National strategy
China’s solar power is becoming a problem
April 6, 2024, 9:51 a.m
Listen to article
This audio version was artificially generated. More info | Send feedback
China is building far more solar cells than it currently needs. This has already claimed victims in the corporate landscape, and not just in Germany. But Beijing is concerned with more than just market power.
Solar cells as far as the eye can see: In western China, huge parks in remote areas produce green electricity from solar energy for the energy-hungry country. The People’s Republic is the leader in the industry, but the sheer flood of panels is leaving the solar industry in other countries in the dark. The Meyer Burger company recently closed its factory in Freiberg, Saxony, due to price pressure from China. Meanwhile, political Berlin is unsuccessfully debating funding for the industry, which is under pressure, while Beijing wants to set the course for China’s economic future with green technology.
“The solar industry is essentially fixing three major problems at once that Beijing is trying to solve,” says economic analyst Jacob Gunter of the Merics research institute in Berlin, which specializes in China. “First, it is a new growth driver. Second, China’s increasingly dominant position in the global solar panel market is hugely geopolitically useful for Beijing. Third, it helps solve the problem through the decarbonization agenda.”
The world’s second largest economy invested in real estate for decades, which accounted for around a fifth of economic output. But the sector, with its heavily indebted corporations, is in a serious crisis and is slowing down the economic engine. Large infrastructure projects also contributed to growth. However, the necessary bridges, highways and train routes have now been built.
Large solar parks are therefore an alternative – but with less impact, as expert Cheng Zhang explains. “Compared to investments in real estate, the multiplier effect of this industry is still too small,” says the chairman of the China-Europe Forum for the Transition to Clean Energy. This means that anyone who invests in solar does not earn as much as with real estate. China has currently installed more solar panels in large-scale projects than all countries in the world combined, says Cheng.
“The bubble is already here”
But now there are no buyers in China. Gunter says: “The bubble is already here. Chinese manufacturers of solar panels are producing many more panels than can be consumed in China and actually in the world at the moment.” The expert sees the government’s policy behind this. Unlike electric cars, where consumers regulate demand, Beijing’s industrial policy drives solar demand. “The big problem is that the bubble that has formed is not necessarily about to burst, but rather that the level of overcapacity means that solar panel manufacturers in other markets cannot compete on price.”
According to Cheng, the oversupply is also reducing companies’ profits and even driving some into insolvency. “Overcapacity has become an increasingly serious problem,” he says. But the Communist Party counts solar cells, batteries and electric cars among the so-called new quality productive forces. Behind this cumbersome term, which the state leadership developed further from Karl Marx’s theory, more or less all of the high technologies in which China wants to become a leader are hidden.
“Beijing has made it clear that the development of solar energy will be at the top of the national strategy to drive China’s energy transition, says Greenpeace East Asia climate policy expert Gao Yuhe. More and more companies are seeing decentralized solar power as an investment opportunity, too to use the energy yourself and release excess into the network.
In 2023, China installed significantly more solar modules. According to the Energy Department, the newly added capacity was about 216 gigawatts, while around 87 gigawatts were added in 2022. For comparison: According to the Federal Network Agency, Germany added 14.1 gigawatts in 2023. China’s photovoltaics industry association expects up to 220 gigawatts of newly installed solar energy to be installed in 2024. China is now installing more power in solar power plants instead of on the roofs of private or commercial buildings. The huge solar parks are located in areas with good radiation such as Xinjiang Province or Inner Mongolia.
Beijing wants dominance
China wants to have reached peak carbon dioxide emissions by 2025, earlier than originally expected. But the People’s Republic still produces 60 percent of its electricity from coal. This is also why Beijing is pushing ahead with the expansion of solar and wind energy so massively, while countries like Germany are not progressing quickly enough in the expansion of wind energy. The People’s Republic wants to be climate neutral by 2060.
But why does China produce so many more solar cells than it needs? On the one hand, Beijing wants to dominate the global solar market. But according to Merics expert Gunter, the government is also using the technology as a deterrent. The current US sanctions are cutting China off from important semiconductor technology, for example. The solar panels are a kind of bottleneck that Beijing can close if the USA or Europe want to tighten their sanctions, explains Gunter.
China’s cheap solar cells are already fueling concerns about deindustrialization in Europe. In Germany, dependency could increase with the demise of Meyer Burger – a risk, according to Gunter: If you can no longer get solar panels from China because of a geopolitical crisis, you would have to create a new solar industry out of nothing. “This will seriously undermine the autonomy with which you can pursue your green agenda,” he says. There is no need to decouple from China. “But I think a mix where you let 100 percent China produce the solar energy we need is unrealistic and naive,” he says.
Even experts from the highly respected Peking University have already drawn attention to criticism that China’s overcapacity could affect the international trade order. Economist Huang Yiping recently said at a forum that this should be taken seriously, as several media outlets reported. According to him, if a wave of protectionism against Chinese products gains momentum worldwide, it could damage development, especially in terms of innovation.