China needs to put a solar panel on every government-owned piece of property in the country. Whether it's the People's Bank of China or a government housing settlement, it is clear that one stroke of a pen could radically change the outlook for the world's leading producer of photovoltaics.
Photovoltaic solar panels are the mirror-like solar cells that make up a solar panel. China is the world's number one producer. But it wasn't the world's number on consumer. It should be.
There are signs that China's appetite for solar is increasing.
The country's solar panel installation capacity is around 43 gigawatt as of 2015, up over 50% from a year ago, the National Energy Administration said on Friday. The increase accounted for a quarter of the world's added capacity in 2015. Of the total installation capacity, 86% was from solar power plants and 14% was from distributed systems, which is both roof-top mounted or ground mounted and aimed at serving a very tight, local zone, like a single piece of property.
Power plants are nice. But imagine what would happen of provincial governments where solar panel producers live suddenly said, "we'll take your supply and put it on our roof at market rate."
On the sentiment side, such an announcement would be a boon for China's biggest players like JA Solar (JASO) and Trina Solar. Their ADRs are down 78% and 66% over the last five years because of a massive supply and demand imbalance. Yingli Green Energy is even worse, down over 95% in five years. Others have completely folded over the same period, namely Suntech, which was the first large cap China stock to ever go belly-up.
If there is a glut in the solar panel market, Chinese demand would surely help the entire supply chain if it succeeded at taking warehouse stock out of the market and not simply giving producers a reason to rev up production again.
China needs to go green. That's national policy. Beijing wants to boost clean energy as part of its energy matrix. China is aiming to lift the proportion of non-fossil fuels in energy consumption to 20% by 2030 from the present 11%, of which hydroelectric power is the dominant source.
Moving to solar could help displaced coal miners. Low cost labor could be switched to installing and delivering solar panel, in an ideal world. It won't help everyone. But it will make China's air cleaner and will save a few solar panel makers still stuck in a supply glut.
Last week, China's government said it would not approve any new coal mines until 2019. That sector is also facing an oversupply issue of its own. The problem with coal is that unless China can find a home for that product along its new Silk Road, then its value will only decline as China promises to turn away from coal fired power generation.
All told, within the next five years China plans to eliminate a whopping 500 million tons of coal capacity and consolidate another 500 million tons into the hands of fewer companies. The private sector will be asked to step in and take over provincial players, providing they convince buyers to take on at least some of the coal miners debt. Beijing wants every coal producer's output to be no less than three million tons per year.
All of this is good for clean energy. And while hydroelectric dams can employ mass amounts of low-skilled labor during construction, they can harm the environment when being built. That's generally not the case with solar panels.
Investors in Trina and Yingli might not have long to wait before Beijing policy makers provide some support for one of China's most important clean tech sectors. And arguably the one facing the biggest oversupply problem.
