China's Solar Surplus: A Global Opportunity for Clean Energy
The report reveals that global solar panel manufacturing capacity has tripled between 2021 and 2023, primarily driven by investments in China.
June 15, 2024. By Abha Rustagi
The report reveals that global solar panel manufacturing capacity has tripled between 2021 and 2023, primarily driven by investments in China. This surge has propelled manufacturing capacity to 1,100 GW per year, expected to rise to 1,300 GW by 2028. However, global installations are lagging far behind production capabilities, with annual deployment projected to remain below half of the manufacturing capacity, increasing from 400 GW in 2024 to 532 GW by 2028.
The disparity between manufacturing and installation has resulted in a historic low for solar panel prices, now averaging around USD 0.10 per watt, nearly half the price from just a year ago. This price drop has led to significant financial strain on manufacturers. In the first quarter of 2024, Chinese companies shelved or postponed USD 8.3 billion in planned investments, and shares of major Chinese solar firms have plummeted by more than 50 percent since early 2022.
Exports from China, which had previously tripled over four years, have plateaued in the past year. Notably, exports to Europe, the largest market, have declined by 25 percent year-on-year. The International Energy Agency (IEA) forecasts a cumulative manufacturing capacity of 7,310 GW from 2024 to 2030, but only 3,473 GW of solar panels are expected to be deployed in the same period, leaving a surplus of 3,837 GW.
The report highlights that this 'spare' capacity presents an opportunity for China to support solar deployment in developing countries, aligning with global development and climate goals. Given China's leadership in solar manufacturing and deployment, expanding solar infrastructure in the Global South could deliver both economic and diplomatic benefits.
The report draws a parallel with China’s response during the 11th Five-Year Plan (2006-2010), where the country bolstered its solar industry by stimulating domestic demand in the wake of a global economic slowdown. Today, however, the domestic market is already approaching saturation, and major markets like the US and India are erecting trade barriers or expanding their domestic manufacturing capabilities, respectively.
By redirecting surplus capacity to developing countries, China can maintain its manufacturing momentum, keeping factories operational and preserving jobs until global demand aligns with supply.
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