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Major Shareholder of Hanergy Solar Further Increases Holdings, Confident in Potential of Thin-film Solar Market

June 25, 2013 - Hong Kong

The photovoltaic ("PV") power subsidy policy to be promulgated around July is under concern. It is reported that the amount of subsidy might increase in comparison to that stated in the consultation draft. Premier of the State Council Li Keqiang indicated at the beginning of the month during his inspection to the PV enterprises in Hebei that the government has formulated policies for promoting PV power generation, including the development of distributed PV power generation and the encouragement of significant usage of PV power generation device by industrial and commercial sectors as well as communities and households. In addition, a research report issued by the research department of Goldman Sachs on the 21 of the month pointed out that there would be considerable growth in the demand of the market in the PV industry in 2013, reaching 35 to 40 giga-watt ("GW"), due to the increasing demand in Japan, the United States, China and the emerging markets, and suppliers of PV modules had also indicated in the recent solar energy fair in Munich, Germany, that demand had outpaced supply.

Despite significant fluctuation and depression in the capital markets were caused recently by the calls of the Federal Reserve for exiting the market, the major shareholder of Hanergy Solar, a company focuses on thin film solar technology, increased its holdings again to approximately 77 million shares on 24 June amid the upcoming promulgation of the subsidy policy on solar energy by the Chinese government and the hope that the global market of solar energy might have reached its bottom, which indicated that Hanergy Investment, the parent of Hanergy Solar, is very optimistic about the prospect of the market of the solar energy industry. Hanergy Investment also purchased 231 million shares of the Company in the market at the beginning of the month.

National subsidy policy brought positive signals and distributed PV power generation enjoys a bright future

The fact that a national subsidy policy will be promulgated to drive distributed PV power generation is not news. As early as in March this year, the National Development and Reform Commission issued the consultation draft of Notice in relation to Refining the Tariff Policy of PV Power Generation. On 19th of this month, the subsidy plan for independent distributed PV power plants issued by the PV Industrial Park in Jiaxing raised concerns in the PV industry. In the plan, it is mentioned that a RMB2.8 subsidy will be granted for each kilowatt hour of electricity generated through the independent distributed PV power generation projects in the PV Industrial Park in Jiaxing.

It is expected that around July, the widely anticipated Notice in relation to Refining the Tariff Policy of PV Power Generation concerning the subsidy policy for each kilowatt hour of electricity generated through PV will be promulgated, which involves the benchmark tariffs for ground-mounted stations and the tariff subsidy for the distributed PV. Among which, the subsidy for the self-generated and self-used electricity generated through the distributed PV may be adjusted from RMB0.35 to RMB0.45. A research report of KGI Securities pointed out that the internal rate of return of industrial and commercial users will be increased to 28% from 23%, and that of the large industrial users will also reach 21% after the promulgation of the subsidy policy, which means that the period for recovering the cost of investment is 4 to 5 years. As a result, market demand will further be stimulated.

All signs have indicated that the central government will attach great importance to distributed PV power generation for the future PV market of China. Distributed PV power generation mainly includes building integrated PV and power generation on rooftop. The development of building integrated PV began to gain momentum since last year when the Ministry of Housing and Urban-rural Development of PRC made an announcement on organizing demonstration on application of PV architects for the year 2012. It is estimated that in 2020, if building integrated PV can be applied to all buildings in China, approximately 1.0 billion KW of installed capacity can be achieved, which will meet about 30% of annual demand for electricity, the same effect as having 368 Gezhouba Dams or 45 Three Gorges Dams built. It is a considerable prospect.

Benefitted from distributed photovoltaic subsidies, thin film technology kept the "commanding heights" of transformation

Under the megatrend of distributed PV power generation, marketization potential of thin-film solar technology has increasingly attracted market attention. It is understood that thin film solar technology is best for the technical route of distributed power generation, which has advantages such as being light-permeable, color-adjustable, flexible-substrate adoptable, bendable, pastable and installable and good low-light power generation. Thin-film solar modules are particularly suitable for building integrated photovoltaic. On the one hand, lightweight thin-film solar requires no burden on the load-bearing of buildings. On the other hand, the advantages of being bendable and pastable and installable can perfectly adapt to all the exterior shape and aesthetic requirements of buildings.

At present, the thin film solar technology in China has been at an international advanced level. According to the related responsible person of Hanergy, conditions for all aspects of a large scale development of distributed power generation have matured in China. The global photovoltaic market will present a clear trend featuring thin film and flexibility. Coupled with the fact that European and American countries imposed penalty duty on polysilicon solar modules but not on thin film solar modules earlier on, all these will provide a prime opportunity for thin film technology to penetrate European and American markets in scale.

Since the tremendous international market brought unprecedented opportunities, the increase in shareholding by Hanergy Solar's major shareholder once again indicated insiders' great confidence in the prospect of the thin film solar industry. In addition to the subsidy policy on distributed PV power generation from the Chinese government, the photovoltaic industry in China is expected to achieve a greater development with the help of thin film solar technology in the "pain" of international photovoltaic trade war.

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