China doesn't have enough storage or transmission capacity for all the solar energy it's producing, per Reuters.
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China has made a lot of solar panels, dramatically lowering prices and helping the country's clean energy transition.
The problem is that Chinese manufacturers seem to have made too many solar panels, according to the US, European Union, and their allies. They are now calling on Beijing to rein in the overcapacity of the panels and other goods, raising prospects of a trade war.
China's facing its own overproduction problem at home following a breakneck pace of growth in solar energy — one key pillar of the country's "new three" economic drivers. China has installed so many solar panels that they are generating excess power that the country doesn't have storage or transmission capacity for, Reuters reported on Wednesday.
Such overcapacity has prompted Chinese authorities to withdraw some price support for the sector, leading to fewer solar panel installations, per Reuters.
China is still setting up solar panels at a rapid pace in the first quarter of 2024, as the installation rate jumped by more than one-third from a year ago, according to official data. However, this growth was much slower than in the 154% surge in the same quarter of 2023.
As of March this year, China — the world's largest solar energy market — has installed 660 gigawatts of capacity. The US, meanwhile, ended 2023 with 179 gigawatts, enough to power 33 million American homes.
Chinese manufacturers are producing more solar panels than people want to buy domestically, according to a Bloomberg analysis in April.
Given the oversupply at home, this development points to one possibility that will not be welcomed by the West: China continuing to dump its excess solar panels on the international market.
Chinese manufacturers are feeling the heat from solar panel overcapacity, too.
In March, Longi Green Energy Technology, the world's largest solar cell manufacturer, announced it was laying off thousands of workers amid overcapacity and low prices.
China's solar panel overcapacity is so bad that the country's China Photovoltaic Industry Association is calling for more mergers and acquisitions, as well as restrictions on domestic competition to control capacity, the association said in a post on its official WeChat account on Tuesday.
Earlier this month, US President Joe Biden announced he will double tariffs on Chinese solar cell imports from 25% to 50%.
China has pushed back against the West's claim of industrial overcapacity. Beijing says the bloc is trying to contain its economic growth.
It's not just China getting hit by an excess of solar energy.
Germany, too, has been producing so much solar energy that energy prices have fallen into negative territory when output peaks.
But experts say these are just bumps in the world's energy transition away from fossil fuels to green energy, which, in its next phase, will focus on optimizing supply and demand.
"Every country in the world that is installing a lot of renewables and then facing the challenges that arise from all this variable intermittent generation, is searching for smart ways, intelligent AI-enabled or at least model-backed approaches to distributing this power and using it in the most efficient and effective way," David Fishman, a senior manager at the Lantau Group economic consultancy, told Reuters.
"Certainly that's where China is heading," he added to the news agency.
