Solar energy ran into a new roadblock in China.
Solar-power industry stocks fell as new policies instituted by three Chinese agencies threaten to reign in the photovoltaic market that has seen explosive growth in recent years.
China's National Development and Reform Commission, the Ministry of Finance and National Energy Administration announced May 31 that installation of new solar-power farms will be halted for the rest of 2018 with future projects needing approval from the government.
China consumes more than 50% of the world's current solar power production and is a major player in the manufacturing of solar power technology. The impending reduction in solar power installations and the cap of 10 gigawatts on solar farms has led to concerns for companies rooted in solar power, according to a report from Brian Lee, an analyst at Goldman Sachs.
China's end to its feed-in-tariff subsidy came as a surprise as it was credited for helping China become one of the leaders in renewable energy. In its place, an auction-based system will be implemented in order to "drive down costs and control installation volumes on location," according to the report.
Goldman Sachs estimates that China's volume in the industry will decline by 9% to 31% over the next three years with the biggest hit coming in 2018. Solar power companies that manufacture modules and other components integral in the solar energy production process will be affected the most, but companies further down the supply chain should benefit from an over-saturation of input products and lower pricing for now, according to Lee.
The news comes on the heels of President Trump's push for the Department of Energy to help struggling coal and nuclear energy manufacturers in order "to promote the national defense and maximize domestic energy lines," according to a memo that was circulated throughout the Trump administration Friday, which, in conjunction with the NDRC's action, could drive solar energy stocks farther down.
Several solar power stocks saw a drop in their share price over the past two days with some falling more than 8%. Tempe, Ariz.-based First Solar Inc. (FSLR - Get Report) , which manufactures solar-power modules, declined 8.3% to $58.24 a share and SunPower Corp. (SPWR - Get Report) , based in San Jose, Calif., another equipment manufacturer, fell 5.7% to $7.87 a share.
San Francisco-based Sunrun Inc. (RUN - Get Report) , a company that specializes in providing consumers with solar power, saw its share price rise 4.6% to $12.82, one of the few stocks in the sector to post gains.