Summary of Key Points
Distributed photovoltaics (PV) were once the main driver of China's new energy expansion, accounting for nearly half of all new PV installations in 2025. However, since 2025, the industry has cooled down due to a series of challenges including new electricity market policies, soaring compliance costs, tax risks, volatile electricity prices, and a depletion of high-quality rooftop resources. Installation volumes have decreased by 41% year-on-year, with central and state-owned enterprises (SOEs) scaling back their operations, facing difficulties in financing, and an increase in disputes over energy management contracts (EMC). Companies are trying to survive by selecting the best projects, innovating cooperation models, and exploring new applications (such as charging for heavy trucks), while also calling for policy stability, grid upgrades, and financial support.
I. The Industry's Transformation from a Hot Commodity to a Troublesome Asset: How Bad Is the Situation?
1. Dramatic Drop in Installation Volumes: In the first quarter of 2026, new distributed PV installations nationwide were 21.57 GW, a nearly 41% decrease compared to 36.31 GW in the same period of 2025.
2. Massive Withdrawal by Giants: The central enterprise China Energy Conservation Group (CECG) terminated a 762 million RMB project in Hebei, and SOE Xin Tian Green Energy divested all its PV projects in Xinjiang and Heilongjiang, with leading companies reducing their investments.
3. Financial and Cooperation Issues: Banks have tightened loan requirements (more stringent compliance checks and interest rates); the EMC model (where the power station and the company split electricity costs at a fixed discount) has failed—negative electricity prices during midday hours after marketization have led to losses for owners under old contracts, prompting them to renegotiate or even refuse to pay.
4. Depletion of High-Quality Resources: Rooftops in areas with good credit ratings and stable electricity demand, such as Guangdong, have been largely exploited. The remaining options are either outdated (with higher construction costs) or have poor capacity, forcing companies to take on smaller projects (in the range of a few hundred kilowatts).
II. Why Has the Industry Suddenly Cooled Down? Multiple Pressures Have Crushed Profitability
1. Policy Changes Altering the Foundation: The policy now prohibits distributed PV from being used solely for selling electricity back to the grid; it can only be used for self-consumption or with any excess power sold to the grid.
2. Soaring Compliance Costs: Power stations are required to meet stringent standards of "observability, measurability, adjustability, and controllability," along with safety inspections, which can cost hundreds of thousands to millions of RMB per report. Hardware upgrades are also expensive, and implementation standards vary across regions.
3. Unexpected Tax Risks: In Guangdong, a tax policy change resulted in companies having to pay back previously waived taxes and late fees, adding a significant financial burden.
4. Power Restrictions and Rising Costs: Power rationing rates as high as 20% exist in some areas of Guangdong, where the coastal climate (typhoons, salt spray) increases the cost of PV components. Small businesses often cut corners, further compromising safety.
III. Companies Are Not Giving Up: Finding New Ways to Survive
1. Narrowing Focus and Selective Investment: Companies are abandoning broad-scale efforts and withdrawing from regions with high power restrictions and costs, focusing on markets with dense demand and clear policies. They are also targeting residential PV installations to offset declining commercial and industrial business.
2. Innovative Cooperation Models: Companies like Qing Tian Technology have introduced a payment model based on actual electricity generation over three and a half years, allowing owners to pay for costs in installments and reducing contract disputes.
3. Exploring New Applications: State-owned energy companies are entering the market for charging stations for heavy trucks, as the penetration of electric vehicles is expected to reach 40% by 2030.
IV. The Industry Is Calling for Help: What Support Is Needed?
1. Policy Stability: There is a need for less frequent policy changes and more detailed guidance that aligns with market realities, enabling companies to predict long-term profits.
2. Grid Upgrades: Current power rationing is largely due to inadequate local grid infrastructure. Investment in the electricity grid (5 trillion RMB planned during the 14th Five-Year Plan) is needed to improve capacity.
3. Financial Innovation: Leveraging Guangdong's financial advantages, new credit products and risk-sharing mechanisms should be introduced to lower financing costs and stabilize investment confidence.
Conclusion
The challenges faced by distributed PV represent a necessary transition for new energy from government-backed policies to market-based competition. Only through combined efforts from companies and policymakers can this once-leading sector find a path to stable development again.