Solar industry prepares for impact of Inner Mongolia change on electricity prices – pv magazine International
Energy policy in China’s Inner Mongolia region took a sharp turn on August 30, when authorities decided to end reduced electricity prices with immediate effect. The full impact of this change remains to be seen.
Chinese authorities announced a sudden change in energy policy for the Inner Mongolia region on August 30, when the National Development and Reform Commission (NDRC) decided to end reduced electricity prices, effective immediate. This marked a sharp break with earlier plans to attract investment in “strategic emerging industries” to the relatively underdeveloped region.
Inner Mongolia has rich energy resources and has already attracted many solar investments, especially from upstream players. Its polysilicon production ranks second in China. According to China Nonferrous Metal Industry Association (CNMIA), Inner Mongolia’s polysilicon capacity reached 74,000 metric tons (MT) by the end of 2021. It said it is expected to reach 320,000 MT and 522 000 MT by the end of 2022 and 2023, respectively.
In 2021, annual polysilicon production in the region reached 66,000 MT, or 13.2% of China’s total. This figure is expected to reach 358,000 MT in 2023, which is about 24.5% of the country’s total projected polysilicon production at that time.
More major solar companies – including Longi, Tongwei, GCL, Daqo, TBEA, East Hope, Zhonghuan, JA Solar, Trina Solar, Canadian Solar, Risen, Shangji and Shuangliang – have invested in Inner Mongolia due to its lower electricity prices . In the past two years alone, total PV investment in the region exceeded 200 billion yuan ($28.1 billion).
The government later said that removing reduced electricity prices would have “very little” impact on businesses in Inner Mongolia. However, the cost impact on the PV industry chain is obvious and significant. Research indicates that the reduced electricity price was around CNY 0.25/kWh to CNY 0.31/kWh before September. This month, it rose to 0.45 CNY/kWh.
Jessica Jin, Renewable Energy Analyst for IHS Markit, said photo magazine that under the new policy, wafer costs will increase between CNY 0.008/W and CNY 0.010/W. She said non-silicon costs would increase by 6% to 8%, while the production cost of polysilicon would also increase by 12% to 15%. The anticipated impact can be attributed to the fact that electricity costs represent approximately 15% of wafer production cost and about 35% of polysilicon production cost.
Longi and Zhonghuan have since told Chinese media that they are carefully assessing the potential impact of the policy change. However, this is This is not the first time that a Chinese region or province has radically changed its electricity pricing policy.
In April, authorities in hydropower-rich Yunnan Province announced the end of electricity price discounts. In June, Longi responded by suspending several ingot and wafer projects in the province. In July, the company also strongly accelerated its plans for new ingot and wafer capacity in Inner Mongolia. But now the new pricing policy in the region has cast a shadow over his plans.
Regional governments in China offer preferential pricing policies to attract investment. However, political uncertainty can often have a negative impact on investor sentiment.
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