<header><h1>Chinese solar panel manufacturing outpaces global demand</h1><a href="" rel="author"></a><span class="title"></span><time rel="pubdate" datetime="2024-02-28T00:00:00-05:00">Feb 28</time></header><p>China is producing far more solar panel modules than the world is on track to use. The implications of the mismatch are set to reach far beyond the country’s borders.</p><p>This dynamic also underscores how differently China — the world’s leader in clean energy manufacturing — operates its economy compared with what we see in free-market countries, where prices fluctuate to balance out supply and demand.</p><p>As China’s property and construction industries went into reverse last year, a government desperate for economic growth turned to the clean energy industry. The industry responded with <a href="https://ciphernews.com/articles/clean-energy-fueled-chinas-economy-last-year/" target="_blank" rel="noopener">massive manufacturing increases</a>, boosting production of solar panels (as well as batteries, electric vehicles and wind turbines). Producers cut prices as demand grew more slowly than supply.</p><p>Yet producers have not slowed down. They will likely produce fully a quarter more solar panel modules this year than they did last year, according to recent <a href="https://www.woodmac.com/news/opinion/power-and-renewables-2024-outlook/asia-pacific/" target="_blank" rel="noopener">data</a> from industry analyst Wood Mackenzie. Meanwhile demand for those modules, the packages in which solar panels are purchased by solar developers, will remain basically flat this year, Wood Mackenzie estimated. The gap between how many modules the world wants and how many Chinese manufacturers’ output alone will provide could balloon by more than two-thirds.</p><p>In theory, the world should have a voracious appetite for more modules, considering ambitious climate goals. But many countries, from the U.S. to Europe to India and Japan, are trying to build their own clean energy manufacturing after years of China dominating that market.</p><p>Countries have responded with industry subsidies and penalties on Chinese products designed to support their local solar panel manufacturing industries. But even the biggest of these efforts — the Biden administration’s 2022 Inflation Reduction Act — won’t be enough to compete with Chinese module makers if those makers cut prices to the point where they earn no profit or even lose money for a time in an effort to keep their factories operating.</p><p>“That seems an increasingly likely outcome this year,” wrote Wood Mackenzie’s Asia renewable industry watcher Alex Whitworth in the <a href="https://www.woodmac.com/news/opinion/power-and-renewables-2024-outlook/asia-pacific/" target="_blank" rel="noopener">recent report</a>.</p><p>Some of China’s excess production could be absorbed by the country itself, which keeps surpassing its own solar installation targets.</p><p>Lower module prices from China could also spur more demand in low- and medium-income countries in Africa and Southeast Asia, though even rapid growth would build on a tiny base.</p><p>Wealthy countries will have to decide to what extent they will allow inexpensive Chinese panels to help them achieve their climate goals. Their transition to clean energy could be <a href="https://www.ft.com/content/ba27f8d3-df06-4e2a-96b7-a8bbc06632a2" target="_blank" rel="noopener">slower</a> and more <a href="https://qz.com/enery-transition-without-china-costs-20-percent-more-1851251438" target="_blank" rel="noopener">expensive</a> without products from China.</p>

Chinese solar panel manufacturing outpaces global demand

by  - 

February 28, 2024


China is producing far more solar panel modules than the world is on track to use. The implications of the mismatch are set to reach far beyond the country’s borders.
This dynamic also underscores how differently China — the world’s leader in clean energy manufacturing — operates its economy compared with what we see in free-market countries, where prices fluctuate to balance out supply and demand.
As China’s property and construction industries went into reverse last year, a government desperate for economic growth turned to the clean energy industry. The industry responded with massive manufacturing increases, boosting production of solar panels (as well as batteries, electric vehicles and wind turbines). Producers cut prices as demand grew more slowly than supply.
Yet producers have not slowed down. They will likely produce fully a quarter more solar panel modules this year than they did last year, according to recent data from industry analyst Wood Mackenzie. Meanwhile demand for those modules, the packages in which solar panels are purchased by solar developers, will remain basically flat this year, Wood Mackenzie estimated. The gap between how many modules the world wants and how many Chinese manufacturers’ output alone will provide could balloon by more than two-thirds.
In theory, the world should have a voracious appetite for more modules, considering ambitious climate goals. But many countries, from the U.S. to Europe to India and Japan, are trying to build their own clean energy manufacturing after years of China dominating that market.
Countries have responded with industry subsidies and penalties on Chinese products designed to support their local solar panel manufacturing industries. But even the biggest of these efforts — the Biden administration’s 2022 Inflation Reduction Act — won’t be enough to compete with Chinese module makers if those makers cut prices to the point where they earn no profit or even lose money for a time in an effort to keep their factories operating.
“That seems an increasingly likely outcome this year,” wrote Wood Mackenzie’s Asia renewable industry watcher Alex Whitworth in the recent report.
Some of China’s excess production could be absorbed by the country itself, which keeps surpassing its own solar installation targets.
Lower module prices from China could also spur more demand in low- and medium-income countries in Africa and Southeast Asia, though even rapid growth would build on a tiny base.
Wealthy countries will have to decide to what extent they will allow inexpensive Chinese panels to help them achieve their climate goals. Their transition to clean energy could be slower and more expensive without products from China.