China Facing the Limits of Its Solar Supremacy: Overproduction, Tariffs, and Price Wars

Massive investments have enabled China to dominate the global solar energy market. However, this lead is now translating into major economic challenges amid overproduction, trade wars, and internal tensions.

Share:

China has solidified its position as the world leader in the field of solar energy through massive investments and sustained state support. In 2023, it accounted for 80% of global solar panel production, according to estimates from the International Energy Agency (IEA). Eight of the ten largest solar panel manufacturers worldwide are Chinese, with exports reaching €45 billion last year, reports Wood Mackenzie. This dominance translates to a production capacity nearly twice that of all other countries combined.

However, this accelerated development has a downside. The United States and the European Union accuse Beijing of unfair practices due to excessive subsidies and a “surplus capacity” strategy aimed at saturating the international market. Washington has recently doubled its tariffs on Chinese solar panel imports, raising them to 50%. Meanwhile, the EU has launched an investigation into possible excessive subsidies received by Chinese manufacturers in this sector.

Crucial State Support

The rise of China’s solar industry largely relies on public subsidies, abundant labor, and access to low-cost materials. Between 2011 and 2022, Chinese authorities invested over €46 billion in building new solar production capacities. According to Lauri Myllyvirta, co-founder of the Center for Clean Energy and Air Research, these factors have enabled Chinese manufacturers to achieve unmatched competitiveness in production costs. This has fostered the development of a robust industrial ecosystem, difficult to replicate by other countries.

Tensions Intensify with Western Countries

China’s hegemony in the global solar panel market is causing concern among Western countries, which fear that Beijing is using its surplus capacity to eliminate international competitors. The United States has thus taken drastic measures to limit Chinese imports. Most of the solar panels imported by the United States now come from Southeast Asia, where Chinese manufacturers have established factories to circumvent American tariffs.

In Europe, China accounts for nearly all solar panel imports from outside the EU. Facing this dependency, Brussels is considering tightening its regulations to protect local producers and prevent further market distortions.

Over-Indebtedness and Price Wars in the Domestic Market

Within China, the exponential growth of the solar industry has led to a fierce production race, resulting in widespread indebtedness among sector companies. At the same time, price wars between major players are intensifying. According to a sector association, the number of new solar projects fell by more than 75% in the first half of 2024. Although exports reached record levels, the revenues generated from these sales have decreased, highlighting the pressure on prices.

David Fishman, analyst at Lantau Group, explains that this dynamic is comparable to “a snake eating its own tail.” According to him, many companies may be forced to shut down due to fierce competition and the lack of government support amid this overproduction crisis.

A Saturated Electrical Grid

Additionally, China’s energy infrastructure is struggling to absorb the enormous renewable production capacity generated by the expansion of solar and wind energy. The electrical grid is regularly saturated, forcing authorities to suspend the connection of certain projects to prevent overloads. In the first quarter of 2024, the use of curtailment—a procedure to restrict production to stabilize the grid—has increased by 4%, according to Fitch Ratings.

Analysts estimate that the government will soon need to halt the approval of new projects or restrict access to the grid for existing installations.

Seeking New International Markets

To alleviate pressure on the domestic market, China is looking to diversify its international markets. In 2023, its solar exports to Africa increased by 187%, according to the Ember think tank, although Europe remains the continent’s main supplier. This strategy could allow China to reduce its exposure to fluctuations in Western markets while capitalizing on its dominant position in the sector.

Strategic Stakes for China

However, the sustainability of this dominance is in question: if Beijing fails to resolve its overproduction issues and adjust its development strategy, the solar sector could fall victim to its own success. The outcome will largely depend on China’s ability to reform its economic model to prevent a potential collapse of the most vulnerable companies while continuing to conquer new markets.

GreenYellow and Meaders Feeds Ltd finalise a second 1.8 MWp solar project under the Carbon Neutral Industrial Sector Scheme aimed at decarbonising the Mauritian industrial sector.
The Lime Kiln project, developed by Chaberton Energy and Pivot Energy, will provide renewable energy to 500 homes and businesses in Maryland, while reducing greenhouse gas emissions.
MPC Energy Solutions has signed an agreement to sell its stake in the Planeta Rica solar project in Colombia. The transaction is expected to close by the end of 2025.
EDF power solutions has commissioned the Aéroparc photovoltaic plant, with a capacity of 42.2 MWp, in the Territoire de Belfort, making a significant contribution to the region's energy transition.
The overproduction of solar energy in Europe is causing a drop in captured prices, undermining the profitability of producers. In Germany, Spain, and France, capture prices are at record lows, with profound economic consequences.
Altarea Energies Renouvelables has started work on its first ground-mounted photovoltaic plant in Caudecoste, marking a new milestone in its development. The 7 MWc plant is expected to be operational by the end of 2025.
Chinese manufacturer JinkoSolar has delivered three energy storage systems totalling 21.6 MWh to the American company Distributed Energy Infrastructure, as part of the Solar Massachusetts Renewable Target (SMART) programme aimed at strengthening local solar infrastructure.
TotalEnergies ENEOS has commissioned two photovoltaic installations totalling 1.2 MWp for marine logistics group Lee Huat Yap Kee in Singapore, under two long-term power purchase agreements with no upfront investment.
TCL Solar has concluded two exclusive partnerships in Suzhou with AU Solar and Madina Solar to supply 250 megawatts of photovoltaic modules to the Pakistani market, addressing rapidly growing local energy demand.
Mitrex secures Guinness Record for the largest integrated solar facade globally, combining photovoltaics and cultural art in Edmonton, covering over 30,000 square feet with installed capacity exceeding 265 kW.
EDF power solutions completes the acquisition of the 500MW Gate Burton solar-battery project from the company Low Carbon, strengthening its presence in hybrid photovoltaic-storage solutions in the United Kingdom.
The global photovoltaic films market is expected to see significant growth, reaching $41.59bn by 2034 due to the development of new solar technologies and the increasing demand for encapsulation suited to these innovations, a recent study indicates.
Italian group Plenitude has begun building Entrenúcleos, a 200 MW photovoltaic plant near Seville, set to deliver more than 435 GWh a year from 2026 while trialling locally produced green steel.
The state-controlled refiner has launched a 7.5-megawatt photovoltaic unit off Qingdao, the country’s first commercial installation designed for fully saline waters, intended to supply its future renewable hydrogen production.
The Emirati company Global South Utilities plans to install up to 250 MW of solar capacity in Madagascar, a project aimed at strengthening the national electricity network heavily reliant on fossil fuels and frequently facing energy deficits.
Emerging economies from the BRICS group now account for more than half of global solar electricity production in 2024, driven mainly by China, India, and Brazil, according to a new report by the organisation Ember.
Star Trade, a subsidiary of HD Renewable Energy, has signed a power purchase agreement with Lightsource bp to manage electricity distribution from a 115 MWp solar project located in Chiayi, strengthening their presence in the Taiwanese market.
TotalEnergies will develop a 1.8 MW photovoltaic installation for Daehwa Pharmaceutical, covering approximately 20% of the annual energy requirements of the production site located in Hoengseong-gun, South Korea, under a 20-year agreement.
Quinbrook Infrastructure Partners announces full operational launch of Cleve Hill Solar Park, now becoming the largest active photovoltaic power plant in the United Kingdom with a total installed capacity reaching 373 MW.
European photovoltaic module manufacturer BISOL is integrating G12R solar cells into its product range, replacing the former M10 cells, to improve product performance and technological competitiveness starting from the second quarter of 2025.