Beijing intervenes in China’s solar industry as overcapacity dries up profit in the country's domestic market
- China’s energy regulator said it will limit “low-end” solar panel manufacturing after industry leaders called for more government intervention earlier this month. The move is an acknowledgement by Beijing that solar panel overcapacity is a problem, one that has pushed Chinese solar firms into a price war and shriveled returns.
- The competition in China’s solar power industry is “indeed very fierce,” an official at the National Energy Administration (NEA) said at a press conference Thursday.
- A price war on solar panels in China has meant that big firms have rapidly lost profit while small firms risk bankruptcy.
- Historically, the industry has been propped up by city governments, which build solar panel factories to lease or sell to private firms. But while some local authorities have expressed willingness to continue to keep solar firms afloat, “that support may dry up as the provinces are themselves swimming in debt, largely stemming from the country’s property crisis, and solar has to compete for their support with other green tech sectors, like electric vehicles, that are also struggling with overcapacity.
- Chinese officials want homeowners to install solar panels to combat overcapacity, but China’s grid is still not able to accommodate fluctuating solar energy levels.
- One solution may be virtual power plants: smaller-scale grids that rely on local renewable energy infrastructure and incentivize homeowners to use that energy during peak times with cash payments. But beyond building a new grid meant to handle renewable energy, China also needs “improved coordination” from Beijing to enable solar-heavy provinces to trade energy with solar-weak provinces.
- China’s energy regulator is also pushing for more spot trading — where prices will fluctuate with supply and demand — rather than fixed rates, encouraging customers to use energy during low-demand periods.
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