In May 2022, at Intersolar Europe in Munich, it was revealed that for the ninth consecutive year, global solar power has broken its annual installation record with 168 gigawatts (GW) of new solar photovoltaic (PV) capacity in 2021. In 2022, global solar is expected to continue the decade-long record-breaking streak, installing more than 200 GW of solar for the first time. As currently the world’s largest greenhouse gas emitter, China is actively transitioning towards carbon neutrality by 2060. One of the ways to achieve that is by replacing fossil fuel energy with clean energy such as wind and solar power. In fact, China has been the largest producer of solar power and currently dominates the global solar PV market, with a market share of over 70%. According to the National Energy Administration (NEA), in 2021, the newly installed PV capacity reached to 54.9 GW, accumulating to a total of 306 GW by end of 2021, almost double the EU’s total capacity of 164.9 GW. It is expected that China will install around 75 GW to 100 GW in 2022. PV industry requires heavy load of investment. In 2021, the total investment amounted to RMB 720 billion ($110 billion), and it is estimated to further expand to RMB 1.6 trillion ($246 billion) in 2022. Traditionally, the investment is dominated by public listed companies or state-owned enterprises, which created a great entry barrier for small to medium companies to tap into this market. It is also hard for these kinds of companies to raise fund or finance to grow their business. As at the forefront of financial innovation, supply chain finance players seem to be the game changer, providing an alternative solution to address this issue. Taking one of the leading supply chain management and finance players in China as an example, the total newly installed PV capacity reached 1 GW, representing 2% of its supply chain. It capitalised on its warehouses network around China and collaborated with those PV manufacturers to install PV appliance on the rooftop of the warehouses, generating clean energy for day-to-day operation, reducing CO2 emission by over 10000 tons per year. As of the end of November 2021, the company has stably operated distributed PV power generation projects in 15 provinces and cities across the country, including 32 core cities with strong electricity demand such as Beijing, Shanghai, Guangzhou, Shenzhen, etc. The cumulative development scale is expected to reach 1 GW by the end of 2021, equivalent to the annual electricity consumption of about 750,000 households. So far, 40% of its warehouse rooftop has been installed with PV appliances. To fund those PV manufacturers, the company leverages on daily operational data to do risk evaluation, and uses PV appliances as a collateral to issue asset backed securities (ABS) and distributed through public offering at stock exchanges. Given its green feature, it also lowers the funding cost compared with traditional finance tools. The green ABS is now considered the alternative green finance tool other than green bond and loans. According to the company, green assets only accounts for 10% of its total supply chain financial assets, which means great potential in the next few years to come.
