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China's old trick to dominate the solar market: selling solar panels at a loss

Written by Noel Budeguer
Published 09/10/2024 às 18:52
energy - solar energy - renewable energy - solar panels - solar panels
China is crushing the solar energy market thanks to an old trick: selling solar panels at a loss

Solar energy market: China uses a strategy of selling at a loss to lead. Find out more about the impacts of this practice and the crisis faced by manufacturers

China managed to make the entire world dependent on its solar energy panels with a simple formula: government support, constant improvement of technology and prices so low that they end up disrupting the market. There's just one problem: its manufacturers lose money on a massive scale.

Crisis in China's solar sector. Most Chinese PV module manufacturers are having trouble turning a profit. Half of them are having difficulty containing their huge losses and are drawing on their “war funds”.

The root of the problem is market prices: many solar panels are sold at cost or even at lower prices than production, a situation favored by the sector's enormous oversupply.

The ability to Chinese solar energy sector production doubled in three years. There are many manufacturers just as installations are slowing down, especially those of older P-type panels.

Half of manufacturers sell at a loss. According to a report from Bloomberg, negative margins are piling up across the solar industry supply chain, and most companies are already losing money.

Chinese manufacturers have the funds to support these losses for a while, but more than half reported negative earnings before interest expenses (EBITDA) during the first quarter of 2024:

  • First Solar (USA): 243,1 million dollars
  • Trina (China): 132,2 million dollars
  • Jinko (China): 73,2 million dollars
  • Canadian Solar (China): 49,1 million dollars
  • DAQO (China): 30,5 million dollars
  • GCL System (China): 14,2 million dollars
  • Aiko (China): 1,6 million dollars
  • Akcome (China): -24 million dollars
  • Eging (China): -27,2 million dollars
  • Risen (China): -34,8 million dollars
  • Tongwei (China): -38,7 million dollars
  • TCL Zhonghuan (China): -78 million dollars
  • JA Solar (China): -96,3 million dollars
  • Longi (China): -437,1 million dollars

GCL asks the Chinese government for help. GCL Technology — China's second-largest solar energy company and one of the largest companies in the global energy sector — asked for state support to face the crisis.

GCL, which manufactures panels of the most efficient N-type, was not only hampered by excessive supply, but also by the drop in exports. Rising tariffs in the United States and European Union investigations into alleged unfair subsidies from Beijing have worsened the global position of large photovoltaics.

Facing the storm. The Chinese government appears to be clear on how to address the crisis: financing new domestic solar installations and reducing industry fees to alleviate oversupply.

Beijing wants to prevent the industry from shrinking at all costs. The crisis has already forced manufacturers like Longi to close production lines and reduce their workforce, but the future is promising for the industry.

A China plans to build more than 1000 GW of N-type cell capacity as the world meets its net-zero emissions commitments. The manufacturing capacity of Chinese industry is 17 times greater than that of the rest of the world and could cause a further increase in the market by 2025.

A bet is risky It is unclear how long these struggling companies can hold out, but if there is one country with the capacity to absorb the losses, it is this one. China accounts for 80% of the solar energy sector, and although its rivals are growing, they still rely on Chinese silicon and other components.

Image | Longi

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Noel Budeguer

Of Argentine nationality, I am a news writer and specialist in the field. I cover topics such as science, oil, gas, technology, the automotive industry, renewable energy and all trends in the job market.

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