New Policies Set to Transform Distributed Photovoltaics in China

As the implementation date approaches, significant changes are occurring in the market, and the role of distributed photovoltaic (PV) systems in the future new power system is set to undergo a major transformation.

In the context of the global energy transition, distributed PV, as a key player in the new energy sector, is experiencing profound changes. Recently, the National Energy Administration addressed questions from the public regarding the “Management Measures for the Development and Construction of Distributed Photovoltaic Power Generation” (hereinafter referred to as the “Management Measures”). It was clarified that large-scale commercial and industrial distributed PV projects that had obtained filing certificates and grid connection plans under the “self-consumption and surplus power grid connection” policy prior to the publication of the “Management Measures”, but fail to commence operation by May 1, 2025, will need to reapply for filing and grid connection documents. Since its release, the “Management Measures” have garnered widespread attention from industry professionals due to their significant impact on the development of the distributed PV sector.

Market Surge Under Policy Implementation

The “Management Measures” aim to standardize the development and construction management of distributed PV, promoting healthy and sustainable industry growth. Professor Sun Chuanwang from Xiamen University’s China Energy Economics Research Center stated in an interview that the policy focuses on addressing issues related to grid fluctuations and localized overloads caused by the rapid expansion of distributed PV. It proposes targeted solutions, emphasizing strategies for local consumption and utilization, thereby facilitating dynamic alignment between project development and grid planning. This approach aims to balance orderly growth in installed capacity with the flexible support of the power grid.

Additionally, the policy outlines refined and differentiated development standards and grid connection rules for various projects, ensuring precise alignment with regional resource endowments. This not only provides buffer space for optimizing existing projects but also delineates compliance boundaries for new projects.

It is noteworthy that distributed PV is closely linked to people’s livelihoods. “The ‘Management Measures’ specify requirements for ensuring public welfare during filing, construction, and operation phases, with a focus on supporting rural revitalization and protecting farmers’ interests. The flexibility and inclusivity of distributed PV will strengthen the safety net for social electricity supply, enabling a dual empowerment of clean energy transition and improved public welfare,” Sun added.

With the imminent implementation of these policies, the distributed PV market is experiencing a rush to install systems. Sun pointed out that the current filing scale is rapidly increasing, highlighting the effects of the policy window. “After the ‘Management Measures’ established clear timelines, companies accelerated their project application processes to secure the benefits of electricity price policies and mitigate uncertainties regarding future investment returns. The scale of filings has rapidly expanded, while companies are also speeding up technological advancements and innovating business models. On one hand, distributed PV enterprises are actively promoting the integrated innovation of PV with storage and load aggregation technologies, leveraging smart technology to enhance component performance and operational stability. On the other hand, the industry is exploring new business models, such as creating comprehensive energy solutions through ‘PV + storage + microgrid’ to improve the economic viability, safety, and market competitiveness of distributed PV projects.

As investment surges, component prices have also seen an increase. “Currently, the demand for distributed PV investment is growing rapidly, activating upstream and downstream capacities through industry chain transmission mechanisms, leading to increased orders for component packaging, inverter manufacturing, and other sectors. In the short term, component prices are on an upward trend,” Sun noted. Market data shows that since the announcement of the new policy, prices for PV components have risen significantly, with March’s mainstream distributed component spot price reaching 0.8 yuan per watt. Prices for some leading enterprises’ components have even reached near two-year highs, such as LONGi Green Energy’s Hi-MOX10 anti-dust components priced between 0.85 and 0.9 yuan per watt.

Reshaping the Future Power Landscape

With policies promoting the market-oriented trading of distributed PV, its role and position in the new power system will undergo significant changes. Sun believes that distributed PV will further enhance local consumption, substantially reducing reliance on cross-regional and long-distance power transmission, thereby optimizing the efficiency of power resource allocation. Once distributed power sources are flexibly integrated into the distribution network, they can dynamically match user load curves, significantly improving the flexibility of the power system’s adjustment capacity. For instance, during peak electricity consumption periods in the daytime, distributed PV can provide timely power to users, alleviating the pressure on the grid; conversely, during nighttime low consumption periods, distributed PV can cease generation, preventing power waste.

Distributed PV also features localized and decentralized layouts, which can lower the risk of concentrated systemic failures in the power system. “By enhancing multi-point support, the grid can better withstand extreme weather or unexpected events, effectively increasing its resilience. In areas frequently affected by natural disasters, the decentralized layout of distributed PV ensures that even if power facilities in some regions are damaged, other areas can continue supplying electricity, thereby meeting the essential power needs of local residents and businesses,” Sun explained.

In terms of collaborative development, distributed PV can form synergistic mechanisms with other energy forms such as wind and hydropower. “Distributed PV and decentralized wind power can complement each other in daily and seasonal output. Coordinated layouts of pumped storage can further balance real-time discrepancies in power supply and demand. For example, during periods of weak wind but ample sunlight, distributed PV can take on the primary generation role; conversely, in seasons with insufficient sunlight but strong winds, decentralized wind power can supplement the electricity supply. This diverse energy structure drives the new power system towards ‘flexible adjustment and multi-source complementarity,’ providing robust support for building a clean, low-carbon, safe, and efficient energy system,” Sun further stated.

Industry insiders believe that the implementation of the “Management Measures” will mark a pivotal moment in the development of the distributed PV sector. It has not only triggered a wave of market rush and price volatility in the short term but will also profoundly influence the relationship between distributed PV and public welfare, as well as its role and position in the new power system in the long term. With the effective implementation of these policies, the distributed PV industry is poised to develop in a more standardized, healthy, and sustainable direction, making greater contributions to the energy transition and socio-economic development of our country.