The path of photovoltaic in China

Reform and opening-up in China basically selects theory of latecomer advantage, which means developing countries imitate techniques from developed countries, no need to take detour, even realizing industry structure upgrade by using opportunities of structure adjustment and upgrade in developed countries, at the same time, merging in global industry chain, making it smooth for followers to achieve modernize, not only above theory has been applied in the photovoltaic industry, we also take a path full of tears and blood that trading market for techniques.

The visible hands of government

There were three ups and downs in the start stage of photovoltaic industry in 2004 due to inefficient creativity ability and lack of market developing. Government indeed provides privileged policies so as to support and nurture ecological economy. According to the provisions issued by national development and reform committee on Apr. 4th2006, the ways and levels of definite online electricity price should be clarified, define excess part of electricity price on renewable energy power generation online should be split fairly by all users, define split level, detailed levy and expenditure management. Development of renewable energy power generation industry speed up since then, and made decisions for National People's Congress, obviously this action surpasses limitation, which means developing the industry funded by the people all over the country.

Photovoltaic power generation industry came across problem of inefficient demands from outside, just like other industries during the global economy crisis in 2008. Governments accidently selected super large scale currency stimulation economy plan costs 0.4 billion yuan and extra 3 years’ 2.6 billion lending scheme, enterprises acquired maxim financing convenience, these enterprises want to become parts of the industry and introduce polysilicon and other photovoltaic power generation module production equipment

The session reviewed and adopted the CPC Central Committee's decision on revising renewable energy law in the twelveth plenary session of the 11th CPC Central Committee, noting that renewable energy development fund be set by national financial department. Fund resource includes special funding arranged by national financial department annually and extral electricity income of renewable energy levied by law. What’s worth of attention is that extral electricity income of renewable energy comes from the split of sales electricity prices, instead of charging by power grid enterprises.

Photovoltaic industry is leagally protected by CPC Central Committee, financially supported by financing institutes through large scale lending scheme, plus lacal governments’ passionate promotion under the pressure of GDP assessment, besides, the it benifited from the trend of developing ecological economy, all these available conditions make everthing possible for the success of photovoltaic industry, enterprises in this business expanded from only a few to dozens of them, and excessive production capacity appeared soon.

On the one hand, due to blocked exports, anti-dumping investigations of Europe countries are continuously increasing against China’s photovoltaic products , on the other hand, power grid company is not cooperated with opening domestic market, these two reasons make it hard to develop. What more worring is that additional fund gap of renewable energy electricity reaches 10.7 billion, if we do not further elevate charging standard,the gap could reach 3 billion by 2015. It will have serious influence on settlement of electricity bills for renewable energy generation companies and healthy development of whole industry. National development and reform committee demands that electricity price of renewable energy electricity rise from 0.8 to 1.5yuan every KWh since Sep. 25,2013 , in addition to the electricity used for residule life and agriculture production. Charging standard of subsidy fund lifted 88% adjusted by the visible hands of government.

According to structure of renewable energy development fund, stock before price adjustment was splited by all users except the special funding arranged annually by financial Dept. 

Subsidy police paid by all users is good for the development of domestic phoyovoltaic generating market, and it can helps lowering risks of enterprises entering market. Under th guidance of theory of latecomer advantage, excessive production capacity and price competition appeared through bringing in and failing again and again. By 2011, there were 43 Siemens polysilicon companies and 20 physical polysilicon companies in China. Due to insufficient innovation capacity, as polysilicon prices continued to fall, a large number of low-competitive companies and those relaying on tax reductions and subsidies could not survive, and were forced to shut down, as a result, the sunk cost of the introduction pipeline was incurred.

Subsidies and tax cuts seem to be a poison for the photovoltaic industry. At the same time, it also reveals that the government's national renewable energy development fund constructed with unconstrained and cost-free funds to support non-public products leads to market inefficiencies. It seems to confirm what former US President Ronald Reagan said, "The government is not the solution, the government is the problem itself."

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