How China's subsidies are reshaping the global solar panel industry

By Asif Aydinli

In recent years, the solar panel market has faced unexpected challenges related to overproduction. Despite the growing popularity of renewable energy sources and the increasing demand for them, the global supply of solar panels significantly exceeds current needs. This situation has had a significant impact on the global economy and has created several problems for manufacturers worldwide.

Currently, production capacity for solar panels exceeds demand by 2 terawatts (TW), leading to a sharp decline in product prices. The primary reason for this situation is the state support provided to Chinese manufacturers, which has allowed them to dominate the market and create serious challenges for companies in Europe and the United States. While this has resulted in lower prices for consumers, manufacturers face financial difficulties and are forced to find ways to adapt.

Solarwatt, a company based in Dresden that emerged in the early 1990s as a symbol of European ambitions in renewable energy, has also come under pressure. Although the opening of a new plant at the end of 2021 was seen as a victory in the battle against Chinese competitors, Solarwatt is now preparing to move its production to China to remain competitive.

This issue has affected not only European companies. The oversupply in the global market over the past two years has led to a collapse in solar panel prices, leaving many European companies unprofitable and threatening U.S. President Joe Biden’s ambitions to turn America into a leader in renewable energy. Even Chinese companies dominating the market have felt the consequences of this situation.

Nevertheless, the drop in solar panel prices has led to an increase in installations among consumers and businesses. According to forecasts from the International Energy Agency (IEA), by 2028, electricity generated by solar installations will surpass that generated by wind and nuclear power stations.

According to SolarPower Europe, more than 800,000 people were employed in the solar energy sector in Europe at the end of last year. In the U.S., about 265,000 people work in this industry, according to the Interstate Council on Renewable Energy. BloombergNEF reports that panel prices have fallen by more than 60% since July 2022.

The significant impact of overproduction has led to calls for protectionist measures. The scale of the damage is causing concern and prompting Brussels to protect European companies from subsidized Chinese products. The U.S. has already introduced new tariffs on Chinese solar panels, ranging from 25% to 50%, and Europe is considering similar measures.

However, some American companies believe that the protective measures may be insufficient. With industries in Europe and the U.S. under pressure, the question arises as to whether Chinese companies can maintain current price levels or will have to reduce production to stabilize their finances. In March, China’s Longi, the world's largest solar panel manufacturer, cut its workforce by 5%, affecting 4,000 employees.

News.Az