Changes in the distributed photovoltaic application market

Under the "cold winter" of the photovoltaic manufacturing industry chain, the distributed photovoltaic application market seems to be in a panic, especially the household photovoltaics that have soared in recent years, and anxiety is spreading among them.

01 Head market slowdown
Benefiting from policy promotion and equipment cost reduction, household distributed photovoltaics can be said to be a market segment with a relatively fast growth rate in recent years. Especially in the past 2023, both quarterly and annual new installations have set historical highs.

However, this "grand momentum" did not continue in 2024. According to data from the National Energy Administration, the new household photovoltaic installations in the first quarter of this year were 6.92GW, a year-on-year decrease of 23%, which is also the first time that the data in the first quarter has declined.

Specifically in terms of regions, the new household photovoltaic installations in 12 provinces, autonomous regions and municipalities in the first quarter declined year-on-year. The TOP10 markets in 2023 (Henan, Jiangsu, Shandong, Anhui, Jiangxi, Hebei, Hunan, Hubei, Shanxi, Fujian) are all listed except Jiangsu. Among them, Henan, the largest market, saw a year-on-year decrease of 87% in new installations in the first quarter, and Jiangxi and Hunan also saw a decrease of more than 70%.

Of course, there are also "the best scenery here", such as Jiangsu replacing Henan as the largest household market in the first quarter, with new installed capacity increasing by 160% year-on-year; the three northeastern provinces of Liaoning, Jilin and Heilongjiang have accelerated, with year-on-year growth of 194%, 880% and 492% in the first quarter respectively. In addition, the household "report card" in Shaanxi, Inner Mongolia, Gansu, Yunnan and other places in the first quarter is also good.

The biggest constraint on household photovoltaics at present is the grid access capacity. Recently, Kailu County, Tongliao City, Inner Mongolia issued a notice that it decided to postpone the filing of household distributed photovoltaic power generation projects because the access of distributed power sources has reached the stability limit. A city in Sichuan has even caused hundreds of photovoltaic agents in the region to be stranded due to the opinions of consumption.

The cases may be far more than this. In fact, since the second half of last year, many places have issued new policies on distributed photovoltaic management, requiring power grid companies to promptly carry out distributed photovoltaic carrying capacity assessment and accessible capacity calculation in the region in accordance with the "Guidelines for the Assessment of the Carrying Capacity of Distributed Power Sources Connected to the Grid", and restrict filing in areas with insufficient open capacity. So far, the constantly updated accessible capacity in various places continues to stimulate the nerves of household photovoltaic practitioners, and the rapid narrowing of access space is indeed a reality.

According to the front-line household photovoltaic developers, the current general choice is to continue to look for the next market with capacity.

02 Leasing model is strictly controlled
Focusing on the development model of household photovoltaics, in recent years, under the deep cultivation of many practitioners, full payment, photovoltaic loans, leasing and other models have flourished. As photovoltaic loans are chaotic and controversial, the leasing model that minimizes farmers' risks has gradually become the mainstream, including pure leasing and operating leasing.

It is understood that for farmers, the income of pure leasing and operating leasing comes from roof rent, which is generally calculated per piece per year. But in essence, there are obvious differences between the two, mainly reflected in the different division of responsible entities in the contract. One is registered with the enterprise, and the responsibility that farmers need to bear is relatively small; the other is registered with the farmer, who is the main body of the power station responsibility. Of course, there are also companies that do not clearly distinguish between the two models and generally carry out mixed marketing and publicity.

Under the leasing model, various platform companies such as central state-owned enterprises, private photovoltaic enterprises, and financial companies have all entered the market, and professional, process-based, and standardized management has been adopted from financial support, project development, construction to operation and maintenance, thus ensuring the quality of household photovoltaic power stations. But at the same time, the rapidly expanding number of platform companies has also driven the scale of household photovoltaics to soar, quickly squeezing out the space for consumption.

Therefore, in the new policies for distributed photovoltaic management in various places that were updated last year, the leasing model has also become one of the key areas of supervision.

On the one hand, Hunan, Henan, Hebei, Shandong and other places have clearly listed distributed photovoltaic projects for profit such as leasing other people's roofs or renting photovoltaic power generation facilities to residents as non-natural person photovoltaic projects. Such projects should be filed uniformly by enterprises and accepted in accordance with the procedures for non-natural person registration.
On the other hand, leasing is also the first choice when capacity is in short supply. Policies in many places emphasize that when the available capacity is insufficient, priority should be given to ensuring the access of household natural person power stations, and the acceptance of household non-natural person photovoltaic power stations should be temporarily suspended.

03 Investment risks increase
In order to break the impact of distributed photovoltaics on the power grid system, energy storage is highly expected, and the configuration of energy storage has also spread from large ground power stations to distributed photovoltaics. Since 2021, many places such as Ningxia, Jiangsu, Hebei, Chongqing, Henan, and Hunan have encouraged or forced distributed photovoltaics and even household photovoltaics to be equipped with storage.
Compared with the cost, household photovoltaic investors are more worried about the risk of electricity prices.

At present, the household photovoltaic access mode is mainly full access to the grid, and the electricity price is a fixed electricity price. However, under limited access, some places have begun to restrict full access to the grid. For example, a local power supply company in Inner Mongolia reminded users at the beginning of the year that the "household photovoltaic project access mode can be selected as full access to the grid" document has been abolished, and all subsequent household distributed photovoltaic customers cannot be registered and filed through the "full access to the grid" mode before receiving new official documents. Similarly, some cities and counties such as Liaoning and Yunnan have also issued policies or voices prohibiting household distributed photovoltaics from being fully connected to the grid.

Recently, a message that "all distributed photovoltaics participate in market-based transactions" has caused a large number of household platform companies and dealers to panic. Immediately afterwards, notices from agents of several platform companies were released one after another, urging them to speed up grid connection and reminding them to recalculate market development fees and installation service fees in accordance with policies.

Polaris verified that some notices were indeed issued by platform companies, but some were fabricated. It is understood that the relevant policies are still under discussion, and the implementation of policies cannot be achieved overnight.

However, the entry of distributed photovoltaics into the market is an inevitable trend, and a drop in electricity prices is a high probability event. An important player in household photovoltaics also suggested that policies should not be "one size fits all" and that new power stations should be distinguished from existing power stations.

It is worth noting that the risks emphasized in the notices of the above-mentioned platform companies also include peak regulation. In fact, there are precedents for distributed photovoltaics to participate in peak regulation. For example, during special holidays such as the Spring Festival, many places such as Shandong and Hebei arranged household photovoltaics to participate in peak regulation. Hunan issued a document to clarify that when conventional regulation means cannot meet the system peak regulation requirements, distributed photovoltaic peak regulation operations should be organized according to the principles of "openness, fairness and justice" to ensure the safety of the power grid.

In addition, the distributed photovoltaic grid connection policy also has a tightening trend. According to the Inner Mongolia Solar Energy Industry Association, it was learned from relevant departments that the local government is formulating a new distributed grid-connected policy. The new policy may be based on the development of the distribution network, and the specific indicator scale will be selected by each league and city based on the scale of grid access.

It can be expected that the high yield of distributed photovoltaics will eventually be difficult to sustain, and the market changes will lead to a brutal competition among companies for new technologies, new solutions, and new models.