With Europe tipped to levy punitive duties on China's photovoltaic (PV) industry, the once lucrative sector may be tottering towards a reshuffle motivated by policy support and industry trends, analysts said.

On Wednesday, the European Commission began voting on proposed import duty rates against Chinese solar panels. The provisional rates were set at an average of 47 percent, and will be effective from June 6 if the proposal is passed.

With the final decision up in the air, the troubled Chinese PV sector - also cornered by defaulted debts from suppliers and the quitting of top executives - seems to be left with very few options.

"The industry can certainly weather it through to the end. But some excessive capacity will inevitably be weeded out during the process of recovering," Wang Haisheng, an energy analyst with Minsheng Securities said in an interview with Shanghai Securities News.

The elimination of obsolete capacity will actually benefit future development of the entire industry, Wang said.

The anti-dumping investigation, reportedly involving 21 billion euros ($27 billion) of Chinese solar panels, came after EU solar companies blamed their Chinese counterparts for seizing more than 80 percent of the European market by dumping cheap products.

The proposed EU duties will involve solar products ranging from silicon wafers to modules, striking a hard blow to Chinese companies heavily relying on exports to Europe, said an analyst with Sinolink Securities who declined to be named.

The contraction in capacity, which has lasted for the past two years, is expected to accelerate in the second half of the year, the analyst said, adding that a reduced capacity will help the sector realize a stronger rebound, which would suggest more gains for companies that survive.

Meanwhile, industry players and market watchers are also pinning hopes on the Chinese government, which has ramped up efforts to develop clean energy and vowed a 21-GW installed capacity target for solar PV power by 2015.

The country now grants differentiated subsidies to three types of PV power projects, but some insiders think the sector eventually needs to break away from the dependence on government subsidies.

China's solar PV sector will not have a truly promising future until the costs of PV power plant construction and power generation are reduced to the levels of thermal power stations, according to Sha Xiaolin, chairman of Nantong Qiangsheng Photovoltaic Technologis Co. (QS solar).

Sha noted that the industry's fundamental way out is to build large-scale distributed power plants that can consume the excess capacity and boost sales. QS Solar, previously a maker of thin-film PV modules, has re-focused its business on the development of PV power plants in the past two years.

In the next two years, the company will make efforts to lower costs of rooftop solar power generation systems to about 5 million yuan (805,152 U.S. dollars) per MW, close to the unit cost of building a thermal power plant, Sha added.

American PV module maker First Solar, Inc. agreed that the Chinese government's favorable policies should be carried out in a sustainable way, while commenting on the Chinese market at the ongoing PV power expo in Shanghai. A feed-in tariff scheme is key to the development of the solar PV sector, said a senior manager of First Solar.

"Generally speaking, the future trends [of PV power] will be private PV power plants and increased energy storage capacity, and the policies should focus on these areas," said Jiang Haijiang, president of Shanghai Aero-Sharp Electric Technologies Co.

In early May, Germany spearheaded global efforts in subsidizing energy storage systems of PV batteries, according to Jiang.