Despite being a reference country World Cup in renewable energy, China Face a perfect storm In its solar sector: price collapse, red margins and an uncontrolled overproduction. Given this situation, more than 30 solar manufacturers agreed to stop the offer to stabilize the market, imitating the OPEC model. A kind of “Solar Cartel” in the style of oil exporting countries.
It hasn’t done very well … Six months later, the result has been a disaster. Far from stabilizing, production has reached historical maximums, the facilities have tripled and losses continue to accumulate. According to Bloombergdifferent executives in the sector have publicly expressed their frustration and accuse their competitors of betraying the collective pact.
OPEC style? Some of the big Chinese photovoltaic companies seem to be following the example of OPEC. As He explained Oilprice, the famous oil sign has been adjusting its production to influence global prices. The logic is clear: if the offer is limited, the price drop is contained and war between producers is avoided.
Something similar is happening in the solar sector. Longi, Tongwei and Ja Solar have signed a “self -discipline” agreement under the Chinese association of the photovoltaic industry. The reason? Profitability is falling as panel prices, modules and wafers continue to fall. The pact seeks to set production fees by 2025, depending on the installed capacity and market share of each company.
Chronicle of an announced death. Like Santiago Nasar at 5:30, this pact also had an inevitable ending. Unlike the oil market – dominated by state giants – the Chinese solar sector is private, fragmented and fiercely competitive. According to Bloombergthe agreement was not binding or contemplated sanctions. It was nothing more than a declaration of good intentions.
And while some expected others to fulfill, many took the opportunity to gain market share producing even more. The result was excess supply, prices in free fall and sunken balances.
No rules and every machine. According to Oilpricethe plan included limiting new investments, raising the technical requirements and increasing from 20% to 30% the minimum capital required for new projects. The government also implemented measures to cool the overheated sector.
However, instead of containing themselves, companies intensified production so as not to lose relevance. According to data cited by Bloombergsolar facilities tripled in a year, and manufacturers have not closed or reduced operations significantly.
The damage has been tangible. Longi Green Energy, one of the leaders of the sector, reported in the third quarter of 2024 a loss of 174 million dollars (1,261 million yuan), its first major fall since 2016. In the words of the company itself, collected by Oilpricelast year marked the first collective loss of the sector in almost a decade.
The Chinese government has already hardened the conditions for new investments, and there are voices that ask for a firmer intervention. But the truth is that the “OPEC Solar” has failed loudly. The market remains overflowing, depressed prices and competition more wild than ever.
The mirage of coordination. Try to coordinate a privatized and fragmented industry with a voluntary pact has been, as has detailed Bloomberg, an idea “condemned from the beginning.” Far from an orderly cartel, the attempt has exposed the structural weaknesses of the Chinese solar model: brutal efficiency, but without rules or firewalls.
China continues to lead the world in installed capacity for renewables. But its solar manufacturing sector now faces a hard truth: in a market without discipline or referees, surviving is more difficult than producing.
Image | Grégory Roose (Pixabay)
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