The capacity for China to overproduce anything is legion. This is especially true for big ticket items sold around the world, from cars to steel to China’s top green tech product line – solar cells and modules. (China is the No. 1 producer of all of those items, globally.)
And while some in Beijing may have signaled to the world that it is against companies producing just to fill warehouses, the one man known for criticizing the trend, Premier Li Keqiang, died of a heart attack in November. Moreover, China’s provincial leaders see things differently when it comes to manufacturing goods. For that reason, it doesn’t matter if there is a market at home or abroad to soak up solar. Provincial players will keep producing solar to keep people employed. This may be the main modus operandi for much of China.
According to a renewable energy forecast report published this month by the International Energy Agency (IEA), mainland China solar producers are back to over-producing again. The current “supply glut” leads to lower prices for solar cells and modules (aka solar panels), the IEA said. Overproduction by China makes it harder for other countries to compete on price, and drives up demand for Chinese solar imports at a time when the U.S. is one year into the Inflation Reduction Act, a law signed in 2022 to help build a solar supply chain here with the help of tax credits for domestic manufacturers.
“Stockpiles of solar modules at the end of 2023 were an estimated 90 gigawatts in the EU and 45 gigawatts in the United States, close to double the installations forecast for this year,” the report said. “Chinese manufacturers – often vertically integrated companies benefiting from various public incentives – are largely responsible for module price drops. Such companies enjoy high production cost efficiencies thanks to the economies of scale they can achieve, which will remain unmatched by any other country in the medium term.”
What does the China solar supply glut mean for U.S. solar manufacturers?
“The depressed prices for solar cells and modules serve to strengthen China’s vicelike grip on the global industry,” said CPA chief economist Jeff Ferry. “Solar manufacturers have to ask themselves if they can justify investing with module prices under 50 cents a watt.”
China accounts for around 80 percent of global solar cell production and 75 percent of global solar module production, CPA highlighted in a white paper published in March 2021.
Solar production forecasts for this year is almost all China, the IEA said.
China accounts for almost 90 percent of the global forecast for solar production, mainly that of solar panels. In fact, its solar panel manufacturing capabilities have almost doubled since last year, leading to what the IEA called a “global supply glut” in their 143-page renewable energy forecast report this month. Current overcapacity in solar panels has led to a more than 50 percent collapse in solar module prices, according to Bloomberg.
China’s solar production is in fifth gear, with the pedal to the metal.
China’s solar cell production rose 54 percent last year to 541 gigawatts, according to government data published by Bloomberg.
Xi Jinping has made so-called cleantech industries like solar, wind and electric vehicles a key part of China’s industrial growth strategy. By the end of 2022, Chinese solar companies, of which there are dozens, had 817 gigawatts of planned or operating solar panel making capacity — which is almost threefold the 310 gigawatts from 2020, according to BloombergNEF research.
The price of solar-grade silicon, used in the early process of making solar cells, fell by a whopping 80 percent last year. For Bloomberg, these lower prices are bad news for China solar companies but what about the non-Chinese companies that compete with them? If Chinese firms are struggling to make a profit due to their own overcapacity, imagine American companies trying to compete on price.
China is the price driver here, and they are driving it down. It hurts the profits of their companies, but China is not worried about Longi and Trina Solar profits. China wants Longi and Trina and other top 10 China solar producers to have market share. With prices in free fall despite record demand, non-Chinese companies have a harder time convincing buyers to buy their wares instead of their Chinese counterparts.
China solar is here, there and everywhere. Tax breaks help China at home and in the U.S., too.
Ten years ago, Chinese solar companies focused on the “make in China and service the world” approach to solar, Sean Wang, executive president of international operations for TCL Zhonghuan Renewable Energy Technology Co., said at a conference in Beijing last month. “That model doesn’t work anymore,” said Wang. “We see the global market becoming regionalized. You have to either onshore or near-shore your manufacturing to service those markets.”
That is precisely what is happening in the U.S.
Of all the countries and companies that have announced investments into greenfield solar manufacturing plants since the IRA became law, no country has more companies represented than China. At least four Chinese solar giants announced investments in the U.S. thanks to the IRA. These investments are spread out in states around the country.
We are still in better shape than the Europeans, though.
