Chinese PV Industry Faces Overcapacity and Profit Losses: IEA Reports

Iea(The International Energy Agency)

The International Energy Agency (IEA) has issued a concerning report highlighting the overcapacity and declining profitability in China’s photovoltaic (PV) industry, which is the dominant force in the global solar energy supply chain. The report, presented during a webinar this Thursday, sheds light on the financial struggles faced by major Chinese manufacturers such as JA Solar Technology and LONGi Green Energy Technology, which have reported significant losses in their recent financial statements.

According to Izumi Kaizuka, an analyst at the IEA, the mood at the 17th SNEC PV conference in Shanghai this June was grim. Kaizuka quoted the founder of GCL Group, a major PV manufacturer, who expressed concern that the Chinese PV industry is "entering an ice age" due to a severe imbalance in supply and demand. The report also highlighted the bankruptcy of Zhejiang Akcome, one of China’s leading PV manufacturers, earlier this year, with the IEA predicting more closures in the near future.

China's Dominance in Global PV Production

Despite the struggles at home, China continues to dominate the global PV industry. In 2023, China accounted for more than half of the 456GW of global solar power capacity added, and nine of the top 10 PV suppliers in the first half of 2024 were Chinese-owned. The country has increased its production share across all segments of the PV supply chain, including polysilicon, crystalline silicon wafers, solar cells, and PV modules, with its share reaching 92%, 98%, 92%, and 85%, respectively, in 2023.

The rapid expansion of China’s PV capacity is evident, with the country increasing its own year-on-year solar additions by 123% from 2022 to 2023, followed by Italy (113%) and Germany (109%). However, the global demand for PV capacity is pushing countries like the EU and the US to expand their own solar production capabilities, with the EU installing over 56GW in 2023 alone.

The EU's Push for Solar Manufacturing

In response to its growing reliance on Chinese imports, the European Union (EU) has set ambitious targets to scale up domestic production of PV panels. Under the Net-Zero Industry Act, the EU aims to produce at least 40% of its annual needs for strategic net-zero technologies—including solar panels—by 2030. With current production at under 5GW annually, the EU is planning to ramp up its manufacturing capacity to 30GW per year by 2030 in order to meet its renewable energy goals.

As the global PV market faces challenges like overcapacity and supply-demand imbalances, the role of China in driving production and the EU’s efforts to boost its domestic capabilities will shape the future of the solar industry.