China has so many solar panels, its grid can’t handle all the power

• China has produced an excess of solar panels, causing overcapacity issues domestically and abroad.
• The US, the European Union, and China are facing challenges because of the glut of solar panels.
• China and Germany are seeing energy-market distortions from excessive solar-energy production.

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, the European Union, and their allies. They’re 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. Reuters reported on Wednesday that China had installed so many solar panels that they were generating excess power that the country didn’t have storage or transmission capacity for.

Such overcapacity prompted Chinese authorities to withdraw some price support for the sector, leading to fewer solar-panel installations, Reuters reported.

China was setting up solar panels at a rapid pace in the first quarter of 2024, with the installation rate jumping by more than one-third year on year, according to official data. But 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 — had installed 660 gigawatts of capacity. The US, meanwhile, ended 2023 with 179 gigawatts, enough to power 33 million American homes.

China’s solar-panel overcapacity may be exported

A Bloomberg analysis in April found that Chinese manufacturers were producing more solar panels than people wanted to buy domestically,

Given the oversupply at home, this development points to one possibility that won’t 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 China Photovoltaic Industry Association is calling for more mergers and acquisitions, as well as restrictions on domestic competition to control capacity, as it said in a post on its official WeChat account on Tuesday.

Earlier this month, US President Joe Biden announced he would double tariffs on Chinese solar-cell imports from 25% to 50%.

China has pushed back against the West’s idea of industrial overcapacity. Beijing says the bloc is trying to contain its economic growth.

Germany’s energy prices are under pressure from too much solar energy

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 economic consultancy The Lantau Group, told Reuters.

“Certainly, that’s where China is heading,” he added.