Last year, the solar industry’s topic of overproduction was widespread. China’s photovoltaic sector has been continuously upgrading its technology, expanding manufacturing and installation scales. This led to a rapid decrease in the cost per kilowatt-hour, reaching an internationally advanced level. China firmly holds a leading position across the global industry chain.
Scientifically addressing photovoltaic overproduction is crucial to mitigating potential risks in the industry.
Phase and Structural Risks:
In 2023, China’s solar industry achieved remarkable milestones. The newly added installed capacity of photovoltaic power generation surpassed 200 million kilowatts, nearly double that of 2022, hitting a historic high. Advanced battery conversion efficiency reached 25.5%, surpassing the 2022 record of 24.6%.
China remains the world’s largest photovoltaic equipment manufacturer, contributing over 70% of global products like silicon wafers, battery cells, and modules.
In 2023, China exported over 175 million kilowatts of photovoltaic modules, a 22.4% increase from the previous year.
However, with rapid growth came the risk of overproduction as companies significantly expanded production. This led to a downward trend in prices along the industry chain, causing some enterprises to halt production.
Officials from the Ministry of Industry and Information Technology acknowledged the phase and structural overcapacity risks in China’s photovoltaic industry. They stated it falls within the normal range of industry development.
The Deputy Secretary-General of the China Photovoltaic Industry Association analyzed that previous declines were due to market and demand decreases, effectively mitigated through policy-driven demand expansion. In this cycle, with steady downstream market growth, it’s appropriate to implement measures from the supply side.
Photovoltaic industry capacity utilization has generally been around 50% to 60%, with a 1x capacity exceeding demand considered normal.
By the end of 2023, various links in the photovoltaic equipment chain reached about 1,000 GW, slightly exceeding the global market demand of 400 GW.
Nevertheless, there is a supply and demand mismatch and negative industry expectations. Since 2023, new production capacity releases led to a significant supply-demand shift, causing prices to fall from silicon materials to modules. At current prices, second- and third-tier manufacturers faced losses, while leading enterprises approached break-even, and some halted production due to costs.
Facing overcapacity concerns, some new capacity constructions and corporate financing slowed or paused.
Leading enterprises saw positive aspects amidst fierce competition. A representative from JinkoSolar noted profitability differentiation during the module price decline. Enterprises with advanced capacity and cost advantages are more competitive. The industry saw differentiated production rates, some enterprise expansions slowing, and new entrant exits. Technological iteration and outdated capacity elimination are expected to accelerate.
Guarding Against Supply-Demand Imbalance:
Officials from the Ministry of Industry and Information Technology believe China’s photovoltaic industry is within a normal range. This is due to green, low-carbon trends driving industry growth and industry cycles being normal. The long photovoltaic industry chain and rapid technological iterations lead to structural overcapacity at certain stages.
According to the Deputy Director of the Silicon Industry Expert Group of the China Nonferrous Metals Industry Association, calling the current industry overcapacity is an exaggeration. “PPT production” in this capacity round won’t be immediately realized.
Additionally, bottlenecks in silicon materials, battery tech iterations, and leading enterprise integrations in recent years enhance industry competitiveness and sustainability.
Chairman of Tongwei Group, Liu Hanyuan, believes maintaining industry competition pressure and efficiency while considering the competitive ecology is crucial. He suggests that the current overcapacity will reach a new balance without much worry, as market matters should be left to the market, with government guidance.
Despite challenges, negative impacts of supply-demand imbalances are concerning. Long-term low-price competition may affect industry operation, innovation, and global competitiveness.
Based on 2023 semi-annual reports, top four photovoltaic component manufacturing companies showed decreased R&D investment. The “14th Five-Year Plan for Scientific and Technological Innovation in the Energy Field” emphasizes innovation as a primary energy development driver. However, some companies may lack the ability to invest in innovation due to zero-profit margins and capital withdrawals.
Avoiding rapid wave in solar industry
The main brands of inverter such as “Huawei”, “Deye“, “Growatt” all of that equally adjust their price lower in the first of this year, it is a super good news for end-users but maybe a problem on the way of China solar industry.
China’s photovoltaic industry faces temporary difficulties but must consolidate its hard-won global competitive advantage by recognizing problems.
Innovation is key to achieving high-quality development. Qian Jing, Vice President of JinkoSolar, emphasizes rational development, with technology and performance speaking for themselves. Efficient capacity isn’t enough; technological upgrades must accelerate. Natural regulatory mechanisms will lead to survival of the fittest in a fair market.
Li Zhenguo, President of LONGi, notes that as competition intensifies, enterprises must strengthen technological innovation, improve solar cell conversion efficiency, and reduce costs. These are consistent themes for high-quality photovoltaic industry development.
Facing the “price war” is part of industry maturity. Achieving healthy development requires returning to orderly competition. Setting “minimum price limits” in tenders can invalidate bids below cost prices, a method used by some central enterprises. However, this requires top-level design guidance for wider industry adoption.
Supporting technological innovation, guiding rational industry planning, and promoting industrial technological iteration are vital. Current photovoltaic installation scales are far from carbon neutrality goals. Policymakers must consider both production capacity restrictions and demand expansion to stabilize industry expectations and avoid booms and busts.
So, that’s a glimpse into China’s solar industry in 2023 – significant growth, challenges to navigate, but still shining brightly!