Solar energy companies under pressure as coal and nuclear get a boost
A drop in Chinese photovoltaic firms may be a temporary blip, or it may signal that the industry is petering out. Meanwhile, China is building nuclear power plants and maximizing its use of coal, its only fossil fuel resource.
The National Energy Administration yesterday announced that as of the end of March, Chinaโs total installed power generation capacity was about 2.40 billion kilowatts, a year-on-year increase of 7.8%.
- Wind power accounted for about 340 million kilowatts, a year-on-year increase of 17.4%.
- Solar power generated about 320 million kilowatts, a year-on-year increase of 22.9%.
- Hydro power produced about 394 million kilowatts, a year-on-year increase of 6.2%.
- Nuclear power generated about 54 million kilowatts, a year-on-year increase of 6.6%.
Ever since Beijing announced its โdouble carbonโ reduction objectives in September 2020 of reaching peak carbon use in 2030 and carbon neutrality in 2060, the photovoltaic industry has surged. Yet is this industry now facing a flame out?
One of Chinaโs largest manufacturers of solar inverters, a crucial piece of equipment in the solar energy system that converts direct current (DC) electricity generated by solar panels into alternating current (AC) used by the electrical grid, is Sungrow Power Supply Co., Ltd ้ณๅ ็ตๆบ่กไปฝๆ้ๅ ฌๅธ. With its main competitor, Huawei ๅไธบ, Sungrow accounted for more than 60% of Chinaโs total photovoltaic inverter industry in 2021.
- Sungrow announced net profits of 1.583 billion yuan ($246.79 million) for 2021, a year-on-year decrease of 19.01%.
- For the fourth quarter of last year, the companyโs net profits were only 77.93 million yuan ($12.14 million), a year-on-year decrease of 89.73%.
Sungrowโs decline has dragged down Chinaโs entire new energy industry chain, which is already battered by rising supply chain and raw material costs and COVID-19. Stocks in photovoltaics, wind energy, lithium batteries, and electrical equipment all took a hit this week. Some have even questioned whether rapid growth in Chinaโs new energy sector may be petering out. Apart from Sungrow, the stock prices of other photovoltaic companies like Trina Solar Co., Ltd ๅคฉๅๅ ่ฝ่กไปฝๆ้ๅ ฌๅธ, JinkoSolar ๆถ็ง่ฝๆบๆง่กๆ้ๅ ฌๅธ, and Zhejiang Chint Electrics ๆตๆฑๆญฃๆณฐ็ตๅจ่กไปฝๆ้ๅ ฌๅธ have declined by more than 15% over the last year.
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King coal and three new nuclear plants
In 2020, fossil fuels still accounted for 85% of Chinaโs total primary energy needs, of which coal alone accounted for almost 60%. At a meeting of the State Council yesterday, Premier Lว Kรจqiรกng ๆๅ ๅผบ announced a large increase in coal production capacity this year, and emphasized the central role of coal as Chinaโs main energy source: coal production capacity of 300 million tonnes will be added this year. And just two weeks ago, the government approved a new mega-mine able to produce 15 million tons each year.
However, Chinaโs โdouble carbonโ objectives aim for coal use to drop by more than 80% by 2060. A central role in the development of energy consumption in China is assigned to solar energy, which is expected to become the largest primary energy source by around 2045.
One way to cut reliance on fossil fuels is the expansion of nuclear power. Beijing yesterday approved three new nuclear plants in Zhejiang, Shandong, and Guangdong provinces, as part of the 14th Five-Year Plan, at a total cost of 120 billion yuan ($18.70 billion).
But nuclear power can only go so far, and power from the sun is cheap and easy to operate. So Beijing has allocated a transformative responsibility to Chinaโs photovoltaic companies, and as a result, the development prospects of the industry are still very positive with market demand continuing to rise.
Current difficulties faced by the likes of Sungrow may turn out to be a temporary blip, or may serve as a severe test for companies to carefully manage supply chains and operating costs.
Some companies in the industry are still growing rapidly. Two photovoltaic companies, Tianjin Zhonghuan Semiconductor Ltd ไธญ็ฏ่กไปฝ and JA Solar Technology Co Ltd ๆถๆพณๅคช้ณ่ฝ, last week announced net profits for 2021 of up to 1.36 billion yuan ($212.02 million), a year-on-year increase of up to 151.18%, and up to 780 million yuan ($121.60 million), a year-on-year increase of up to 397.33%, respectively. Both companies put their success down to careful management of supply chains and operating costs.
So in the long term, the solar industry is almost certain to thrive. But in the short term, some of the companies might end up dead.
