|Manufacturers would welcome higher demand from the U.S. after the Chinese government said it is trying to slow the pace of construction in the world's biggest solar market. |
Source: Associated Press
A top solar module manufacturer expects the U.S. market to strengthen through the second half of the year, with tax policy helping to drive development after activity slowed in the wake of new import tariffs that the Trump administration imposed in January.
The Internal Revenue Service in June clarified the dates by which solar developers in the U.S. must begin construction or incur certain expenses to qualify projects for federal tax credits. The guidance should "further accelerate or even encourage the customer to expand [development] pipelines for their future business because they have more time to do it," Gener Miao, vice president of global sales and marketing at China-based JinkoSolar Holding Co. Ltd., said during an Aug. 13 earnings conference call.
Manufacturers would welcome higher demand from the U.S. after the Chinese government in May said it was trying to slow the pace of construction in the world's biggest solar market, raising the prospects of an equipment and raw material glut globally.
In the weeks after China announced the new policies, solar panel prices tumbled as manufacturers in Asia tried shedding excess inventory at the same time import duties were "killing demand" in the U.S., Sachin Shah, CEO of BRP Energy Group, the service provider to Brookfield Renewable Partners LP, said on an Aug. 3 earnings call.
Sunrun Inc. Chairman Edward Fenster said on an earnings call Aug. 9 that the IRS guidance gives the California-based rooftop solar developer "fantastic optionality."
"I think in the short term, yes, we see it as a positive," Alexander Bradley, CFO of the Arizona-based solar panel manufacturer and power plant developer First Solar Inc., said of the IRS guidance on an earnings call July 26. He added that it could delay the transition away from tax-equity financing and toward a "more optimal capital structure."
Consolidation and declining costs
For JinkoSolar, the market headwinds emanating from China could create opportunities by triggering an industry consolidation to eliminate outdated production and by accelerating cost declines to make solar more competitive with other energy sources, CEO Kangping Chen said.
JinkoSolar shipped 2,794 MW of solar modules during the second quarter, an increase of 39% from the prior quarter but down 3% from a year earlier. The company, which is adding 1,800 MW of new solar module manufacturing capacity this year, including a 400-MW plant in Florida, expects to ship between 11,500 MW and 12,000 MW compared to 9,807 MW in 2017.
"Growth during the quarter was strong and we expect this momentum to continue into the second half of the year despite the impact from the new policies issued by the Chinese government ... as shipments to overseas markets are expected to continue growing," Chen said in a news release. Within China, market activity is expected to be driven by local government subsidies, poverty-alleviation programs and demand for unsubsidized distributed solar projects, JinkoSolar said.
Longgen Zhang, CEO of China-based polysilicon producer Daqo New Energy Corp., has also cited strong demand in China's rooftop solar market, predicting on an Aug. 7 earnings call that some observers may be surprised by the amount of growth in the country's overall market this year as falling equipment prices continue to drive demand for smaller-scale projects.
China installed approximately 24,500 MW of new solar capacity during the first half of 2018, about half of which was distributed generating projects, Chen of JinkoSolar said.
JinkoSolar reported second-quarter net income attributable to ordinary shareholders of nearly 99 million yuan, or 2.5 yuan per diluted American depositary share, compared to net income of 47.4 million yuan, or 1.5 yuan per diluted ADS, a year earlier. The company's financial results benefited from a currency exchange gain as the U.S. dollar appreciated against the yuan. Revenues were down 24% in the second quarter at 6.06 billion yuan from 7.92 billion yuan a year earlier.
As of Aug. 10, US$1 was equivalent to 6.85 Chinese yuan.