Time to Worry In India? Chinese PV Firms In Production Control Agreement To Stem Losses

Over 30 of the top Solar PV firms in China are said to have signed up for a program of self-discipline at the China Photovoltaic Industry Association’s annual meeting last week. Taking a stated cue from OPEC ( The organisation of petroleum exporting countries), the world’s oldest existing cartel, the Chinese PV firms are setting off on a path where they receive and adhere to quotas for how much they can produce next year, based on their existing market share and capacity as well as expected demand. The agreement has reportedly been finalised at the China PV Industry Association meeting in Yibin, Sichuan Province last week. The industry moves follow recent signals by the Chinese government for the industry to set its house in order itself, after it withdrew some export incentives, and pushed for stronger manufacturing and efficiency standards to weed out weak hands in the business.

These firms are said to account for over 90% of the solar PV production in China, making the chances of concerted action being successful that much higher. Especially since most have slipped into losses this past year due to lower prices. Global solar installations spiked 76% in 2023 and are expected to increase by another 34% by the end of 2024, but if growth moderates to 8% in 2025 as predicted, then there could be a real bloodbath for many. It must be noted that solar growth has exceeded projections in each of the past 4 years by a significant margin.

The agreement was the highlight of a session on “Preventing Cutthroat Malicious Competition” at the 2024 Annual Conference of the PV Industry.

The move by China’s PV sector follows a similar move by its wind energy majors, who have also promised to collaborate to weed out ‘irrational pricing; from the market for the broader good of the industry. China’s PV majors that dominate the global PV sector as well have faced a series of strong headwinds in the past 15 months, facing a perfect storm of overcapacity, followed by high inventory levels, price crashes and now, protective tariffs in many key markets, notably, India the US and possibly Europe soon.

What is interesting about the latest move is that it includes both PV manufacturers as well as inverter majors.

The news should send shivers of worry through India’s solar market as well, as the combination of protective measures for local manufacturing industry has already led to grumblings from many developers about ‘over protection’ and profiteering from local manufacturers. Local prices are at a 100% premium to international Chinese prices for now, making many wonder just how far the government will wait for prices to come down to a more reasonable level. For Indian consumers, it is a tough choice between benefiting from low solar prices versus seeing a strong solar manufacturing ecosystem domestically. For now, customers have gone along, thanks to the low Chinese input prices for cell, module manufacturing in the country. A rice recovery in China beyond 10-15% will truly start to bite, of manufacturers here raise their prices in step.  We have already seen at least one newly formed solar ancillary body take pains to claim that the impact of yet another protectionist measure, anti-dumping duties on solar glass is much lesser than claimed on social media posts by many developers.