Hong Wei: Thoughts on Photovoltaic Guofa [24]

Hong Wei came across the "Several Opinions of the State Council on Promoting Healthy Development of the Photovoltaic Industry," commonly referred to as Guofa [24]. At the same time, he read an article stating that Germany would stop solar energy subsidies. This made him reflect on the previous policies and their potential consequences, but the next article provided some clarification. Although Germany’s proposed photovoltaic policy hasn’t yet reached final legislation, it has sparked a lot of debate about the success or failure of its subsidy system. For a country that once led the global solar industry, proposing to phase out PV subsidies by 2018 is significant. As China continues to be the world’s largest market for solar installations, it should carefully consider its own long-term strategy, especially with the recent release of Guofa [24]. Guofa [24] offers a comprehensive approach to the development of the photovoltaic industry, addressing multiple aspects of the sector. The author finds the document well-structured and detailed, possibly more so than similar policy outlines from other developed countries. This thoroughness raises several thoughts. First, while the government’s attention to the photovoltaic industry is evident, there's also a need to understand how to balance state support with market forces. In a socialist market economy, emphasizing market-oriented strategies is crucial, even for industries that are not fully marketized. Second, the document emphasizes expanding the domestic market as a key driver for the industry's growth. However, the author argues that this should only be a temporary measure, not the ultimate goal. The real objective should be to build an internationally competitive photovoltaic industry, as stated in the document itself. Relying solely on the domestic market may not lead to global competitiveness, as seen in the challenges faced by China’s wind power sector. Third, the demand-pull strategy outlined in Guofa [24] echoes past economic policies used during crises. However, such approaches require a fully marketized environment to work effectively. Otherwise, they risk creating inefficiencies. The author draws a parallel to the “four trillion” stimulus package, questioning whether domestic demand alone can truly foster a globally competitive industry. Germany’s experience suggests otherwise. Despite early success, the photovoltaic sector saw a sharp decline after subsidy cuts. Installations dropped from 7.5 GW in 2011 to 7.6 GW in 2012, and are expected to fall below 3 GW this year. Solar power now accounts for just 4% of total electricity generation. Meanwhile, many German solar companies lack international competitiveness. The decision to end subsidies was driven by concerns over financial sustainability. With renewable energy subsidies reaching 216 billion euros so far, and ongoing costs for 20 years, the German government felt the need to adjust the rules. The lesson here is clear: industries dependent on subsidies and domestic markets are not sustainable in the long run. It’s time to rethink strategies and focus on building a resilient, globally competitive photovoltaic industry.

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