Solar panel makers in China are seeking government intervention to stop “overinvestment” in the industry as falling prices for solar cells and modules hurt their profits.
Billions of dollars worth of government subsidies and incentives helped China dominates the global solar industry. The country currently accounts for 80% of global module capacity.
But this advantage has come at a price—industry overcapacity has fueled a steep decline in solar cell and module prices, with no end in sight.
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Last year, the prices of finished solar panels in China fell by 42%.
This not only threatened the profit margins of the big Chinese solar panel makers, but also forced smaller players to close shop.
“We must join forces to prevent overinvestment,” said Gao Jifan, chairman and CEO of Trina Solar and honorary president of CPIA.
Graphic: Reuters
Gao’s comments came as the country’s solar panel manufacturers gathered on Tuesday at the International Solar Photovoltaic and Smart Energy conference to call for industry cooperation.
While Gao wanted government regulation of new investment in the sector to offset further losses, Duan Yuhe, president of SiNeng Electric, asked China’s state planner to intervene.
“The goal is to survive”
Analysts expect Chinese manufacturers to add 600 gigawatts (GW) this year, enough to meet global demand through 2032.
A skilful leap expressed it even China’s own power grid does not have sufficient storage or transmission capacity to absorb excess energy from rooftop solar panels when the sun shines.
This has led Beijing to impose restrictions on feeding excess power from rooftop solar to the grid and cut some of the price supports that have fueled the rapid growth of distributed solar.
Graphic: Reuters
The choice manufacturers are left with is to export more and more solar panels to global markets competing to meet climate goals.
But Chinese solar panel makers are running into roadblocks there, too. Markets such as India and the US have imposed restrictions on imports, not just from China but also the countries of Southeast Asia Chinese manufacturers such as Vietnam, Malaysia and Cambodia have reportedly shipped solar panels.
Europe, a key market for China, is also sounding the alarm about Chinese solar panel imports to counter the threat to domestic manufacturers.
These problems, coupled with intense competition at home, threaten to drive small industry players into bankruptcy.
“Survival is the goal,” Li Gang, chairman of Seraphim Energy Group, said at a conference call on Tuesday.
“Consolidation has already begun”
According to the China Photovoltaic Industry Association (CPIA), from June 2023 to February 2024, at least eight companies canceled or suspended more than 59 GW of new generation capacity, which is the largest share of China’s finished panel production capacity in 2023. It is equal to 6.9%.
And it wasn’t just the smaller players who suffered from the industry’s deteriorating fortunes. In March, China’s Longi Green Energy Technology, one of the world’s largest solar panel manufacturers, announced will lay off about 5% of its employees.
A month later, the company’s vice president, Dennis She he said A Reuters consolidation would be “good for the leading players” in the country.
Graphic: Reuters
At a conference on Tuesday, Asian Photovoltaic Industry Association chairman Gongshan Zhu warned new companies against rushing into the sector.
He noted that industrial profits fell by 70% due to overcapacity and falling prices, while exports were limited by trade barriers imposed by the United States.
“If you’re just a copycat, it won’t be sustainable for you,” Zhu said, adding that the situation is exacerbated by local governments investing to boost employment.
Industry leaders speaking at the conference also called for an end to price competition. They suggested that tender processes should consider research and development levels, not just price.
Some company officials, such as Fei Wu, chairman of Wuxi Suntech Power, said consolidation has already begun. He added that the outlook for the industry is likely to deteriorate this year, with more small companies going out of business.
Reuters, with additional information from Vishakha Saxena
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Vishakha Saxena
Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. He has been working as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, he is very interested in the new economy, emerging markets and the intersection of finance and society. You can write to his address [email protected]