China’s Solar Industry Slows Down Due to Industry Pressures

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China’s solar industry is entering a more challenging phase following years of record expansion. The sector is currently grappling with slower installation rates, shifts to market-based electricity pricing, significant manufacturing overcapacity, and a rapid transition toward higher-efficiency technologies.

Some experts say that the solar industry in the country is being pulled in multiple directions. Developers face a market-oriented grid, manufacturers contend with excess capacity and weak prices, and grid operators manage massive variable generation. The result is an industry maturing beyond pure build-out, with a new focus on system integration, storage, and technological efficiency to sustain growth.

According to the National Energy Administration (NEA), China installed 72.07 GW for first-half solar additions from a 71.77 gigawatts in the first half of the year bringing the country’s total photovoltaic capacity to 1.27 terawatts. During this period, solar power generated 655.5 billion kilowatt-hours, with an average utilization rate of 91.4%.

These first-half additions represent a significant slowdown compared to the record pace of 2025, when China added more than 315 gigawatts of solar capacity. Industry data from TaiyangNews indicates that installations in January and February fell more than 17% year-on-year. This deceleration followed a rush to complete projects before the expiration of China’s feed-in-tariff regime.

Starting in 2026, new renewable projects increasingly operate under market-based electricity pricing, which is fundamentally altering the economics of solar development. This shift coincides with a massive increase in variable renewable generation on the grid. By June 2026, the country held 679 gigawatts of wind capacity alongside its 1.27 terawatts of solar. Together, wind and solar accounted for nearly half of China’s total installed generating capacity.

To manage this volatility, energy storage has emerged as a critical bright spot. New energy storage capacity reached 153 gigawatts or 396 gigawatt-hours by the end of June, a 61% increase year-on-year. Storage is becoming essential for absorbing large volumes of wind and solar power. Simultaneously, electricity market trading has expanded, with 3.685 trillion kilowatt-hours traded in the first half of 2026, up 24.2% from the previous year.

For developers, the new pricing model places greater emphasis on timing, location, and grid absorption capacity rather than just installed volume.

China’s domestic slowdown must be viewed against its continued dominance as the world’s primary solar manufacturing base. Solar panel exports exceeded 35 gigawatts in January and February, though this was 9% below the same period in 2025. Conversely, solar-cell exports rose 44% as manufacturers increasingly supplied overseas production chains.

Exports surged to a record 68 gigawatts in March for modules, cells, and wafers before China removed its value-added tax (VAT) export rebate for photovoltaic products on April 1, 2026. This policy change, announced in January, aimed to reduce trade frictions and address overcapacity. The removal of the rebate caused a visible decline in total exports in May and June, though shipments to Southeast Asia, South Asia, and Africa continued to grow.

China’s manufacturing capacity remains far larger than its domestic market can absorb. While finished modules remain the largest export product, the growth in cell exports signals a more geographically distributed supply chain. Chinese companies are increasingly supplying cells and components to factories in Southeast Asia and elsewhere to navigate local-content requirements and trade restrictions in other markets.

Technological efficiency remains a key competitive lever. In the first half of 2026, commercial module efficiencies reached 25% for back-contact products, 24.1% for TOPCon products, and 23.8% for heterojunction products. For large-scale projects, these efficiency gains are critical for reducing balance-of-system costs and improving project economics in a market-constrained environment.

Domestic electricity demand continues to provide a growing market for renewables. National electricity consumption rose 5.3% in the first half of 2026. High-technology and equipment manufacturing industries saw a 9.8% increase, while internet data services consumption surged by 44%, driven by data center expansion.