forced mechanism.’ But it can’t be left to fall; there’s no exit, only a swarm—a chronic issue in this emerging industry."
At the start of the PV boom, local governments competed fiercely to attract investment. Within a few years, 20 PV industrial parks emerged across the country, 18 provinces established new energy bases, and hundreds of cities adopted PV as a pillar industry, leading to 15 U.S.-listed and 23 A-share listed PV companies.
Now, the situation has changed dramatically. How do local governments respond? "If they withdraw support, many PV companies would go bankrupt immediately, passing the risk to banks and society," said an industry analyst. Some regions have seen cases of nationalization, while others have rumors of fiscal support or credit relief.
For large-scale new energy projects in Hefei, both Jingao and LDK were personally recruited by provincial and municipal leaders. They arrived around 2010, during the peak of China’s PV boom. The plan was to make Hefei the "First City of Photovoltaics" in five years. Jingao’s Hefei base project involved a total investment of 13.5 billion yuan, expected to become the world’s largest 3 GW solar integrated production base.
Despite initial plans, tax targets were not met, and both companies faced difficulties. However, Hefei did not give up. Jingao shifted from solar cells to components, and the local government provided strong support, helping secure billions in funding.
As the industry looks ahead, photovoltaic power plants are expected to spark a new boom. Banks are now focusing on supporting power stations rather than PV products. However, Cao admitted that the cost of building a power station is too high for most manufacturers.
Meng Xianqi, deputy chairman of the China Renewable Energy Society, pointed out that only large state-owned enterprises could access the national benchmark tariff, while private companies struggled to enter the market. PV building integration also faces challenges, including urban planning and unpredictable costs.
In Hefei, the goal of completing a 200 MW roof PV plant by the end of the 12th Five-Year Plan remains incomplete, with over 100 MW of unfinished roofs. The available roof area is limited, and some sites face restrictions. Additionally, Hefei’s solar conditions are not as favorable as those in western China, where 1 watt of PV generates 3–4 kWh, compared to just 1 kWh in Hefei.
"For local governments, building a power station may not be the best option, but it helps companies digest production capacity," said analysts. Despite these challenges, the dream of developing PV continues. For companies in a cold winter, the road ahead remains uncertain—marked by fierce competition and new challenges, including the influence of central enterprises.
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