The photovoltaic (PV) industry has recently faced scrutiny as a central enterprise has bid at exceptionally low prices for a major project, stirring discussions regarding the sector's internal dynamics and competitivenessThis unusual phenomenon occurred on the night of December 22, when the State Power Investment Corporation's subsidiary, Guodian Power Xinjiang Bazu Power Company, announced its procurement of solar photovoltaic modules at remarkably low prices, igniting alarms among industry experts and watchdogs.
Just days before, on December 18, the China Photovoltaic Industry Association raised concerns over the bidding process for the same project, emphasizing the need for more equitable practices in an industry that has seen devastating price warsThe project's bid results were made public on December 20, revealing that two companies—Shanghai Electric Group's Huanxi Photovoltaic Technology and Hesheng Silicon Industry Co.—secured the orders at bid prices of 0.6245 RMB/watt and 0.629 RMB/watt, significantly below the threshold price previously set by the association.
This incident is not merely an isolated occurrence but a reflection of a wider issue plaguing the PV sector, which has been grappling with a phenomenon often referred to as “internal competition”—a race to the bottom that threatens the sustainability of numerous firms
As observed by seasoned industry commentator Li Li, the initiative led by the China Photovoltaic Industry Association strives to combat this relentless competitionHowever, the self-regulatory agreements articulated are binding only upon a select group of over 30 enterprises, excluding those who participated in the bidding for the Guodian project.
According to Li, while it is commendable that the industry association has put forth various initiatives to regulate pricing, the real challenge lies in convincing firms, especially those that lack the brand power and resource backing of larger companies, to forego aggressive bidding practices to merely survive in a tight marketFor many small to mid-tier enterprises, lowering prices may seem like the only solution to maintain market presence amidst fierce competition.
The key question now is whether the self-regulation initiative can effectively lead to the desired change within the industry
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The recent bid by Guodian Power has highlighted the ongoing struggle against internal competition, prompting further investigation into the legitimacy of bid prices that seemingly undermine the profitability of solar manufacturers.
In a statement, the China Photovoltaic Industry Association reflected a sentiment of frustration, lamenting the lack of response from Guodian Power regarding the transparency of the bidding criteria and cost calculationsThe organization voiced two main concerns: whether the project adhered to the latest economic directives from the central government and if the minimum bidding price was de facto excluded in the selection process.
The stark contrast between the association's calculated minimum bid price of 0.69 RMB/watt and the set maximum of 0.6313 RMB/watt raises questions about the rationale behind these limitsGiven the current economic climate and recent market dynamics, the association’s leadership emphasized the imperative for transparent and reasonable pricing that reflects true operational costs without exacerbating competitive pressures.
As the debate continues, solar energy pioneers like Cao Renxian, Chairman of Sungrow Power Supply Co., have remarked on the dangers posed by bid undercutting, cautioning that firms should not operate with the assumption that entering a low-price game will ultimately benefit them in the long run
He underlined the importance of collective industry responsibility and refraining from destructive competition, urging peers to maintain vigilance against market impulses that drive irrational bidding behavior.
Much depends on the future regulatory framework and self-restraint within the industryRecent moves from national authorities aiming to eliminate inefficient capacity and restrict excessive price competition reflect a growing recognition of the precarious state of the PV marketInitiatives have been proposed to establish effective bidding mechanisms, in which the proposed prices would not fall below operational cost thresholds—a significant step toward achieving a more stabilized market environment.
There’s a cautious optimism emerging among the industry’s major players, as self-regulatory pricing calculated in accordance with guidance from the association shows signs of early success
In recent collective procurement projects, leading enterprises have submitted bids that align closely with the minimum pricing benchmarks recommended by the association, illustrating a shift toward healthier competition.
As illustrated in the recent procurement initiated by the Power Construction Corporation of China, bids were reported to range around 0.69 RMB/watt—indicative of a new commitment to pricing that is both competitive and sustainable, keeping in mind the operational realities that manufacturers faceAnother notable project in December further reflected this trend, where major companies like Trina Solar and GCL-Poly Energy Corporation achieved winning bids exceeding the prior minimal pricing encouraged by the association.
Despite these positive developments, it’s crucial to acknowledge that we are in the early stages of reformThe road ahead is likely to be complex, as the industry continues to grapple with the ramifications of past pricing wars and the underlying competitive pressures that irrevocably altered its landscape
As suggested by Zhang Zhang, a senior executive at a leading domestic PV manufacturing firm, the efficacy of self-regulation will depend significantly on the collective willpower of market playersTrue progress will only be seen when the majority agree to abandon the pursuit of unsustainable profit through price cuts.
Discussions are ongoing regarding the finer details of self-regulatory agreements, particularly how quotas are assigned, and the mechanisms for monitoring successAs stakeholders aim to shape a more equitable market, the effectiveness of these self-imposed regulations will significantly influence future profitability and operational stabilityIt is a delicate balance, and much remains to be validated as the industry navigates through its transformation from hyper-competitive practices to a standardized and resilient approach.
Over time, as the standards of industry self-regulation become increasingly formalized and accepted, the hope is that firms will no longer find loopholes to exploit, thus creating an environment where all players can thrive without sacrificing their viability for short-term gains