China’s solar subsidy cuts will help US developers to revive projects and jobs

China’s solar subsidy cuts will help US developers to revive projects and jobs

October 29, 2018
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The move by China in May this year to slash subsidies for domestic utility-scale solar projects will ultimately benefit developers in the US who rely on imported solar panels to revive projects and jobs, says GlobalData, leading data and analytics company.

Solar power developers in the US have been struggling since early 2018 due to two separate policy decisions announced in the US and China. In January 2018, the US government imposed tariffs of 30% on imports of solar products to safeguard the interests of local manufacturers.

Mohit Prasad, Power Analyst at GlobalData, says: “Hit by higher costs of imports, many developers announced cancelation of their projects. Some developers even started negotiations to restructure their power purchase agreements due to higher costs resulting from tariffs.”

Utility-scale solar developers like Cypress Creek Renewables, LLC and Southern Current cancelled or deferred projects worth more than $2.5bn.

According to the US Energy Information Administration (EIA), the US solar industry employs more than 250,000 people with about 40% in the installation sector and 20% in the manufacturing sector. Since the majority of them were employed by project developers, the industry started witnessing job cuts after the implementation of import tariffs.

On the other hand in May 2018 China, which has been struggling to build infrastructure to link the solar projects to the grid, announced a cut in the feed-in-tariff subsidy to reduce the surge in solar installations.

Prasad continues: “Subsidy cuts in China have resulted in reduced demand for solar products within the country. Subsequently, the global market is expected to witness an oversupply of solar panels, thereby reducing the prices.”

Local Chinese manufacturers are now looking to export more panels, resulting in an oversupply in the global solar photovoltaic (PV) module market, which will further reduce the prices.

As a result, developers such as Inovateus Solar have become more optimistic. The company has closed a deal to develop a 6 megawatt (MW) solar PV plant in the city of Pratt, Kansas. Pine Gate Renewables, a North Carolina-based solar installer, has welcomed the move, since the lower prices will help the economics of projects already in the pipeline.

Prasad concludes: “Following the announcement made in China, many developers will revive their hiring plans and the industry will witness an influx of jobs. So the drop in prices globally and in the US will help developers to revive projects and jobs which were put on hold after the import tariffs levied previously.”

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