China’s Solar Panel Price War Could Drive Renewable Energy Installations: How?

Europe is expected to benefit significantly from cheaper solar prices. As Europe diversifies it’s energy sources in response to declining Russian has supplies.

Longi Green, leading Chinese solar panel makers and TCL Zhonghuan and Tongwei cut prices as much as 27% last month due to falling raw material costs.

According to analysts, a drop in solar panel prices in China will increase demand globally. Specifically in Europe which is currently experiencing an unprecedented energy crisis.

However, leading Chinese manufacturer Longi Green Energy Technology, TCL Zhonghuan, and Tongwei solar cut prices by as much as 27% due to falling costs of the essential material polysilicon.

“The increasing cost competitiveness of solar power generation, driven by expanded production and upstream cost reduction, will help promote renewable energy across the world” Shanghai-based brokerage firm BOCI Securities said in the recent report.

Hence, China is one of the leading producers and supplier of more than 80% of the world’s photovoltaic panels. The country is all set to add at least 570 gigawatts of wind and solar power in the 14th five-year plan period. Moreover, the country is striving to achieve its carbon-neutral goal by 2060.

On the other hand, the lower prices of solar components in China will help in promoting the expansion of renewable energy. As more than half of the solar panels EU imported in 2022 were from China, according to Frank Haugwitz, founder of the Asia Europe clean energy solar advisory.

Furthermore, he also added that “Lower prices will indeed stimulate fresh demand, not only in Europe but also in other important markets across Southeast Asia.

Washington has banned solar energy components from China Xinjiang region and imposed high import tariffs on Chinese solar panels due to concerns about Forbes labors. “Chinese solar panel manufacturers will continue facing import restrictions imposed by the US government in the foreseeable future, Haugwitz said.

Moreover, “in this context, if the European Commission moves ahead with its proposal to ban products made with forced labor next year. This too might have significant implications for solar panels export destined for Europe”.

Besides, due to the imbalance in supply and demand, the price war at home is likely to temporarily destabilize. Chinese solar wafer manufacturers. According to the report published last week by Shanghai based Huajin securities analyst Liu Jing, the predicament would probably last until February.

Whereas, the price cuts will also affect the profitability is the sector to some extent.

According to Huagwitz, the windfall profits in China solar sector are not likely to repeat in 2023. As the ongoing technological advancements, increased digitalization, and automation of production.  Lower material input and the effects of economies of scale will result in respectable profits for Chinese solar manufacturers.

“Lower module prices will in particular create demand for large scale ground-mounted projects. Highly favored by both central and local governments in a push towards a faster decarbonization of China” ,as per Huagwitz.

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