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China Set to Increase Capacity by a Whopping 500GW by Year-End

REW Clean Energy Group Solar Leads

In terms of production, the Chinese photovoltaic industry is the fastest-growing globally. With competitive pricing structures, the industry is set for another boom in 2022 after seeing a relative slump in the fourth quarter of 2021.

The Chinese are geared for this new high in production with 500 GW module capacity by the end of 2022. Renewable energy options are a welcome change for the world; these numbers did not reflect in the capacity expansion for wafers in 2021, where Chinese manufacturers could only reach 340 GW.

The capacity generated is not proportionate to the actual demand for solar energy

However, according to Asia Europe Clean Energy (Solar) Advisory (AECEA), the capacity generated is not proportionate to the actual demand for solar energy in the global market. AECEA has also predicted that the price level for solar modules is set to increase by $0.28/W in the second half of 2022. New PV editions equalling 53 GW contributed half of this generated capacity to distributed generation in 2021.

To illustrate this point, the agency explains data of the fourth quarter of 2021, where 80 GW of new wafer production was primarily attributed to new market entrants. The agency cited the precedent of the last few decades where generated capacities have remained well over the global demand. Solar energy still has a long way to go before a global market matching the overcapacities of the current industry can be rationalized. There has been an increased shift towards clean energy solutions in the last five years. However, the Chinese industry is growing faster than the demand for solar energy. China’s Polysilicon industry has already reached an aggregate capacity of 530,000 MT, And AECEA expects that China will add another 300,000 MT to its capacity in the first quarter of 2022.

Overproduction does not bode well

This overproduction does not bode well for the first quarter of 2023. If current estimates are anything to go by, the current price elevated at approximately RMB 200/kg will hit a historic low off RMB 56/KG. Analysts already see a decline in prices happening much faster than anticipated in 2022. The initial boom in production can be attributed to PV systems being connected to China’s National Grid Which shows the addition of 53 GW through solar energy. On the other hand, 2021 will be the last year to benefit from the Chinese government’s subsidies, which explains the growth of 113% and is not altogether surprising. From the Chinese cumulative PV capacity of 306 GW in December of last year, 107.5 GW can be attributed to distributed solar capacity.

Reuters reported that the “China Photovoltaic Industry Association” (CPIA), a member-led association representing entities in the solar power value chain, seeks to enhance and grow even further. CPIA keeps this progress up and predicts China could be adding anywhere between 83 and 99 GW annually between 2022 and 2025. The increase in capacity is also connected to Chinese plans to boost solar power in the eastern and central parts of the country to give grid accessibility to consumers in those regions. Over 50% of solar power accounted for distributed energy in 2021. As the industry growth shows no signs of sluggishness, centralized solar farms and distributed solar power are expected to grow simultaneously.