Green demand, Europe's heightened buying due to energy crisis big factors

China's exports of solar modules are expected to gain further momentum this year, buoyed by increasing global demand amid green energy transition as well as Europe's plan to cut energy imports from Russia, said industry analysts.

The increasing demand for solar power worldwide will continuously provide opportunities for solar companies in China, leading to a robust rise in exports of Chinese solar components, said Luo Zuoxian, head of intelligence and research at the Sinopec Economics and Development Research Institute.

Compared with China, the world's top solar manufacturer, Europe's manufacturing capacity is smaller, and that market needs to rely on China in the short to medium term, he said.

Exports of solar products, together with lithium batteries, lead China's list of high-tech and high-value exports, according to the Ministry of Commerce. China's exports of solar cells rose by nearly 68 percent in 2022, as the country is continuing its rapid expansion into new energy markets globally, it said.

Germany, for example, relies heavily on solar cells sourced from Chinese manufacturers. Deutsche Bank data showed that more than one-third of Germany's small and medium-sized enterprises in the solar industry rely heavily on Chinese supplies.

Peter Walch, purchasing manager of German solar company Belectric, was quoted by www.tagesschau.de as saying that the company might not be able to build and develop solar power plants without the core components provided by Chinese companies.

According to BloombergNEF, total exports of solar cells and modules from China rose sharply in 2022 to a record high of $46.3 billion. This is 63 percent higher than the dollar sum in the previous year. While solar modules represented a capacity of 157 gigawatts, cells added up to 24 GW.Together, the two solar products' capacity was 181 GW, it said.

"China dominates the global solar supply chain, with at least an 80 percent share of the total manufacturing capacity for photovoltaic module production," said Tan Youru, an analyst from BloombergNEF.

The EU was the biggest destination region for the Chinese mainland's PV exports in 2022, buying nearly $23 billion worth of products, up 113 percent year-on-year. This is equivalent to about 84 GW of modules, more than half of China's total module exports in 2022, he said.

BloombergNEF said it expects the market for newly built PV modules to grow by another 8 GW in 2023 in Europe to reach 49 GW. China will contribute significantly to it.

"The European Commission presented a Green Deal Industrial Plan to enhance the competitiveness of Europe's net-zero industry and support a rapid transition to climate neutrality in February 2023. While discussions on systematic incentive programs for solar manufacturing in competition with the US Inflation Reduction Act are heating up, Europe doesn't yet have a solid plan to support its solar manufacturing industry," he said.

"Although many countries are hoping to establish solar manufacturing capacity so that they can depend less on China, the capital expenditure required to do that is still significant, especially in the US and Europe, despite the decreasing costs due to efficiency improvements and cheaper equipment over the last decade."

The EU's heightened buying activity was spurred by energy security concerns and the acceleration of solar projects, although the market is limited by labor shortages for rooftop installations, which are permitted, and grid bottlenecks for large projects, he said.

Estimates by Pingan Securities show that China will account for a large proportion of solar product exports during the 2022-26 period. It is expected to account for less than half of the major markets worldwide with Europe and South America being the major growth markets.

Overseas revenue has become critical for China's top PV module manufacturers, which are also the world's top six, including Jinko Solar, LONGi Green Energy Technology and Trina Solar.

Jinko Solar, which is based in Shanghai, saw its shipments of PV modules rise to 44 GW last year, ranking second worldwide. With 14 production bases worldwide, it is optimistic about the prospects for solar module shipments this year.

Strong demand from Europe, Australia, Latin America and the Middle East substantially contributed to the company's better-than-expected performance last year. Overseas revenue of the company accounted for a major part of its total revenue last year, it said.