Has Photovoltaic Power Disappointed the Nation?

On March 27, 2024, while attending an event at a solar cell factory in Georgia, USA, then-US Treasury Secretary Janet Yellen stated: “China's 'overcapacity' in the green energy industry poses a threat to global supply chains and related industries in the United States.”

 

During her subsequent visit to China in April, Yellen continued to emphasize that China has New Energy Vehicles 、 Photovoltaic 、 Lithium Batteries These three green energy-related industries have "overcapacity" issues. In November, the Group of Seven (G7) once again hyped up the "China's overcapacity" argument, prompting a rebuttal from the Chinese Ministry of Foreign Affairs:

 

“The so-called 'overcapacity in China' has been proven to be a false proposition by a large amount of factual evidence and data. We hope that relevant countries will adopt an open mind and uphold fair competition.”

 

So, does China, and specifically the Chinese photovoltaic industry, actually have an overcapacity problem?

 

Image: March 27, Yellen visits the reopened US photovoltaic cell factory Suniva

 

01 Frozen Ground Beneath the Numbers

 

Seven years ago, the International Energy Agency (IEA) published the World Energy Outlook 2018 report, indicating that global energy demand growth would exceed 1/4 by 2040, Photovoltaic installed capacity will surpass wind power in 2025, hydropower around 2030, and coal-fired power before 2040, second only to natural gas in global installed capacity.

 

In the same year, a British group company's 2018 International Energy Outlook predicted that photovoltaic power generation would account for 12% of global power generation by 2040, with an annual growth rate exceeding 10%.

 

Clearly, forecasting agencies have underestimated the capabilities of the world's largest industrial nation to some extent. Statistics show that in 2024, China's photovoltaic industry chain capacity expanded threefold compared to three years prior. The effective production capacity of polysilicon, silicon wafers, cells, and modules reached 2.65 million tons, 1075 GW, 1140 GW, and 1020 GW respectively. The entire industry chain accounts for over 90% of the global market share, easily outpacing the global installation plan scale.
Looking at more accurate production data, in 2024, China's polysilicon production was 1.82 million tons, a year-on-year increase of 23.6%; silicon wafer production was 753 GW, a year-on-year increase of 12.7%; cell production was 646 GW, a year-on-year increase of 10.6%; and module production was 588 GW, a year-on-year increase of 13.5%.

Against this backdrop, domestic photovoltaic new installations exceeded expectations, with cumulative installed capacity exceeding 885.68 GW. However, behind the brilliance lies a crisis. Due to trade barriers and changes in the overseas industrial landscape, China's photovoltaic product exports have declined for two consecutive years. 。
According to InfoLink's latest forecast, global photovoltaic market demand is between 469 GW and 533 GW; looking ahead to 2025, the year-on-year growth rate compared to 2024 may only be 5%-7%. Other industry analysts predict that the industry-wide loss rate will expand to 60% in 2025, and it will take at least 2-3 years to clear out lagging capacity.
Judging from the generally pessimistic sentiment within the industry and the severe financial reports of photovoltaic companies, the repercussions of the "overcapacity" argument seem to have left an indelible mark on our minds.
 

Jin Yong, an academician of the Chinese Academy of Engineering and professor of the Department of Chemical Engineering at Tsinghua University, once said: “China needs ten times more photovoltaic production capacity because it needs to completely replace 4 billion tons of coal-fired power generation.”

Such objective facts were once a shot in the arm; now, they are like antibiotics with no resistance against objective drug resistance. A stone is thrown, but no ripples are seen.
This pain, however, is not unique to the photovoltaic industry.
 

02 The Main Contradiction in Hiding

 

Overcapacity was generally referred to as excess capacity in early economics literature, first proposed by Edward Chamberlin in his 1933 book, "The Theory of Monopolistic Competition".

 

Discussions on overproduction in China's policy circles originated from the 1997 Asian Financial Crisis. At that time, External demand fell sharply Domestic enterprises had severely insufficient operating rates, and many export-oriented enterprises went bankrupt, resulting in massive employee layoffs and unemployment.

 

In response to the "overproduction" phenomenon in 1998, the state adopted a strategic approach of using government bond investment to stimulate economic growth. As a result, large-scale investments in major infrastructure projects such as railways, highways, airports, and water conservancy projects flourished, laying a solid foundation for foreign investment in China and the recovery of state-owned enterprises, thereby boosting economic growth.

 

In 2014, China's economy entered an L-shaped downward curve. The following year, the state decisively proposed Supply-side structural reform in industry Advocating Reducing overcapacity and inventory 。

 

It seems that the problems encountered ten or even twenty years ago are similar to the current situation.

 

Over the past decade, the state has vigorously promoted “The Belt and Road Initiative” 、 Poverty alleviation 、 Rural revitalization The implementation of these major strategies is essentially aimed at solving the problem of "overproduction." In this context, "overproduction" is not an absolute derogatory term but rather a driving force for regional development.

