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China to hold over 80% of global solar power manufacturing capacity from 2023-26

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China to hold over 80% of global solar power manufacturing capacity from 2023-26​

November 7, 2023

Despite local manufacturing policies in overseas markets, China’s expansion will dominate global solar supply chain, and widen the technology and cost gap.

After investing over US$130 billion into the solar industry in 2023, China will hold more than 80% of the world’s polysilicon, wafer, cell, and module manufacturing capacity from 2023 to 2026, according to a recent report by Wood Mackenzie titled “How will China’s expansion affect global solar module supply chains?”.

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Huaiyan Sun, senior consultant at Wood Mackenzie, and author of the report said: “China’s solar manufacturing expansion has been driven by high margins for polysilicon, technology upgrades and for developing local manufacturing in overseas markets, China will still dominate the global solar supply chain and continue to widen the technology and cost gap with competitors.”

More than one terawatt (TW) of wafer, cell and module capacity is forecasted to come online by 2024, meaning China’s capacity is sufficient to meet annual global demand now through to 2032, based on Wood Mackenzie forecasts of annual demand growth.

China’s capacity expansion will perpetuate its dominance in the global solar industry with its advanced technology, low costs and complete supply chain
Strong government policies in overseas markets have started to increase local solar manufacturing, but they are still not cost-competitive compared to Chinese supply. A module made in China is 50% cheaper than that produced in Europe and 65% cheaper than the US, according to the report.

The US and India have announced more than 200 gigawatts (GW) of planned module capacity since 2022, driven by the Inflation Reduction Act (IRA) in the US and the Production Linked Incentive (PLI) in India.
“Despite considerable module expansion plans, overseas markets still cannot eliminate their dependence on China for wafers and cells in the next three years,” Sun said.

China will continue to be the global technological leader with its announcements to build more than 1,000 GW of N-type cell capacity, the next-generation technology after P-type. This represents 17 times more capacity than the rest of the world.

Looking outside China, India is forecasted to overtake Southeast Asia as the second-largest module production region by 2025, which will be driven by India’s strong PLI incentives.

Oversupply and intense competition will characterise the solar supply chain going forward, and is already driving cancellations of some expansion plans
Concerns about the market’s oversupply are mainly aimed at old production lines that produce lower efficiency products, such as the P-type and M6 cells. Demand for P-type cells began to decline in 2023 and Wood Mackenzie analysts expect it to be only 17% of supply by 2026.

Sun added: “Oversupply will undeniably hinder some of the current expansion plans. More than 70 GW of capacity in China has been terminated or suspended in the past three months.”

The solar manufacturing industry in China is entering a challenging time. Module manufacturers will be forced to take orders at a loss, reduce capacity, or shut down entirely.

 

China to ‘Dominate’ Global Solar Supply Chain For Next Decade​

November 8, 2023

The world’s second-largest economy will account for more than 80% of the global solar manufacturing capacity through to 2026, according to a new report​


Smoke rises from chimneys near solar panels, during a Huawei-organised media tour, in Shaanxi province, China


Smoke rises from chimneys near solar panels, during a Huawei-organised media tour, in Shaanxi province, China. Photo: Reuters

China is set to dominate the global supply chain for solar power for much of the next decade as countries race towards their clean energy transitions, a new report has found.
The world’s second-largest economy will account for more than 80% of the global solar manufacturing capacity through to 2026, a report by UK-based energy research firm Wood Mackenzie said.

China will also bring more than a terrawatt of solar wafer, cell and panel capacity online by 2024, enough to meet annual global demand through to 2032, the report added.

The report’s findings are in-line with what energy executives have consistently said for the past few years — China has established an overwhelming lead in the production of solar panels.

The country already controls more than 80% of solar panel manufacturing, the International Energy Agency said last year. It projected China will produce almost 95% of the world’s polysilicon and the ingots and wafers further down the solar value chain.

China’s solar energy prowess is down largely to its extensive investment in the sector.

Beijing has invested more than $130 billion into the country’s solar industry just this year, the Wood Mackenzie analysis said.

India to grab second spot​

The report also forecast that India would overtake Southeast Asia as the second-largest solar module production region by 2025.
The growth of India’s solar capacity was linked to the Narendra Modi government’s Production Linked Incentive (PLI) scheme that went into effect in 2020.
Efforts by India, and also the United States, to subsidise their own solar production are aimed, in part, at reducing reliance on Chinese-made goods.

Solar module production capacity by region


Graph: Wood Mackenzie

The United States and India combined have announced more than 200 gigawatts of module capacity plans since 2022 to achieve their clean energy goals, Wood Mackenzie said.
But “despite strong government initiatives for developing local manufacturing in overseas markets, China will still dominate the global solar supply chain and continue to widen the technology and cost gap with competitors,” Huaiyan Sun, senior consultant at Wood Mackenzie, and author of the firm’s report, said in a statement.

Driving down solar costs​

The Wood Mackenzie report also noted that overseas manufacturers are still not yet as cost-competitive compared to China. A module made in China is 50% cheaper than one produced in Europe and 65% cheaper than the US, the report said.

China’s aggressive capacity expansion – both for export and installation at home (which is expected to reach 150 GW this year) – has already forced solar panel prices down dramatically this year.

The earlier IEA report noted that a huge amount of Chinese investment has meant that solar photovoltaic technology, which converts sunlight into electricity, has become the cheapest way to generate power in many parts of the world.

The solar industry has already absorbed a 26% drop in panel prices this year, according to S&P Global Commodity Insights.

Cheap imports from Asia, however, are prompting concern among US producers that are banking on a government-backed domestic manufacturing boom. Apart from China, India, Malaysia, Thailand, Cambodia and Vietnam have also been shipping to the US.

US officials have also repeatedly warned that over-reliance on Chinese clean energy technology could pose a security risk similar to Europe’s historical dependence on Russian natural gas.

 
In 2023 alone, they invested over US$130 billion, solidifying their position as a leader in the global solar industry. Projections suggest that from 2023 to 2026, China will control more than 80% of the world's polysilicon, wafer, cell, and module manufacturing capacity. This expansion is expected to have a significant impact on global solar module supply chains, according to a recent report by Wood Mackenzie.
 
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