Solar power. Solar energy stood out as the largest contributor to China''s clean-energy growth in 2023, with its total value increasing by 63 percent year-on-year, from RMB 1.5 trillion (US$207.01 billion) in 2022 to RMB 2.5 trillion (US$345.03) in 2023.
Globally, China''s unprecedented clean-energy manufacturing boom has pushed down prices, with the cost of solar panels falling 42% year-on-year – a dramatic drop even compared to the historical average of around 17% per year, while battery prices fell by an even steeper 50%.
In 2022, China installed roughly as much solar photovoltaic capacity as the rest of the world combined, then went on in 2023 to double new solar installations, increase new wind capacity by 66 percent, and almost quadruple additions of energy storage.
With the vast majority (80-85%) of solar manufacturing plants located in China, supporting deployment of ''spare'' solar capacity in the developing world presents a significant opportunity for China to deliver national gains, in addition to helping deliver global goals on development and climate change.
The solar panel manufacturing industry could supply an estimated 7,310 gigawatts (GW) of solar panels between 2024 and 2030. Deployment over the period is forecast to be 3,473 GW. This leaves a ''spare'' solar capacity of 3,837 GW – more than half of the total that could be manufactured, installed and used.
Neither national targets nor projected renewable energy deployment rates are high enough to triple global capacity by 2030, the collective target governments set at the 2023 UN climate summit (COP28). National targets would deliver 7,241 GW by 2030, and projected deployment 9,513 GW, while the tripling target calls for 11,000 GW. Deploying all the ''spare'' solar in addition would reach the target a year ahead of schedule and deliver 13,345 GW in 2030, exceeding the target by 21%.
Accelerating solar energy rollout across the Global South would reduce the proportion of electricity that countries generate using fossil fuels – constraining greenhouse gas emissions, reducing import dependence and providing a buffer against supply shocks. It would bring jobs and investment. It would improve access to electricity, potentially for hundreds of millions of people. Just one-seventh of the ''spare'' capacity could in principle meet electricity demand growth and extend basic electricity access to the entire populations of 88 Global South countries considered in this report.
Supporting use of ''spare'' solar capacity would also benefit communities where the panels are made, safeguarding manufacturing jobs and investment. With 80-85% of the solar manufacturing industry based in China, this is the country that stands to lose the most if factories close or have to run at low capacity – and already, Chinese companies are feeling the pinch, with workers being laid off and investment withheld. Further contraction is inevitable unless demand is supported in the next few years.
Fifteen years ago the Chinese government prevented its nascent solar manufacturing industry from contracting, in the face of similarly difficult circumstances, by supporting deployment within China. Now, the most obvious opportunity for supporting deployment lies overseas, in countries with low levels of per-capita GDP and energy access, and most immediately at risk from climate change impacts. These countries are the ones with the most to gain from a fast solar rollout, but are largely missing out due to the high cost of capital for financing renewable energy build.
The existence of such abundant and cheap quantities of ''spare'' solar capacity is also an opportunity for developed nations, which have an acknowledged responsibility to support the Global South in delivering both the Sustainable Development Goals and global climate change targets, to make up for lost time. Solar panels are going to remain cheap for the foreseeable future even if deployment ramps up, creating a unique and immediate opportunity.
Stimulated by the exponential growth of solar power in the previous decade, manufacturing companies ramped up investment in new production lines in the early 2020s. The manufacturing capacity of factories worldwide tripled from 2021 to 2023, and is set to reach 1,100 GW per year by the end of 2024. About 80-85% of manufacturing capacity is based in China, which is also the clear market leader in upstream parts of the supply chain.
However, forecasts for deployment this decade suggest that more than half of this manufacturing capacity will lie unused, with neither government targets nor project pipelines running at a commensurate scale. Solar panel prices are accordingly at a historic low of about US$ 0.10 per watt, having virtually halved during 2023.
This is already having an impact on manufacturers. In the first quarter of 2024 alone, Chinese companies cancelled or delayed an estimated US$ 8.3 billion of planned investments. Shares of major Chinese manufacturers have fallen by more than half since January 2022. Longi, one of the world''s biggest solar panel producers, is laying off 5-30% of its workers, with its President Li Zhenguo saying recently that at current prices, ''Most companies are barely surviving.''
Unless installation rates ramp up quickly, market analysts believe that a contraction in manufacturing capacity is inevitable, with production lines shuttered or mothballed. But there is no obvious route to market expansion. Export volumes from China have flatlined over the last year, having tripled in the previous four. Exports to Europe, the biggest market, are currently down by a quarter year-on-year.
In China itself, deployment rose by 50% in 2023 alone, and in the first four months of 2024 was up a further 24% year-on-year. But it is encountering a range of constraints including lack of grid capacity, reducing the scope for a further acceleration.
While a shortfall in demand could partially serve to weed out older and less efficient manufacturing plants, it will obviously carry negative consequences for jobs and the economy in communities where factories are located. Chinese companies may be particularly exposed to falling market conditions given that in other countries with substantial manufacturing capacity, such as India and the United States, governments are aiming primarily for domestic use, whereas Chinese companies are targeting both domestic and global markets.
The International Energy Agency (IEA) projects that global solar manufacturing capacity will rise from 1,100 gigawatts (GW) in 2024 to 1,300 GW in 2028. It forecasts that annual deployment of solar panels will run at under half of that level, rising from 400 GW in 2024 to 532 GW in 2028.
We extend these projections out to 2030, to allow for easy comparison with the target that governments agreed at the 2023 UN climate summit of tripling renewable energy capacity from the 2022 level by 2030.
Based on the IEA''s figures, and taking into account that the utilisation rates of production lines are unlikely to exceed 85%, we calculate the cumulative manufacturing capacity over the period 2024-30 to be 7,310 GW. We calculate cumulative projected deployment over the same period at 3,473 GW. (See Appendix 2 for methodology).
The difference is 3,837 GW. This can be regarded as ''spare'' manufacturing capacity, representing solar panels that could be produced, installed and used, but under current targets and deployment projections, will not be.
According to the IEA''s estimates, the currently projected deployment of solar would raise globally installed capacity from 1,550 GW in 2023 to 5,023 GW by 2030. Deploying the ''spare'' solar capacity of 3,837 GW in addition to this would raise the global installed capacity in 2030 by over 75%, to a total of 8,855 GW.
The opportunity gains significance when one compares it against the scale of installation needed across all renewables to deliver the COP28 tripling target. Meeting that would require 11,000 GW of renewable energy capacity to be in place by 2030 (against the 2022 figure of 3,630 GW).
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