China Vows to Rein In Redundant Solar Factory Investment

(Bloomberg) -- China’s government has responded to calls for help from beleaguered solar manufacturers, promising to guide capacity expansions and avoid redundant investments.

The National Energy Administration will monitor solar factory utilization and expansion plans to help improve market conditions, Li Chuangjun, director of the agency’s renewable energy department, said at a press briefing on Thursday. The pledge comes after solar companies called on Beijing to step in after a surge in capacity caused equipment prices and company profits to crater.

“We will reasonably guide the construction and release of upstream production capacity, avoid duplicate construction of low-end production capacity, and strive to create a good market environment,” Li said at the briefing in Beijing.

Executives from firms including Trina Solar Co. and GCL Technology Holdings Ltd. last week called for increased government intervention at the industry’s largest annual gathering in Shanghai. Industry insiders have warned that bankruptcies are looming, and BloombergNEF analysts don’t expect a market recovery until 2025 or 2026.

Trina gained as much as 3.4% in early trading Friday in Shanghai. Tongwei Co. added as much as 3.9%, while Longi Green Energy Technology Co. gained as much as 2.6%. GCL fell as much as 3.1% in Hong Kong.

Reining in solar’s expansion will take time to affect a market where total production capacity was nearly double demand by the end of 2023. It may also help abroad, where governments in places like the US and Europe are increasingly scrutinizing Chinese supply chains for crowding out their overseas competitors.

Still, low prices are helping speed up clean energy adoption. In China, the world’s largest market for wind turbines and solar panels, thermal power output fell in May amid a surge of new clean energy, stoking hopes that the world’s largest polluter might have already peaked carbon emissions years before its 2030 target.

(Updates share prices in fifth paragraph.)

©2024 Bloomberg L.P.