S&P Global’s analysis highlights that China’s new renewable energy pricing mechanism is likely to significantly enhance solar module demand and prices. Announced by the National Development and Reform Commission, this shift from a feed-in tariff to a market-driven pricing model is set to encourage an increase in renewable energy installations before its full implementation on June 1. Experts forecast a surge in solar module demand as developers rush to secure fixed pricing arrangements, potentially leading to price hikes domestically that may ripple out to international markets. Jessica Jin from Commodity Insights anticipates that, while solar prices could see a rebound due to heightened demand, the global price response might lag slightly, influenced by distinct market contexts like those in the U.S. and India.
However, the long-term outlook for China’s solar market hinges on overcoming existing challenges related to grid integration and market reforms. The rapid expansion of solar capacity has exposed the need for a more flexible grid and a comprehensive improvement across the photovoltaic industry’s ecosystem. If these challenges remain unaddressed, they could hamper future solar installation growth, thus constraining domestic solar module demand. While current price increases may create urgency among developers, some market participants consider these trends temporary, suggesting they may not persist beyond the third quarter of the year. Ultimately, the sustainability of solar demand and pricing will depend on systematic improvements within the sector.