We explore the impact of China’s new rules on solar photovoltaic overcapacity, pricing and market dynamics.
In November 2024, China’s Ministry of Industry and Information Technology released revised guidelines for the photovoltaic (PV) industry. The new guidelines?are set to?reshape the solar industry, addressing?overcapacity,?pricing volatility, and?inefficiency?across the value chain.
While?existing polysilicon,?wafer,?cell and?module manufacturing capacity?largely aligns with the new regulations, the?emerging manufacturers?and?new expansions?will be most impacted. These changes will catalyse?consolidation and market shifts, and will ultimately lead to?a more efficient and sustainable solar industry.
What are the key changes?
1. Stricter efficiency standards
- Cell and module performance: P-type cell efficiency increased to?23.7%, and N-type cells introduced with?26% efficiency, favoring next-generation technologies.
- Degradation rates: Lower degradation rates (N-type:??1% over 25 years) encourage higher-quality manufacturing and reduced warranty risks.
- Increased capital investment requirements: The minimum capital ratio for new and expanded PV projects increased from?20% to 30%, raising entry barriers and discouraging speculative expansion.
2. Tighter energy and resource consumption standards
- Stricter power consumption thresholds force manufacturers to adopt advanced, cost-efficient production processes.
3. Enhanced reporting and compliance
- Manufacturers must meet stricter compliance and quality assurance requirements, ensuring only competitive players remain in the market.
Limited impact on existing capacity, but new expansion plans hit hard
The?2024 guidelines?are primarily aimed at?new facilities?and?expansion plans?rather than?existing manufacturing capacity.?Existing production lines?for?polysilicon,?wafer,?cell and?module manufacturers?are largely compliant with the new?efficiency standards.
The main impact will be felt by the?emerging manufacturers?and?new entrants?who are struggling to meet the?capital investment threshold?and?technological demands?of the guidelines. At the same time, the most prominent manufacturers’ expansion plans are not affected as they can meet the new module efficiency demand.
The 200 GW expansion that likely won’t happen
Approximately?200 GW?of?new PV module manufacturing capacity?planned in the next few years will?likely not materialise, as the guidelines target?new capacity?expansion and?speculative investments. These plans, driven by recent entrants, face hurdles due to?capital requirements?and?technology standards. The?existing 1.6 TW?of capacity will mostly remain intact, but the?pace of new growth?will?slow significantly.
Dominance of large players
The shift toward?N-type modules?will favour?larger, financially resilient manufacturers?who can absorb the?upfront costs?of transitioning to high-efficiency technologies.
Smaller, emerging manufacturers who cannot meet the new capital and technology requirements will face?increased financial pressure?and will likely be?forced to exit?the market.
This will accelerate?market consolidation, leaving the industry dominated by a smaller number of?large players?who control?premium module production.
PERC prices to decline as N-type modules gain market share
The shift to?higher-efficiency N-type modules?(TOPCon, HJT) will push?PERC prices lower?due to declining demand.?PERC technology, which has already met earlier efficiency standards, will be phased out in favor of?N-type technologies that offer superior?performance?and?durability. As a result,?PERC module prices?will experience a?steady decline.
The guidelines raise technical and capital requirements, forcing out low-cost producers and outdated facilities that cannot meet new standards. This reduction in inefficient production capacity will likely help rebalance supply and demand, alleviating pressure on prices.
N-type module prices: short-term price premium, long-term stabilisation
TOPCon?and?HJT modules?will initially see?price increases?due to?the higher production costs?associated with these advanced technologies. In the short term, manufacturers will charge a?premium?for?high-efficiency modules. However, as production processes scale and?economies of scale?are achieved, prices for?N-type modules?will stabilise and eventually decrease, with a?long-term trend?toward price?normalisation.
By focusing on advanced technologies (e.g., N-type cells with higher efficiencies), the guidelines encourage the production of premium products with higher price points. This transition reduces the reliance on mass production of low-margin products and supports a shift toward sustainable pricing.
New manufacturing guidelines will impact 70% of announced polysilicon expansions
The new?energy consumption standards?for polysilicon production (?53 kWh/kg) will impact?polysilicon producers significantly. Companies unable to meet these new thresholds will be forced to either?upgrade their facilities?or exit the market. However, the?existing polysilicon capacity?largely meets the guidelines, so the?largest producers?will continue to?expand, while smaller, inefficient players will?exit?the market. This will?consolidate the polysilicon industry, making the supply chain more?efficient?and?stable.
Short-term price volatility, long-term market stability
It is expected that polysilicon prices will increase short-term. However, the market will ultimately?stabilise?as production becomes more?concentrated?among?large, efficient players. Over time, this will lead to?lower costs?and more?predictable pricing?for polysilicon, benefitting the entire solar supply chain.
Cell manufacturers to focus on N-type technologies
Cell manufacturers will be heavily affected by the new?efficiency requirements?for?N-type technologies?(TOPCon and HJT). The transition from?PERC cells?to?N-type cells?will require?significant investments?in?R&D?and?production upgrades. Manufacturers that already produce?N-type cells?will benefit from?increased demand, while those who remain reliant on?PERC technology?will face declining margins.
Conclusion: a transition to efficiency, consolidation and price stability
The?2024 PV manufacturing guidelines?will have?wide-ranging impacts?on the?solar industry, especially for?new manufacturers?and?expansion plans:
- Overcapacity?will be reduced as weaker players are forced to exit, and production will shift toward?higher-efficiency technologies.
- Prices?for?PERC modules?will?decline, while?TOPCon?and?HJT modules?will see?price increases in the short term, followed by stabilisation as production scales.
- Each segment—polysilicon,?wafer,?cell, and?module manufacturers—will experience?increased investment,?technological upgrades and?market consolidation.
In the long run, the?guidelines will foster a more sustainable, competitive and?efficient solar industry, ensuring that only the most?technologically advanced?and?financially robust manufacturers?thrive.
While the short-term effects may include?higher costs?and?supply chain disruptions, the industry is set for a?long-term transformation?that will lead to?greater efficiency,?market stability and?cost reductions.
To get more detailed insights into the impact of regulatory changes on the PV and solar industry, click here to explore our global power and renewables offering.
Yana Hryshko
Managing Consultant and Head of Global Solar Supply Chain Research
