- China’s solar firms face a supply glut, producing nearly twice the projected global demand, forcing many to sell at a loss.
- Increasing protectionism from countries like the US and India challenges China’s dominance in the solar supply chain.
- Executives urge Beijing to regulate new factory builds and promote consolidation to stabilise the market.
On Friday, June 15, 2024, a solar expo in Shanghai masked severe issues plaguing China’s solar firms despite a festive atmosphere. Attendees enjoyed mascots, games, and lavish booths while industry insiders grappled with plunging prices and overcapacity.
Domestic overproduction forces firms to sell at a loss. Meanwhile, global protectionism challenges China’s solar dominance. “We’re entering a deep down-cycle,” said Amy Song, Vice President of GCL Technology Holdings Ltd. “Barely anyone makes money right now.”
Once a niche market, the solar industry has become the leading new energy source. Last year, the world installed 445 gigawatts of solar panels, primarily produced in China. This growth created multi-billion-dollar companies but also led to an unsustainable supply glut.
By the end of 2023, Chinese firms produced 1,154 gigawatts of solar modules, more than double their 2021 capacity. However, BloombergNEF projects 2024 global demand at only 585 gigawatts. This rapid build-up caused market saturation.
Trina Solar Co. Chairman Gao Jifan criticised companies for expanding recklessly, driven by self-interest and local government’s growth targets. Executives urged Beijing to regulate new factory builds, close inefficient plants, cap price cuts, and promote industry consolidation.
Oversupply has led to fierce competition, pushing prices to historic lows. Analysts expect recovery by 2025 or 2026, with potential bankruptcies looming. The Chinese government, a long-time supporter of the solar sector, seeks to shift the economy from property and low-end manufacturing to clean energy.
Chinese firms control over 80% of the global solar supply chain. This dominance sparked resistance from foreign governments. The US has tightened trade measures against Chinese solar equipment and targets Southeast Asian operations suspected of bypassing tariffs. India imposed import duties, and calls for similar actions grew in Europe.
Chinese companies now invest overseas to penetrate markets shielded by trade barriers. This includes the US, where a 2022 bill incentivises domestic clean energy production.
Despite current challenges, the solar industry remains optimistic. Analysts expect demand to grow over the next decade, potentially easing the crisis. However, industry leaders warn that significant changes must occur to balance supply and demand effectively.
The carnival mood at the Shanghai expo highlighted the gap between public perception and the industry’s grim reality. Solar power’s rise faces its first significant test, and the sector’s response will shape its future trajectory.