Chinese solar panel makers want Beijing to end ‘overinvestment’

Solar panel makers in China are seeking government intervention to stop “over-investment” in the sector as falling prices for solar cells and modules erode their profits.

Billions of dollars in subsidies and government incentives have helped China dominate the global solar industry. The country now accounts for 80% of global module capacity.

But this dominance comes at a price: industry overcapacity has fueled a sharp fall in the prices of solar cells and modules, with no end in sight.

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Prices of finished solar panels in China plunged 42% last year.

This not only threatened the profit margins of major Chinese solar panel manufacturers, but also forced smaller players to close shop.

“We need to join forces to avoid overinvestment,” said Gao Jifan, chairman and CEO of Trina Solar and honorary president of CPIA.

Gao’s comments come as the country’s solar panel makers gather at the International Photovoltaic and Smart Solar Energy Conference on Tuesday and call for industry collaboration.

As Gao sought government regulation of new investment in the sector to plug further losses, SiNeng Electric Chairman Duan Yuhe asked China’s state planner to intervene.

“Survival is the goal”

Analysts expect Chinese manufacturers to add up to 600 gigawatts (GW) this year, enough to meet global demand through 2032.

The meteoric increase in capacity means that even China’s power grid does not have enough storage or transmission capacity to absorb excess energy generated by solar panels on roofs when the sun shines.

This led Beijing to impose restrictions on supplying excess electricity from rooftop solar to the grid and also reduce some of the price support that has led to the rapid growth of distributed solar.

The final option then for manufacturers is to export more and more solar panels to global markets that are racing to meet their climate goals.

But Chinese solar panel makers also face obstacles. Markets like India and the United States have imposed restrictions on imports not only from China. but also the countries of Southeast Asia such as Vietnam, Malaysia and Cambodia, markets from which Chinese manufacturers would ship solar panels.

A major market for China – Europe – has also sounded the alarm on Chinese imports of solar panels to combat the threat to domestic manufacturers.

These challenges, coupled with intense domestic rivalry, threaten to drive smaller players in the sector out of business.

“To survive – that’s the goal,” Li Gang, chairman of Seraphim Energy Group, said at Tuesday’s conference.

“The consolidation has already started”

Between June 2023 and February 2024, at least eight companies canceled 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 (CPIA).

And small players weren’t the only ones affected by the deteriorating situation in the sector. In March, Chinese company Longi Green Energy Technology, one of the world’s largest solar panel manufacturers, announced it will lay off around 5% of its employees.

A month later, the company’s vice president, Dennis She said Consolidation according to Reuters would be “good for the main players” in the country.

At Tuesday’s conference, Gongshan Zhu, president of the Asian Photovoltaic Industry Association, warned new companies against rushing into the sector.

He noted that industry profits had fallen by 70% due to overcapacity and falling prices, while exports were hampered 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 has been exacerbated by investments by local governments with the sole aim of boosting employment.

Industry executives speaking at the conference also called for an end to the race to the bottom. They suggested that tender processes take into account levels of research and development, rather than simply setting prices.

Some company officials, like Fei Wu, president of Wuxi Suntech Power, said consolidation has already begun. The sector’s outlook is expected to deteriorate this year and more small businesses risk going out of business, he added.

• Reuters, with additional contributions from Vishakha Saxena

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Vishakha Saxena

Vishakha Saxena is a Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013 and is an experienced multimedia writer and producer. As a trader and investor, she has a keen interest in the new economy, emerging markets and the intersections of finance and society. You can write to him at (protected email)