Chinese Solar Group Urges Faster Consolidation as Glut Deepens

By Bloomberg

Jul 25, 2024

image is BloomburgMedia_SH5OZOT0G1KW00_25-07-2024_06-00-10_638574624000000000.jpg

Solar panels at Elion Resources Group Ltd.'s Hangjin Banner solar project in Kubuqi Desert in Ordos, Inner Mongolia, China, on Wednesday, May 31, 2023. By the end of this decade, China aims to build the equivalent of 225 more of these massive renewables bases across vast swathes of the country’s interior. Photographer: Qilai Shen/Bloomberg

(Bloomberg) -- China should push struggling solar manufacturers to exit the market as soon as possible to reduce severe overcapacity in a sector that’s vital to the energy transition, according to a major industry group.

Central and local government, financial institutions, and companies should coordinate to speed up industry consolidation, Wang Bohua, head of the China Photovoltaic Industry Association, said at a solar conference in Zhejiang province on Thursday.

The country’s world-leading solar industry is grappling with factory overcapacity that’s spurred a deepening glut in generation equipment and an ensuing price war. Longi Green Energy Technology Co. and Tongwei Co. — two of the biggest manufacturers — lost more than $1 billion in the first half amid a glut that’s expected to hit smaller firms harder.

Chinese solar installations are still forecast to be fairly high this year, despite the glut. The CPIA said Thursday that it was expecting 190 to 220 gigawatts of new capacity in China this year, unchanged from a forecast in February. That compares with a record 217 gigawatts in 2023. Globally, the association predicted 390 to 430 gigawatts of installations this year.

Solar firms in China are facing terrible cash flows and are even delaying loan payments and order deliveries, Wang said at the conference in Wenzhou. Polysilicon manufacturers and module makers are only operating at about 50% to 60% of full capacity, he said.

The poor financial situations of some of the solar companies is also endangering product quality, Wang said, adding that the “immediate agony” of a speedy industry consolidation was better than a long and drawn-out process.

Financial institutions should avoid providing funding to companies that are expected to fail, while manufacturers should be cautious when investing in new capacity and consider buying plants that are set to be abandoned by outside investors, Wang said.

Authorities and financial institutions should support solar-sector takeovers and mergers to avoid resources being wasted, Gao Jifan, chairman of leading manufacturer Trina Solar Co., said on the sidelines of the conference on Wednesday.

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