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(Bloomberg) — China’s beleaguered solar manufacturers have seen their shares rebound in recent days as speculation mounts that the government will take steps to maintain the industry’s rapid build-up of capacity.

Beijing could end its policy of limiting installations when power curtailments rise above 5% of installed capacity for a given source, according to local media reports, which didn’t say where they got the information. The National Development and Reform Commission, which imposed the rule in 2018 to make electricity supply more efficient, didn’t respond to a faxed request for comment.

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To meet its climate targets, China has engaged in a world-leading buildout of renewable energy. But the electricity grid at times has been overwhelmed by the additions, forcing plants to stop generating or even offer power at negative rates. The expansion has also left the solar industry with excess manufacturing capacity, which has weighed heavily on valuations in recent years. 

Doing away with the cap could allow developers to keep installing solar panels in several regions where grid constraints may have forced them to ratchet back, JP Morgan Chase & Co. analysts including Alan Hon said in a research note on Sunday. The bank has boosted its forecast for installations this year by 21% to 225 gigawatts — even higher than last year’s record. 

Shares in Xinyi Solar Holdings Ltd., a leading solar glass manufacturer, have surged 10% this week through Tuesday’s close in Hong Kong, while equipment-maker Sungrow Power Supply Co. has risen 9.4% in Shenzhen. Top panel producers such as Longi Green Energy Technology Co. and Trina Solar Co. have also seen their stocks gain.

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Curtailments have been a persistent headache for the industry because it’s difficult and costly to store renewable power. Electricity worth billions of dollars was squandered in 2017 when a boom in wind and solar — aided by generous government subsidies — couldn’t be absorbed by the grid. That was followed by years of slower installations.

This time might be different. Government officials have softened their tone on wasted power as clean energy becomes a major source of growth for the economy, Hon said. 

But even if the policy ends, the more fundamental problem with grid congestion will have to be addressed, said Dennis Ip, an analyst with Daiwa Capital Markets. That will require major investment in energy storage and transmission.

On the Wire

The National People’s Congress’ emphasis on cutting China’s carbon emissions further could brighten the solar sector’s outlook.

Australian vinters and lawmakers said China proposed lifting punitive tariffs on the nation’s wine, signaling the end is near to a three-year trade dispute as both countries seek to strengthen ties.

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China’s urgent iron ore hunt looks set to increase competition.

The Week’s Diary

(All times Beijing unless noted.)

Wednesday, March 13:

• China to release February aggregate financing & money supply by March 15
• CCTD’s weekly online briefing on Chinese coal, 15:00
• China Nonferrous Metals Industry Association holds Copper Smelting Enterprise Symposium in Beijing
• Mysteel hosts international iron ore conference in Qingdao, day 1

Thursday, March 14:

• Mysteel hosts international iron ore conference in Qingdao, day 2
• EARNINGS: Rusal

Friday, March 15:

• China sets monthly medium-term lending rate, 09:20
• China new home prices for February, 09:30
• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~15:30
• Mysteel hosts international iron ore conference in Qingdao, day 3
• EARNINGS: CATL

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