China’s Photovoltaic Industry Faces Overcapacity and Financial Losses, IEA Warns

Overcapacity and Profitability Struggles in China’s PV Sector
The International Energy Agency (IEA) has raised alarm over the growing overcapacity and declining profitability within China’s photovoltaic (PV) industry. Despite being the global leader in solar energy production, major Chinese manufacturers, including JA Solar Technology and LONGi Green Energy Technology, are reporting significant losses, signaling a troubling trend in the sector. The IEA highlighted these concerns during a webinar on Thursday, underscoring the financial difficulties faced by Chinese PV companies.

Imbalance Between Supply and Demand
The core issue within China’s PV industry is the imbalance between supply and demand, which has pushed the sector to its limits. At the 17th SNEC PV conference in Shanghai earlier this year, GCL Group’s founder warned that the industry is entering an “ice age” due to overproduction. With China’s vast production capacity outpacing global demand, companies are left with excess stock, contributing to unsustainable competition and falling prices. This imbalance has already led to the bankruptcy of Zhejiang Akcome, and the IEA forecasts that more closures are likely in the coming months.

China’s Continued Dominance in the Global PV Market
Despite its domestic challenges, China remains the dominant force in the global solar industry. In 2023, China accounted for more than 50% of the global solar power capacity added, contributing to a total of 456GW in new installations worldwide. Furthermore, Chinese manufacturers hold significant market share across all segments of the PV supply chain, including polysilicon, crystalline silicon wafers, solar cells, and PV modules. In 2023, China’s share in these categories reached 92%, 98%, 92%, and 85%, respectively, further solidifying its leadership position.

Global Shifts in Solar Production and the EU’s Response
As global demand for PV capacity continues to grow, countries like the EU and the US are ramping up efforts to reduce their reliance on Chinese solar imports. In 2023, the EU installed over 56GW of solar capacity, and the European Union has set ambitious goals to scale up domestic production. Under the Net-Zero Industry Act, the EU aims to produce 40% of its strategic net-zero technologies, including solar panels, by 2030. This is a significant shift from the current production capacity of less than 5GW annually, with plans to expand to 30GW per year by 2030.

Conclusion: Navigating a Shifting PV Landscape
As China grapples with overcapacity and profitability losses in its PV industry, the global solar market is experiencing a shift. The EU’s efforts to increase its domestic solar manufacturing capacity represent a major step toward reducing dependency on China. With China’s continued dominance in PV production, the global market will likely see more regional diversification and adjustments in supply chains to meet growing demand.