Beijing's new policy to eliminate subsidies for most of its solar projects might lead to a drop in global solar installations and introduce short-term disruption for industry participants globally, analysts believe.

James Evans, an industry analyst at Bloomberg Intelligence, said the halting of installation quotas in 2018 for ground-mounted solar energy projects in China and limiting distributed solar activity to 10 gigawatts are set to have major industry implications, given the country had 54 percent of global installation in 2017.

The measures will curb demand while adding margin pressure, encourage industry consolidation and drive aggressive export activity, he said.

According to Evans, polysilicon demand from China could slow if the newly introduced policy compresses near-term needs, considering the raw material for solar panels is still largely imported, particularly for higher-quality material, with South Korea and Germany being the largest sources.

"Producers including Wacker Chemie and OCI have been operating at high output utilization rates to support strong high-quality polysilicon demand, while lower tariff rates and suspension of new project-quota allocations could result in slower demand, intensifying pricing pressure and reducing output, potentially driving up production costs," he said.

Insiders believe 2018 is likely to be the first year ever seeing negative annual worldwide installation growth. Some manufacturers of polycrystalline silicon, the key component of solar panels, said they would cut production capacity over the next three months while some small players have even halted production.

Insiders also cut forecasts for panel prices. Bloomberg New Energy Finance adjusted its outlook from a 25 percent price decline to a 34 percent drop between January and the end of the year while the China Non-Ferrous Metals Industry Association also said the subsidy cut has led to a slump in solar panel prices as demand from solar power project developers has declined.

According to Wood Mackenzie, due to the new solar sector policy, 20 gigawatts will be shaved off China's installations this year, which is one fifth of last year's global demand.

Despite the government's efforts to encourage clean energy including solar power, much of the solar power installed in China in recent years remains unused or curtailed as there is inadequate grid access.

Curtailment for solar and wind power in the Xinjiang Uygur autonomous region stood at more than 20 percent by the end of 2017, compared with nearly one-third of installed capacity that stood idle in the previous year.

Beijing's new policy to reduce feed-in tariffs is partly meant to address the curtailment problem in the country through managing the pace of construction and give grids more time to expand transmission capacity. But insiders anticipate solar power policy in China will continue to be supportive in the longer term.

Li Junfeng, former director and researcher at the National Center for Climate Change Strategy and International Cooperation, believes that the only way to survive in this competitive sector is through innovation and cutting the cost of electricity per kilowatt hour.

China has become the world's largest green energy supplier after years of development, taking the lead in photovoltaic development and making a great contribution to the global energy transformation, he said, adding that the key to success is identifying promising technologies.