China installed 18 percent less solar power capacity in 2018

SHANGHAI (Reuters) - China put just over 43 gigawatts (GW) of new solar generation capacity into operation in 2018, down 18 percent from a year earlier, an industry group said on Thursday, after a government move to curb new capacity and ease a subsidy payment backlog.

The new generation took the country's total installed solar power capacity to more than 170 GW by the end of the year, the China Photovoltaic Industry Association (CPIA) said.

China announced last year that it would suspend new projects after a record 53 GW capacity increase in 2017 left it struggling to find spare grid capacity and pay a renewable subsidy backlog amounting to more than 140 billion yuan (£16.08 billion) last year.

China is also aiming to gradually phase out direct financial support to the solar industry after a decline in costs, announcing last week that it would launch a series of new subsidy-free projects.

But solar manufacturers are already feeling the pinch, and warned last year they were facing closure after a surge in new production capacity in previous years sent component prices plummeting.

"Facing a lot of complicated domestic and overseas trends, the sector as a whole is under big pressures and substandard producers are expected to promptly exit the market," said Wang Bohua, CPIA vice-chairman, in a speech on Thursday.

Wang said output of solar equipment continued to increase in 2018 despite the decline in new domestic capacity, with solar module production up 14.3 percent to an equivalent of 85.7 GW.

Much of the surplus production was diverted to overseas markets, with solar component export earnings rising 10.9 percent from a year earlier to $16.11 billion, Wang said, according to a transcript published on CPIA's official WeChat social media account.

China's solar manufacturers have been accused of using subsidies to drive down prices and put foreign competitors out of business, but they claim they have been the beneficiary of a fierce competitive environment forcing them to reduce costs.

The United States imposed tariffs on China's solar products last year, and its share of China's exports fell from 5.9 percent in 2017 to 0.24 percent in 2018. The bulk of China's overseas shipments went to India, South East Asia and Europe.

(Reporting by David Stanway; editing by Richard Pullin and Christian Schmollinger)