In the first half of 2025, China added approximately 256 gigawatts (GW) of new solar-power-generation capacity to its electric grid, equivalent to the United States’ entire installed solar fleet and more than the rest of the world combined installed in the same period. This represented a surge from prior periods of solar expansion in China, the immediate trigger for which was a major policy shift in Beijing. In February, the government announced a market-based pricing system for solar and wind power that will replace feed-in tariffs (that is, guaranteed, above-market prices paid to renewable-energy generators to encourage investment). On 1 June 2025, the new pricing system went into effect; it is based on competitive bidding, and developers therefore rushed to connect projects before this date to take advantage of the more-generous above-market rates guaranteed by the tariff policy.
Record-breaking expansion
China’s renewable-energy reforms did not emerge in isolation. By late 2024, solar and wind capacity in China had surpassed coal-power capacity for the first time, but the power system had not adapted to this new balance and renewable curtailment – the forced reduction of output – was rising across provinces. The February overhaul was designed to ease these pressures and correct supply mismatches. Led jointly by the National Development and Reform Commission and the National Energy Administration, it aimed to cool investment incentives, make developers price risk more carefully and bring project developments back in line with the system’s capacity. Officials described the shift as moving the sector from ‘high-speed growth’ to ‘high-quality growth’.
The surge of deployed capacity seen ahead of the 1 June policy change is one example of a larger phenomenon. National targets, provincial incentives and subsidy timelines often combine to create intense bursts of pre-deadline investment. Industries from steel to cement have followed similar cycles, with accelerated output before the imposition of capacity caps. Even coal power, China’s largest single source of carbon emissions, is experiencing this dynamic, with provinces racing to approve new plants before the 2030 deadline for reaching peak carbon emissions.
“China’s ability to add such an unprecedented volume of solar capacity to its grid highlighted how far its clean-energy industrial base has outgrown those elsewhere in the world.”
Despite the one-off nature of the policy shift, China’s ability to add such an unprecedented volume of solar capacity to its grid highlighted how far its clean-energy industrial base has outgrown those elsewhere in the world. For years, solar power has been embedded in China’s industrial strategy, backed by large manufacturing clusters, deep capital pools and fierce local competition. The momentum created through these policies explains part of the surge, but the record additions recently point to something more consequential: a manufacturing system expanding faster than China’s domestic power system can accommodate and increasingly shaping the pace and geography of global clean-energy deployment.
Industrial ambitions
By late 2025, China’s solar manufacturing capacity reached an estimated 1,200 GW per year, nearly twice that of the rest of the world’s current annual solar installations. This reflects more than recent investment and rests on policy foundations laid over a decade prior. In the early 2010s, policies such as feed-in tariffs and the ‘Golden Sun’ subsidy programme encouraged the emergence of a new clean-energy manufacturing base. In June 2014, when China’s President Xi Jinping called for an ‘energy-technology revolution’, solar moved from an emerging industry to a sector increasingly tied to China’s strategy to raise the ambitions of its domestic industrial capacity. In 2023, the clean-energy sector, including batteries and electric vehicles, accounted for 40% of China’s GDP growth. Solar, wind and other clean technologies have increasingly been presented by party leaders not only as tools for achieving climate goals – an agenda Xi has personally championed, pledging in 2020 that China will become carbon neutral by 2060 – but also as engines of economic modernisation and essential tools of energy security.
With the political elevation of the issue, solar manufacturing became an important plank of industrial planning, with national and provincial subsidies, land and credit support, tax incentives, and competition among local governments reinforcing each other and producing waves of factory construction. China now dominates every major segment of the solar supply chain, from polysilicon and wafers to modules and inverters.
