GCL-Poly expansion raises oversupply fear

China's largest producer of solar panel components, GCL-Poly Energy Holdings, has embarked on an aggressive expansion programme that could worsen industry oversupply and depress prices next year, warn analysts.

Jiangsu province-based GCL said on February 18 that it would raise its output of polysilicon rods from 21,000 tonnes currently to at least 46,000 tonnes by the the end of the year, and 65,000 tonnes by the end of next year.

It also planned to raise its production of polysilicon wafers from 3.5 giga-watt (GW) generation capacity at the end of last year to 6.5 GW by the end of this year. One GW of wafer capacity can supply the solar energy needs of about 800,000 households in the United States for a year.

The two-year expansion plan would cost a total of HK$17.7 billion, GCL said. Solar panels are made mostly from polysilicon rods, some two metres long, which are cut into ingots and then sliced into wafers that are 0.2 millimetres thick. The wafers are then processed into solar cells that are assembled into the solar panels that convert sunlight energy into electricity. Most of China's solar panels are for the export market.

The domestic market has been growing by over 100 per cent annually in the past two years from a low base, although this has been held back by less favourable government incentives compared to developed markets like Europe.

China is the world's largest solar panel producer.