After six consecutive years of growth, China’s solar installations are forecast to drop by up to 22% in 2025 with the introduction of market-based pricing reforms.

According to the China Photovoltaic Industry Association (CPIA), solar installations will likely decline in 2025 to between 215 GW and 255 GW or 8.13% and 22.54% from 277 GW in 2024.

China installed 277.17 GW of solar capacity in 2024, up 27.79% from 2023.

Wang Bohua, CPIA Chairman, attributed the likely drop in solar installations to a policy change under which the sale of power from renewable energy projects must be aligned with the market conditions. The new policy, replacing the feed-in tariff system, will take effect in June 2025.

The feed-in tariff regime has helped China to ramp up renewable energy capacity at a staggering pace. Renewables comprise over 40% of the country’s power generation capacity.

China’s National Energy Administration and National Development and Reform Commission recently announced a sustainable pricing mechanism for renewable energy projects selling power to the grid. The tariff will be determined from June through market-based bidding in each region.

The country witnessed oversupply in 2024, forcing many companies to cut prices across the solar supply chain. The imposition of import tariffs by the U.S. exacerbated the Chinese solar industry’s problems. Last September, the Office of the U.S. Trade Representative announced 50% tariffs on solar cells and polysilicon in solar panels starting in 2025.

China’s Ministry of Finance and the State Taxation Administration intervened to lower the export tax rebate rate for solar photovoltaic products and batteries from 13% to 9% starting December 1, 2024. This intervention was to address global concerns about renewable energy overcapacity, seen as a factor in global trade tensions. The measure also sought to curb aggressive low-price competition and unchecked industry expansion.

Despite a lower capacity addition forecast for 2025, China still holds a seemingly unassailable lead in solar energy, with the U.S. a distant second. According to the Energy Information Administration, the U.S. is expected to add 32.5 GW of solar capacity in 2025.