China’s solar panel industry faces a year of reckoning amid global protectionism, slowing demand at home

Chinese suppliers of solar panels could be facing an epic headwind in the year ahead, as rising production capacity is set to coincide with a downturn in domestic demand and growing trade protectionism that threatens access to the US and promising emerging markets such as India.

China exported 37.9 gigawatt (GW) of solar panels last year – equivalent to 37 per cent of global solar installation – up 78 per cent from 2016, according to China Photovoltaic Industry Association data. 

The Chinese solar manufacturing industry – which last year accounted for 55 to 83 per cent of global supply of products ranging from raw material polysilicon to solar panels – will have to brace for hard times, analysts said.

Access to the US market has come into question since the Trump Administration announced a 30 per cent tariff on solar panel imports from China, while India has discussed a 70 per cent duty, threatening access to the world’s second most populous market.

“We believe a down-cycle and de-rating of China’s solar sector is likely to happen in 2018,” said Daiwa Capital Markets in a recent report. “China’s solar upstream market is set for significant oversupply from 2018.” 

Daiwa said it expects a profits squeeze at solar panel makers as domestic installation demand this year falls to 45GW from 53GW last year, while solar panel production capacity rises 10 to 20 per cent across the supply chain.

Frank Haugwitz, founder of Asia Europe Clean Energy (Solar) Advisory, also projected 45GW of new capacity in China this year, while industry information and analytics provider IHS Markit senior analyst Jessica Jin Feng indicated domestic installation of at least 50GW.