China solar sector faces shakeout but rockbottom prices to stay
Consolidation in China’s crowded solar power sector is pushing smaller players out of the market, but excess production capacity — with more on the way — threatens to keep global prices low for years.
China accounts for 80% of solar module production capacity after years of subsidies, driving oversupply that has triggered a collapse in global prices and provoked import duties from trading partners to stave off being swamped by lowcost equipment.
U.S. Treasury Secretary Janet Yellen, set to visit China this week, plans to warn
Beijing of the harm done by subsidies for cleanenergy products ,including solar panels that she says are flooding global markets and pose a threat to U.S. firms, workers and the global economy.
Overcapacity in China’s solar industry is emblematic of the challenges facing the world’s secondbiggest economy. High levels of Stateguided industrial investment and low levels of household consumption mean many sectors produce more than the domestic market can absorb.
Prices almost halve
Oversupply pushed prices of finished solar panels in China down 42% in 2023, making Chinese panels more than 60% cheaper than U.S.made equipment, with some moduleonly manufacturers taking orders at negative margins to preserve market share, said Wood Mackenzie analyst Huaiyan Sun.
At the end of 2023, China’s annual production capacity for finished solar modules was 861 gigawatts (GW) equivalent according to China Photovoltaic Industry Association data, more than double global module installations of 390 GW. Production capacity is expected to increase by a further 500 or 600 GW this year, according to forecasts by Wood Mackenzie and Rystad Energy, as Chinese heavyweights, including Longi, Jinko Solar and JA Solar continue to build new plants. Sector expansion has been driven by local government policy support and comes after years of breakneck demand growth.
“China’s estimated wafer, cell and module capacity that will come online in 2024 is sufficient to meet annual global demand now through to 2032,” said ◣uyang Dong, China energy policy analyst at Climate Energy Finance in Sydney.
Shipped to Europe
Nearly half of China’s solar panel exports in 2023 were to Europe, data compiled by energy think tank Ember showed, where multiple factories have announced plans to close due to the flood of imports.
Chinese solar panels have been subject to U.S. tariffs for more than a decade, with further duties recently imposed on several Chinese solar panel makers who finished their panels in Southeast Asia.
China’s solar industry generated 2.5 trillion yuan ($346 billion) in investment, goods and services last year, according to a study by think tank Carbon Brief, making it the top contributor to the country’s economic growth as investment poured in.
“Many nonsolar companies in China have been enticed by massive sustained market growth opportunities in solar and favourable policy support,” said Dong of Climate Energy Finance, who expects most plans by such players not to materialise.
Between June 2023 and February 2024, at least eight companies cancelled or suspended more than 59 GW of new production capacity, equivalent to 6.9% of China’s total finished panel production capacity in 2023, according to the China Photovoltaic Industry Association.
Utilisation rates for finished solar panel production capacity tumbled to 23% in February 2024, down from more than 60% a year earlier, as per data from consultancy PV Infolink. Marius Mordal Bakke, a solar supply chain analyst at Rystad, said the largest vertically integrated players will grow market share as smaller players are squeezed out.