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Domestic photovoltaic industry enters honeymoon policy
The domestic photovoltaic industry, which has long been facing challenges due to market fluctuations and international trade pressures, is now entering a period of favorable policy support. On December 19, the State Council's Executive Meeting took a major step by introducing five key policies aimed at promoting the sustainable development of the solar energy sector. This marks the first time that the government has addressed the photovoltaic industry in such a targeted and comprehensive manner, signaling a significant shift in policy focus.
These five measures, often referred to as the "Five National Policies for Photovoltaics," are designed to tackle the core issues currently affecting the industry. They provide clear guidance and practical solutions, offering a roadmap for the orderly and healthy growth of China’s solar power sector. The positive impact of these policies was immediately felt in both the U.S. and Chinese stock markets, with photovoltaic companies seeing substantial gains following the announcement.
In the U.S., stocks like Suntech Power surged by 17.76%, while major players such as Big Brand New Energy, LDK Solar, and Alss Solar saw gains over 10%. Hanwha Solar, JA Solar, Trina Solar, and Yingli also posted strong performances, with many rising by more than 5%. The overall U.S. solar index climbed 10.59% to 187.27 points. In China, the photovoltaic sector experienced a similar rally on the following day, with Hairun PV hitting its daily limit and other companies like Yijing Optoelectronics and Tuoxin Energy recording gains above 6%.
A key focus of the new policies is to reduce the industry's heavy reliance on overseas markets. With the European and U.S. markets becoming increasingly difficult to access due to trade barriers, the "Five National Policies" emphasize the need to expand the domestic application market. Specifically, they encourage the development of distributed photovoltaic systems, urging households, businesses, and communities to install solar power generation systems.
To support this transition, the policies also call for improved subsidy mechanisms. For instance, the implementation of sub-regional benchmark prices for photovoltaic power plants will allow for more accurate pricing based on local resource conditions. This approach is expected to make solar projects more viable across the country, especially in the eastern regions, where previously high costs limited growth.
Additionally, the policies introduce a direct electricity consumption subsidy model, which aims to prevent fraud and inefficiency seen in earlier initiatives like the "Golden Sun" program. This approach ensures that subsidies are directly tied to actual usage, making the system more transparent and effective.
Another important aspect is the improvement of the central government's financial support mechanism. The policies also propose that photovoltaic power plants be granted the same value-added tax (VAT) benefits as wind energy projects. Currently, the VAT rate for solar is about 17%, compared to 8.5% for wind. If this change is implemented, it could effectively increase the on-grid tariff by around 8 cents per kWh, significantly boosting revenue for solar power projects.
For a 20 MW plant, this would translate into an 8% increase in annual revenue, creating stronger incentives for companies to invest in solar power generation. Overall, these new policies represent a turning point for the Chinese photovoltaic industry, offering a solid foundation for future growth and stability.