In-Depth: The Peril of Excess Solar Power Capacity (AI Translation)

【周刊提前读】深度：光伏过剩产能危如累卵 让谁出局？

Since late June, China’s photovoltaic (PV) market has experienced dramatic turbulence, with prices surging across the supply chain. Leading the spike was polysilicon, whose main futures contract climbed 80% in one month to reach 53,800 yuan/ton on July 24, 2024[para. 1]. Stock prices of major PV companies such as Tongwei, GCL Technology, Daqo New Energy, and Xinte Energy rose by over 50% in the same period, while others like LONGi Green Energy and Jinko Solar regained 15–30%[para. 2].

This market activation was driven by strong policy expectations focused on curbing “involution” (excess competition) and excess capacity. The National Development and Reform Commission (NDRC) and Ministry of Industry and Information Technology (MIIT) initiated investigations and meetings from late June through July 2024 to address low utilization rates, cutthroat pricing, and unhealthy competition. The government signaled intention to manage price competition and eliminate backward capacity[para. 3][para. 4], extending these expectations to overcapacity sectors beyond PV[para. 5].

Polysilicon futures, launched in December 2024, have attracted speculative and institutional capital, but most funds are short-term oriented. For example, on July 23, polysilicon futures volume rose 67% while open interest fell by 15%—indicating fast turnover rather than sustained investment[para. 6]. Analysts argue the solution lies in legal price floors and industry self-regulation, with a focus on upstream supply control to balance supply and demand across the PV value chain[para. 7][para. 8].

Industry leaders plan to create a platform company for consolidated production and coordinated supply management, focusing on joint acquisition of excess capacity. This is feasible as the top 7 polysilicon producers control over 80% of total capacity in China, making upstream coordination more likely than downstream integration[para. 9][para. 10].

China’s PV industry underwent exponential expansion from 2020, with polysilicon capacity rising nearly sevenfold to 3.2 million tons by end-2024, while wafer, cell, and module capacity increased over fourfold. Current capacity at all levels nearly doubles (or exceeds) global demand projections, leading to deep losses: polysilicon, wafer, cell, and module prices in 2024 fell by 29–50%, with most prices below cash cost[para. 11][para. 12].

Despite policy efforts, challenges persist. Upstream companies have raised spot offers based on higher costs, but low transaction volume and speculative restarts undermine efforts to scale back supply. Downstream module prices remain stuck due to weak terminal demand and uncertainty around government energy policy and project returns[para. 13][para. 14].

Losses have triggered partial production cuts and discussions on sector consolidation, but with little material progress due to divergent interests, local government involvement, and the resilience of companies—many propped up by local governments, subsidies, and financial leverage[para. 15][para. 16][para. 17]. Notably, in 2024, top firms like Tongwei, GCL, Xinte, and Daqo suffered heavy net losses, and across the supply chain, job cuts and bankruptcies have been widespread[para. 18][para. 19].

Efforts are underway to set up a multi-stakeholder platform for capacity acquisition and restructuring, supported by banks and asset managers. The approach envisions using future profits from market stabilization to repay existing debts, buying time to digest excess capacity[para. 20][para. 21][para. 22]. However, obstacles include consensus on valuation, distribution of benefits, exit mechanisms, and legal concerns over potential anti-monopoly violations[para. 23][para. 24].

As domestic and global demand growth slows, compounded by changing overseas energy policies, the market faces continued downward pressure despite short-term speculative rallies. The root issue remains severe oversupply, and the path to industry rationalization will be slow, painful, and heavily dependent on effective policy enforcement and collective action[para. 25][para. 26][para. 27].