 

 

However, over the past decade, industrial supply-side reforms have not been effectively implemented, and under the new cycle, "overproduction" has become a global phenomenon. Why?

 

Professor Wen Tiejun's perspective reveals that the real estate boom in 2016 to some extent "blocked" the pace of supply-side reform, and excess capacity was absorbed by the real estate industry, which could drive thousands of related industries. The financialization of real estate capital further overdrew future consumption. After the bubble burst, the existing "overproduction" in China was compounded by suppressed resident investment and consumption levels, exacerbating the contradiction.

 

Therefore, The so-called "overcapacity" in the photovoltaic industry is almost inevitable, and it is not controlled by photovoltaic companies, even leading ones.

 

They, too, were caught up in the whirlwind of the times, trapped in a vicious cycle of "expansion-losses-re-expansion."

 

And this is just the challenge faced within China. In fact, for production capacity, the biggest fear is not overproduction, but insufficient absorption.

 

 

Therefore, as globalization gradually disintegrates, we should be clear-headed: the establishment of trade barriers by Western countries led by the United States will not change due to shifts in political parties. Malicious competition among industrial capital has begun to reappear. 。

 

The difference is that after World War II, the outflow of industrial capital from Western countries led to the rise of globalization, which in turn caused these countries to enter a stage of insufficient production. Developing countries, due to advancements in their industrial levels, have taken over the phenomenon of "overproduction."

 

And For developing countries, this phenomenon of vicious competition among industrial capital is obviously difficult to evolve into "waging war against developed countries," objectively evolving into the phenomenon of "involution."

 

In the photovoltaic industry, this structural imbalance is particularly evident in the price: the price of photovoltaic components has fallen from 2 yuan/W to 0.86 yuan/W by the end of 2024, breaking through the cost line of most enterprises.
 

 

On the other hand, this round of global "overproduction" crisis in the photovoltaic field also presents an unprecedented composite form: local governments' blind pursuit of "new three items," the speed of technological iteration far exceeding the cycle of production capacity clearing, a 380% increase in photovoltaic patent litigation cases in the past year, and continuously rising tariffs in European and American countries...

 

Since encountering the trade war in 2018, China has proposed a domestic-cycle-based economic model. Now, the method of using industrialization and urbanization to drive high economic growth and thus absorb production capacity is no longer realistic. Where is the path to "absorbing" the production capacity of China's photovoltaic industry?

 

 

03 Breakthrough from Life and Death

 

During the 2025 Two Sessions, 13 representatives and committee members offered suggestions for the development of the photovoltaic industry. High-frequency words include, but are not limited to: going global, internationalization, technological innovation, patent protection... reflecting the anxiety about the depletion of the existing market.

 

At present, the targeted measures adopted by the state have been upgraded from investing in infrastructure and promoting supply-side reforms to accelerating the formation of "new-quality productivity." Photovoltaics, as an industry with inherent green attributes, is naturally a good shield to address the current complex economic situation in the country.

 

In September 2023, during an inspection and research trip to Heilongjiang, General Secretary Xi Jinping first mentioned the term "new-quality productivity." At the end of the year, in his New Year's address for 2024, the General Secretary specifically mentioned photovoltaics, stating: "New energy vehicles, lithium batteries, and photovoltaic products have added new highlights to Chinese manufacturing."

 

At the end of last year, the President's New Year's address only included new energy vehicles, with the relevant content being:" We cultivate new-quality productivity according to local conditions ，new industries, new formats, and new models are emerging in large numbers. The annual output of new energy vehicles exceeded 10 million for the first time, and new achievements have been made in fields such as integrated circuits, artificial intelligence, and quantum communication."

 

Has Photovoltaic Power Disappointed the Nation?

 

 

The average abandonment rate of photovoltaic power stations in the three northern provinces has rebounded, and the actual IRR of some power stations is far lower than the data in the feasibility study report... Land rent is rising, and the cost of energy storage is increasing sharply. Existing power stations have become "junk assets," and centralized photovoltaics are deeply trapped.

 

The bad debt rate of household photovoltaics in a certain county in Shandong Province reached 19%, and the number of rooftop lease disputes increased by 300% year-on-year... The chaos in household photovoltaics continues. Insufficient grid carrying capacity, and many places have triggered "circuit breaker mechanisms"... Industrial and commercial photovoltaics are constrained by grid connection and absorption problems.

 

More than 90% of the production capacity has not led to high-end transformation, but has instead become a "low-price" puppet. Replacing thermal power was originally a "consumerist trap" under global consensus, but it has become a "hard indicator" for the continuous decline in the cost of photovoltaic power generation. In this respect, photovoltaics may indeed be disappointing.

 

However, from another perspective, the national strategy clearly points to the "Belt and Road" initiative and rural revitalization, which are precisely the advantageous areas for photovoltaics among the "new three items." Combined with the demand stimulated by the power reform under the national unified large market, photovoltaics is never a story of disappointment, but will instead be an epic of a great industry traversing the storm.