China’s solar photovoltaic (PV) industry is on the brink of overcoming persistent overcapacity challenges. The sector, marked by intense price wars and rapid capacity expansion, is witnessing positive developments as several solar panel producers reevaluate and scale back expansion plans. This shift is expected to have a constructive impact on the solar energy market.
Optimistic Turn for Solar Energy Market Amid Overcapacity Woes
In 2023, China experienced a remarkable 55.2% increase in installed solar electric power generation capacity, adding over 216 gigawatts (GW) of solar power. While this rapid expansion aligned with the country’s 2060 carbon-neutral target, it also led to a situation where solar panel manufacturers outpaced capacity additions, resulting in overcapacity challenges.
Financial Struggles and Price Wars Impact Profitability
Despite impressive solar power installations, nearly half of the listed Chinese solar PV enterprises are expected to report lower profits or losses in 2023. The aggressive price war and overcapacity issues have significantly impacted the profitability of leading companies, including TCL Zhonghuan Renewable Energy Technology and Daqo Energy.
Analysts Express Optimism with Accelerated Correction in 2024
Industry analysts from Changjiang Securities are optimistic about the future, foreseeing an accelerated correction of the supply and demand dynamics in the photovoltaic industry in 2024. The recent trend of solar panel producers delaying or canceling capacity expansions contributes to the positive outlook, providing a potential solution to overcapacity challenges.
Global Industry Dynamics: Balancing Installations and Overcapacity
While China is projected to install approximately 220GW of solar power in 2024, maintaining a level similar to 2023, global installations are expected to rise by 18% to reach 450GW. This emphasizes the nuanced dynamics of the solar energy market as it grapples with overcapacity challenges and strives for a balanced and sustainable growth trajectory.
Industry Response: Adapting to Market Shifts and Financing Challenges
Facing profitability concerns and intensified challenges in China’s capital markets, solar panel makers are expected to reduce production. Several companies, including Changzhou EGing Photovoltaic Technology, have put expansion plans on hold due to the evolving solar PV market. The industry is undergoing strategic shifts and adapting to new market realities.
Source: scmp.com
