The Impacts and Interaction of Upstream and Downstream Policies for the Solar Photovoltaic Industries of China

Wang Hongwei, Zhang Kai and Vanessa Zhang ()

Chapter 8 in Financing Renewable Energy Development in East Asia Summit Countries A Primer of Effective Policy Instruments, pp 223-265 from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: In this chapter, we provide a research framework on the industrial structure of solar photovoltaic (PV) industry in China and aim to study the incentive correlation and interaction between upstream and downstream firms. We first draw a picture of Chinese solar PV industry and go through the literature to lay out the history and existing policies of the industry and current issues that companies in different positions in the industry chain have to face. Secondly, we use industry data and apply unit root test, Johansen cointegration analysis, Granger causal test, and Directed Acyclic Graph test. With these econometric methods, we study the long-term relationship between the polysilicon price, government subsidies on polysilicon plants, the solar cell price, the solar power price, and government subsidies on solar power. Our analysis shows that the policy-conducting effects from upstream PV firms to the downstream products are smaller than that coming from the downstream PV firms to the upstream products. Policy implications are discussed. We recommend that the Chinese government should issue policies to facilitate coordination between the central government and local governments on the development of PV industry in China. The government should encourage indigenous innovations in the PV industry and improve its competitiveness. Policies on electricity pricing and cost allocation should also be improved to ensure the steady growth of the solar PV industry in China.

Keywords: Upstream and downstream policies; solar photovoltaic industries; interaction; China (search for similar items in EconPapers)
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