Beijing intervenes in China’s solar industry as overcapacity dries up profit

A price war on solar panels in China has meant that big firms have rapidly lost profit while small firms risk bankruptcy. Historically, the industry has been propped up by city governments, which build solar panel factories to lease or sell to private firms. But while some local authorities have expressed willingness to continue to keep solar firms afloat, “that support may dry up,” The Economist reported. The provinces are themselves swimming in debt, largely stemming from the country’s property crisis, and solar has to compete for their support with other green tech sectors, like electric vehicles, that are also struggling with overcapacity.

Chinese officials want homeowners to install solar panels to combat overcapacity, but China’s grid is still not able to accommodate fluctuating solar energy levels, as Semafor previously reported. One solution may be virtual power plants: smaller-scale grids that rely on local renewable energy infrastructure and incentivize homeowners to use that energy during peak times with cash payments. But beyond building a new grid meant to handle renewable energy, China also needs “improved coordination” from Beijing to enable solar-heavy provinces to trade energy with solar-weak provinces, according to the Environmental Politics journal. China’s energy regulator is also pushing for more spot trading — where prices will fluctuate with supply and demand — rather than fixed rates, encouraging customers to use energy during low-demand periods.

China’s ultra-low price solar panels have stifled international competition, but a new technology could help bring prices down elsewhere. Israeli startup Lumet has developed a new form of metallization — the most expensive part of solar panel production where polysilicon wafers are treated with silver to make solar cells — that the company says will significantly reduce production costs, The Wall Street Journal reported. South Korean solar company Hanwha has canceled a planned Chinese plant and instead invested billions to use Lumet’s technology at its US-based plant, where its new generation of solar panels are “expected to be one of the biggest beneficiaries” of President Joe Biden’s Inflation Reduction Act, the Journal noted.