China’s solar manufacturers are uniting to tackle industry overcapacity with an OPEC-inspired production quota system. Over 30 major companies, including Longi Green Energy and Tongwei Co., signed a self-discipline agreement at the China Photovoltaic Industry Association’s (CPIA) annual meeting. The agreement aims to stabilize the struggling sector, allocating production quotas based on market share, capacity, and demand forecasts.
This move follows years of overexpansion that began in 2021, leading to a production capacity of over 1,100 gigawatts annually—almost double the expected global installations for 2024. Excess supply has driven prices below production costs, causing significant financial losses, with Longi forecasted to report a $1 billion net loss this year.
Executives are skeptical about the agreement’s enforcement but acknowledge the urgency for industry-wide restraint. Analysts predict recovery may take until at least 2025, as growth in global solar installations slows to just 8% by then, following rapid surges of 76% in 2023 and 34% this year.
Beyond overcapacity, trade tensions and tariffs have pushed Chinese firms to establish overseas operations in countries like the US, India, and Indonesia. Despite challenges, the solar sector remains vital in the fight against climate change, with installed capacity growing from under 200 GW in 2014 to over 2,200 GW by 2024.
Whether this collective restraint succeeds in stabilizing the market remains to be seen. “We are entering a new OPEC era,” said Jefferies analyst Alan Lau, emphasizing that effective execution will be key.