Europe’s solar industry is about to vanish again. Producers there are facing “their deepest crisis in more than a decade” as impossible price competition from China erodes manufacturing in the sector. Just as the EU becomes less dependent on Russia for natural gas, it is increasingly dependent on China for solar, Bloomberg noted on Jan. 20.
In a House Foreign Affairs hearing last week, Sen. Josh Hawley (R-MO) said the Inflation Reduction Act was not meant for ‘foreign entities of concern’ – which banned companies with roughly 25 percent state ownership, or sanctioned entities, from getting those tax benefits. This is going to be a hard nut to crack for Congress as it rethinks the IRA because – on paper – the five Chinese solar companies investing in the U.S. are not state-owned, nor are they sanctioned in any way. For Hawley, though, “Chinese companies get the IRA tax break. We are subsidizing our rivals,” he said.
Around 30 GW of polysilicon, 60 GW of wafers, 80 GW of cells and 100 GW of solar modules manufacturing capacity is currently under development outside of China, and the majority of these new investments are in countries with trade measures against China, led by the United States thanks to the IRA. But according to the IEA, due to Chinese oversupply of solar, policies like the IRA are helpful to local manufacturers to complete their projects, but making these new facilities profitable could be quite challenging in the long term. Smaller solar manufacturers struggling financially will find it harder to survive, the IEA said.
It’s not just solar that China overproduces in the new clean-tech marketplace.
Production capacity at China’s EV battery factories is expected to start 2024 off with 1,500 gigawatt-hours ready to go — enough to install into 22 million EVs. The 1,500 GWh of car batteries expected this year is roughly two times the demand level of 636 GWh, according to data from CRU Group, a London-based business intelligence firm focused on commodity markets.
China’s overproduction will lead to a market glut in EV batteries next. That will force competitors – namely in Japan and South Korea – to lower prices. That sounds good if it makes EVs more affordable, but what is more likely to happen is that China’s oversupply in this market will put rivals out of business, force markets to consolidate, or make it next to impossible for a U.S. EV battery maker to enter this market.
Rhodium Group analyst Noah Barkin predicted in September that it is only a matter of time before China is dumping the excess into Western EV markets.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
Is China Overproducing Solar Again? IEA Report Says Yes.
The capacity for China to overproduce anything is legion. This is especially true for big ticket items sold around the world, from cars to steel to China’s top green tech product line – solar cells and modules. (China is the No. 1 producer of all of those items, globally.)
And while some in Beijing may have signaled to the world that it is against companies producing just to fill warehouses, the one man known for criticizing the trend, Premier Li Keqiang, died of a heart attack in November. Moreover, China’s provincial leaders see things differently when it comes to manufacturing goods. For that reason, it doesn’t matter if there is a market at home or abroad to soak up solar. Provincial players will keep producing solar to keep people employed. This may be the main modus operandi for much of China.
According to a renewable energy forecast report published this month by the International Energy Agency (IEA), mainland China solar producers are back to over-producing again. The current “supply glut” leads to lower prices for solar cells and modules (aka solar panels), the IEA said. Overproduction by China makes it harder for other countries to compete on price, and drives up demand for Chinese solar imports at a time when the U.S. is one year into the Inflation Reduction Act, a law signed in 2022 to help build a solar supply chain here with the help of tax credits for domestic manufacturers.
“Stockpiles of solar modules at the end of 2023 were an estimated 90 gigawatts in the EU and 45 gigawatts in the United States, close to double the installations forecast for this year,” the report said. “Chinese manufacturers – often vertically integrated companies benefiting from various public incentives – are largely responsible for module price drops. Such companies enjoy high production cost efficiencies thanks to the economies of scale they can achieve, which will remain unmatched by any other country in the medium term.”
What does the China solar supply glut mean for U.S. solar manufacturers?
“The depressed prices for solar cells and modules serve to strengthen China’s vicelike grip on the global industry,” said CPA chief economist Jeff Ferry. “Solar manufacturers have to ask themselves if they can justify investing with module prices under 50 cents a watt.”
China accounts for around 80 percent of global solar cell production and 75 percent of global solar module production, CPA highlighted in a white paper published in March 2021.
Solar production forecasts for this year is almost all China, the IEA said.
