China’s Solar Surplus: A Global Clean Energy Opportunity – Asia-Pacific

A new report from EMBER entitled “China’s Backup Solar Capacity Offers Opportunities for Energy and Climate Access” highlights a critical moment in the global solar industry, with China at the center of overcapacity and a missed opportunity for global energy access .

The report shows that global solar panel production capacity tripled between 2021 and 2023, mainly driven by investments in China. This rapid growth has increased production capacity to 1,100 GW per year, which is expected to increase to 1,300 GW by 2028. However, installations around the world remain far behind production capacity, and annual deployment is expected to remain below half of production capacity, increasing from 400 GW in 2024 to 532 GW by 2028

The mismatch between production and installation has driven solar panel prices to historic lows, now averaging around $0.10 per watt, almost half of what they were a year ago. The fall in prices has led to significant financial burdens for producers. In the first quarter of 2024, Chinese companies shelved or postponed $8.3 billion in planned investments, and shares of China’s largest solar companies have fallen more than 50 percent since the beginning of 2022.

Exports from China, which had previously tripled in four years, stabilized last year. It is worth noting that exports to Europe, its largest market, fell by 25 percent year-on-year. The International Energy Agency (IEA) forecasts total production capacity of 7,310 GW between 2024 and 2030, but only 3,473 GW of solar panels are expected to be deployed over the same period, leaving a surplus of 3,837 GW.

The report highlights that this “spare” capacity creates an opportunity for China to support the deployment of solar energy in developing countries, in line with global development and climate goals. Given China’s leadership in solar energy production and deployment, expanding solar infrastructure in the Global South could bring economic and diplomatic benefits.

The report refers to China’s response during the 11th Five-Year Plan (2006-2010), in which the country strengthened its solar industry by stimulating domestic demand in the wake of the global economic slowdown. Today, however, the domestic market is already approaching saturation, and major markets such as the US and India are respectively erecting trade barriers or expanding their domestic production capabilities.

By redirecting excess production capacity to developing countries, China can maintain production momentum, keep factories operating and preserve jobs until global demand equals supply.