If there is currently a power in renewables, that is China. The country installs 60% of the renewable capacity of the world and has huge projects such as its ‘Great Solar Wall’, the largest wind turbine in the world and ambitious offshore energy plans both wind and photovoltaic. In the solar energy segment there are so many companies competing for the same piece of the cake that even the largest are drowning.
And with problems everywhere, the industry wanted to emulate the oil sector with a large self -control pact. The first attempt has gone wrong.
Saturation. The storm began in 2021. It was the year in which China presented its zero net emission plan for 2060 with a very ambitious goal: at least 1,200 GW of solar and wind capacity installed in 2030. Energy companies got to the dough , but there were also non -endemic companies in the energy sector that got into the car of what was pointed out to be a very lucrative business.
The problem is that it was done without apparent control, each fighting the war on their own. The result? Large projects throughout the country and a production of solar panels so bestial that it has drowned companies outside China, but also an annual production capacity of around 1,200 GW of panels.
So we don’t fit. This might seem good, but it is not: it is twice the world demand in 2024 and is more than expected for 2030. The situation pushed many companies deduced prices, sometimes below the costs, creating a kind of ‘Ice age’ of the photovoltaic sector with companies such as GLC Technology – the second solar company in China and one of the largest in the energy sector – asking for help from the State.
The reason is that the prices of the entire production chain (from silicon to the photovoltaic modules) had fallen below costs and companies were losing money with each sale. As we read in South China Morning Post, the Chinese Photovoltaic Industry Association, or CPP 2023.
Following the steps of the OPEC. The problem is that the lawsuit also follows the trend. According to the Ember Energy Studies Center, world solar facilities grew by 29% in 2024 compared to 87% of 2023. Only in China, the expected growth in 2024 was 28%, far from 55% of the previous year. In addition, 39 of the 121 photovoltaic producers that are quoted in the stock market, reported losses in China, and giants such as Long Green Energy had to fire 5% of their template.
We had to take control of this production without limits, and it is something that was tried to stop at the December CPPA meeting last year. In the LA, 33 of the main manufacturers signed a compromise of self -control based, according to SCMP, in the OPEC agreements -organization of oil exporting countries. The idea was to agree production quotas based on its capacity, respect the minimum recommended Price established by the association and, with this, expect the market to be regulated.
First problems. It is curious that, just two weeks after the signing of that self -control pact, the CPPO issued an open letter criticizing a solar project in Xinjiang that was violating the agreement. The problem? The company, subsidiary of the Chinese Group Energy Investment Group, set a “significantly lower” price than 0.68 yuan – about 0.09 euros – per watt stipulated by the CPPPO.
It is something that has weakened the moral of an industry that considered an OPEC -style pact as one of the latest realistic resources to save companies and jobs related to solar energy in the country before taking actions that end up with closures and layoffs
The government puts hand. This is something that concerns government institutions and companies themselves because a negative climate in which companies are operating at losses or without achieving financial objectives can have a disastrous consequence: compromising the quality of panels and industry, prevent it from being innovated and, therefore, make China blurred what has been achieved in recent years, vanible with competitive advantage and causing the loss of talent.
And the Cpp is not the only one who has tried to control the situation. The central government also imposed some measures to stop expansion, such as increasing from 20% to 30% minimum capital requirements for new panel manufacturing projects, lower export reimbursements and lower limits and stricter limits for water and energy consumption . For example, the allowed electricity consumption for existing manufacturers of 80 kWh/kg at 60 kWh/kg was reduced.
It is complicated. The problem is that the industry is, at this point, too big. With the new government measures in energy use, it is estimated that the production capacity will be between 20% to 30%. But the problem is, as Jessica Jin – Analist of Global S&P – points out that the main stumbling block will be to control all the factories in the country to ensure that they meet the measures.
In the end, what is happening in China is something that has been cooking for months: they lead the market of solar panels (by far), but they have grown without control and that accelerated boom is currently regulating depending on the demand both both internal as external.
Images | Korea Aerospace Research Institute
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