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Wood McKensie

The bright future of renewable energy

Source: Wood McKenzie December 2023

China is the world’s solar module powerhouse. Its domestic solar capacity additions this year will be more than double those of the US and EU combined, while its phenomenal cost advantage means it commands more than 80% of global module capacity. China’s current domination of solar module supply looks assured for the next decade or more.

The country’s colossal manufacturing base is key. Even as its costs continue to tumble, Chinese solar manufacturing could already comfortably supply more than twice the current global module demand of 350 GW. Meanwhile, in other markets, cost inflation drags on solar photovoltaic (PV) cell manufacturing. Critics point to direct Chinese government subsidies for domestic companies (as well as allegations of forced labour), but this isn’t the full story.

Falling interest rates, low energy costs, intense domestic price competition and government support for research and development also play their part. Equally as important has been indirect system-level support, with massive investments in transmission, energy storage, flexible capacity and manufacturing. Lower costs and lower curtailment of solar in China have kept its companies buoyant.

With Chinese solar module costs falling 42% between December 2022 and December 2023 alone to reach US$0.15/W, the ambitions of the US, Europe and others to compete look doomed. However, for those needing low-cost hardware to de-carbonize, China’s solar module manufacturers are open for business.

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