China’s solar production is in fifth gear, with the pedal to the metal.
China’s solar cell production rose 54 percent last year to 541 gigawatts, according to government data published by Bloomberg.
Xi Jinping has made so-called cleantech industries like solar, wind and electric vehicles a key part of China’s industrial growth strategy. By the end of 2022, Chinese solar companies, of which there are dozens, had 817 gigawatts of planned or operating solar panel making capacity — which is almost threefold the 310 gigawatts from 2020, according to BloombergNEF research.
The price of solar-grade silicon, used in the early process of making solar cells, fell by a whopping 80 percent last year. For Bloomberg, these lower prices are bad news for China solar companies but what about the non-Chinese companies that compete with them? If Chinese firms are struggling to make a profit due to their own overcapacity, imagine American companies trying to compete on price.
China is the price driver here, and they are driving it down. It hurts the profits of their companies, but China is not worried about Longi and Trina Solar profits. China wants Longi and Trina and other top 10 China solar producers to have market share. With prices in free fall despite record demand, non-Chinese companies have a harder time convincing buyers to buy their wares instead of their Chinese counterparts.
China solar is here, there and everywhere. Tax breaks help China at home and in the U.S., too.
Ten years ago, Chinese solar companies focused on the “make in China and service the world” approach to solar, Sean Wang, executive president of international operations for TCL Zhonghuan Renewable Energy Technology Co., said at a conference in Beijing last month. “That model doesn’t work anymore,” said Wang. “We see the global market becoming regionalized. You have to either onshore or near-shore your manufacturing to service those markets.”
That is precisely what is happening in the U.S.
Of all the countries and companies that have announced investments into greenfield solar manufacturing plants since the IRA became law, no country has more companies represented than China. At least four Chinese solar giants announced investments in the U.S. thanks to the IRA. These investments are spread out in states around the country.
We are still in better shape than the Europeans, though.
Europe’s solar industry is about to vanish again. Producers there are facing “their deepest crisis in more than a decade” as impossible price competition from China erodes manufacturing in the sector. Just as the EU becomes less dependent on Russia for natural gas, it is increasingly dependent on China for solar, Bloomberg noted on Jan. 20.
In a House Foreign Affairs hearing last week, Sen. Josh Hawley (R-MO) said the Inflation Reduction Act was not meant for ‘foreign entities of concern’ – which banned companies with roughly 25 percent state ownership, or sanctioned entities, from getting those tax benefits. This is going to be a hard nut to crack for Congress as it rethinks the IRA because – on paper – the five Chinese solar companies investing in the U.S. are not state-owned, nor are they sanctioned in any way. For Hawley, though, “Chinese companies get the IRA tax break. We are subsidizing our rivals,” he said.
It’s not just solar that China overproduces in the new clean-tech marketplace.
Production capacity at China’s EV battery factories is expected to start 2024 off with 1,500 gigawatt-hours ready to go — enough to install into 22 million EVs. The 1,500 GWh of car batteries expected this year is roughly two times the demand level of 636 GWh, according to data from CRU Group, a London-based business intelligence firm focused on commodity markets.
China’s overproduction will lead to a market glut in EV batteries next. That will force competitors – namely in Japan and South Korea – to lower prices. That sounds good if it makes EVs more affordable, but what is more likely to happen is that China’s oversupply in this market will put rivals out of business, force markets to consolidate, or make it next to impossible for a U.S. EV battery maker to enter this market.
Rhodium Group analyst Noah Barkin predicted in September that it is only a matter of time before China is dumping the excess into Western EV markets.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
TRENDING
Chinese Solar Trade Association SEIA Laughs Off Chinese Illegal Trade Activity
Market Says Dollar Too Strong; Overvalued Currency a Problem For Washington’s Reshoring Plans
Economic View: Leading Economists Turn Against Free Trade – “A Flawed Game”
CPA Strongly Supports New Solar Trade Case Filed by Major U.S. Solar Manufacturers
Mexico and China Trade Problems Mounting, Senator Sherrod Brown, Others on Finance Committee Say
The latest CPA news and updates, delivered every Friday.
WATCH: WE ARE CPA
Get the latest in CPA news, industry analysis, opinion, and updates from Team CPA.
CHECK OUT THE NEWSROOM ➔