China’s solar exports surged by 64% to $52 billion in 2022, on the back of low-cost supply and technological expertise, despite global trade tensions, according to a recent analysis published by Wood Mackenzie.

The solar exports from China during the year were mainly dominated by modules, with Europe being the country’s top solar module export destination with a 56% share.

Solar cell exports grew by over 100%, with Southeast Asia taking a 31% share of the total exports. The U.S. tariffs on Chinese-made modules have driven module production to Southeast Asia, where manufacturers rely on imported cells from China.

Alex Whitworth, Research Director at Wood Mackenzie, said, “Trade tensions have taken a back seat to high power prices driven by the energy crisis, and this is causing consumers and developers from around the world to buy more solar panels from China.”

Chinese photovoltaic (PV) modules continued to stay cost competitive as compared to other global markets during the year and were up to 57% cheaper than the modules produced in the U.S. and EU.

The global research and consultancy group found the material cost to be the primary reason for the considerable price gap. China’s low energy costs, scaling advantages, and government support give local manufacturing an edge over the U.S. and EU counterparts, where solar module manufacturing is not competitive without subsidies.

US’ dependence on imports to continue

The analysis suggests that the U.S. goal to produce 100% U.S.-made modules by 2026 will be arduous due to the significant lack of wafer and cell production. Even the incentives rolled out by the government will not be able to fully bridge the manufacturing cost gap with the Chinese-manufactured modules.

Whitworth said: “The U.S. is counting on the IRA (Inflation Reduction Act), which will allocate at least $41 billion to stimulate domestic manufacturing. But costs still favor imported modules, and even as more local module production comes online in coming years, there will be persistent dependence on imports of components from Asia.”

The China-targeted PV trade policies by the U.S. have benefited the Southeast Asia region, which has developed a mature supply chain and large production capacity for export. Chinese manufacturers account for 55% of the region’s PV manufacturing capacity, which builds on Chinese-produced components.

Whitworth said even with the EU advocating trade restrictions to secure its domestic PV manufacturing, specific policies to drive capacity building and displace imports were missing.

He also said, “India also has great ambitions to expand its PV manufacturing, but financial support is insufficient to reach aggressive targets.”

India recently suspended the Approved List of Models and Manufacturers regulations for a year, citing the lack of larger capacity solar modules in the country as the reason, giving way to more Chinese imports into the country.

China’s PV Manufacturing Expansion

The analysis suggests that China’s export capacity for upstream wafers and cells would grow to more than 230 GW in 2026, more than sufficient to meet the domestic as well as global market demand outside China of 170 GW.

China’s domestic solar PV industry continues re-investing profits to expand its local capacity while attracting new investors. More manufacturers investing in upstream sectors, which are more profitable than modules.

The available export module capacity in the country is expected to grow to 149 GW by 2026.

Wood Mackenzie suggests that companies outside of China, even with multiple opportunities, will find it challenging to compete with China’s low-cost supply chain and pool of expertise, which it has developed over a decade.

In February this year, the European Commission published the Green Deal Industrial Plan based on the idea of developing a ‘Single Market,’ which will utilize €250 billion (~$269.51 billion) of existing EU funds to safeguard and enhance the competitiveness of its clean energy industry.

According to Department of Commerce data, India exported solar cells and modules worth $479 million (~₹39.5 billion) in the first quarter of the calendar year 2023, a staggering increase of 6,293% year-over-year.