China’s solar industry dominates all stages of the global supply chain, from polysilicon to completed product. According to Wood Mackenzie, the country’s module production capacity exceeded 1,000 gigawatts (GW) last year, about five times that of the rest of the globe combined. Furthermore, it has tripled since 2021, outpacing the rest of the world, despite efforts by America and others to increase local production. China is still, by a far margin, the dominant player.
This tremendous increase in supply has helped lower the cost of clean energy for consumers, acting as a counterweight to the rising capital costs required to build solar farms. During the pandemic, the price of solar modules increased due to a shortage of polysilicon. However, since then, the global price has dropped to a record low of less than 10 cents per watt, according to PVInsights, a data source.
However, since Chinese supply has expanded faster than global demand, much of the industry’s profit has been squeezed. Polysilicon, wafers, cells, and final modules are currently priced below their average production cost. According to Wood Mackenzie, falling prices reduced Chinese solar export revenues by 5.6% last year, despite rising quantities. Longi’s stock price has fallen by around 60% since the beginning of 2023. In March, the company announced that it would lay off 5% of its workforce, citing a “increasingly complex and competitive environment”. Other Chinese solar giants, such as Trina Solar, JA Solar, and Jinko Power, have all seen their share values plummet.
However, there are few indicators that China’s overcapacity problem is coming to an end. Despite financial pressure from declining pricing, the industry’s major companies continue to enhance their equipment and expand their output in an attempt to maintain their marginal costs lower than those of their competitors. Wood Mackenzie predicts that China’s solar industry will increase capacity to about 1,700GW by 2026.
Source: Economist