The strengths that underpin this rise have also created structural pressures. Manufacturers can now produce far more solar panels than the domestic grid can absorb, and competition has pushed prices and margins to historic lows. By mid-2024, these strains had become prominent enough for Beijing to shift its stance. The July Politburo meeting that year was the first to warn explicitly against ‘involution’, and since then, the message has hardened: the revised Anti-Unfair Competition Law passed in June 2025 and a sector-wide meeting convened by six central ministries in August reflected a clear effort to bring the industry under tighter regulatory discipline.
The emerging policy response operates on two fronts. The first targets local governments, among which incentive races were a major driver of redundant capacity. The Fair Competition Review Regulations, implemented in 2024, required provinces to scrutinise measures that distorted market entry. Over the past year, several preferential tax arrangements and fiscal and land subsidies used to attract solar manufacturing projects have been withdrawn. Year-to-date national fixed-asset investment fell 1.7% year-on-year in October 2025, the first contraction since the COVID-19 pandemic, suggesting that the clampdown on local incentives is beginning to bite. But the shift is far from complete. According to some sources, more than 100 GW of additional solar-related manufacturing capacity has been announced in 2025, underlining how difficult it is to fully curb expansion in a sector that many provinces continue to view as a source of growth and employment.
The second front concerns existing capacity. Unlike the steel industry, in which state ownership allowed Beijing to impose production quotas, solar manufacturing is dominated by private firms. The government cannot simply mandate across-the-board output cuts without triggering employment and financial risks. Current discussions amongst government and industry focus on managed consolidation. One proposal would establish an industry-backed fund, capitalised by leading firms and supported by national banks, to acquire and retire older or less efficient production lines, after which the China Photovoltaic Industry Association would assign production quotas to remaining firms. Yet it is unclear whether regulators are willing to entrust such a central role to a private-sector association.
So far, neither state-owned banks nor the responsible government departments have indicated a willingness to extend credit to the proposed fund. The hesitation reflects a deeper tension in the policy debate. The board chair of Tongwei, one of the largest solar manufacturers in China, publicly called for ‘prioritising anti-involution over anti-monopoly’, a notably blunt appeal that underscored both industry frustration and Beijing’s concern that consolidation, if mishandled, could tip too quickly into market dominance. A more interventionist option under consideration is to close facilities that fail to meet energy-efficiency or environmental standards. Signs of tightening may have emerged: polysilicon and wafer prices have risen moderately since mid-2024. But some in the solar industry have argued that durable relief will require not only supply-side discipline but also stronger, more stable demand growth, without which the structural imbalance is likely to resurface.
Bottlenecks at home
China’s solar industrial surge is increasingly colliding with a power system that was structured around coal. Solar-power curtailment, which averaged 1.8% in the first ten months of 2022, rose to about 5.1% during the same period in 2025. The strain is most visible in western provinces where rooftop deployment is dense or transmission capacity is limited. In Qinghai and Gansu, regions with large solar bases but relatively low local demand, solar-power utilisation rates fell to 84.3% and 89.8% respectively in the first three quarters of 2025, both below the National Energy Administration’s 90% minimum requirement. Solar accounts for 30% of China’s installed power capacity but contributes only about 10% of electricity generation.
Instead of cycling up and down in response to the variable energy contributions of renewables to the grid, many coal plants continue to run in baseload mode – that is, at high output around the clock, behaving as if the grid were still dominated by steady fossil-energy generation. Coal power accounts for only one-third of total power capacity, yet it still generates about 55% of China’s electricity. Dispatch rules in many provinces require grid operators to schedule minimum coal-power-generation levels in advance. At the same time, most electricity is still traded through long-term contracts that effectively guarantee coal power has a fixed share of output. Capacity payments provide steady revenue regardless of the flexibility delivered. As a result, coal-power generation can readily increase when renewable output dips but seldom ramps down when renewables are abundant. This coal-power lock-in limits how far solar and wind can grow within the existing system. Even with renewable manufacturing capacity rising, the space for additional solar generation is expanding slowly, mostly through incremental growth in total power demand.
These pressures are pushing the solar and wind industry to search for demand outside the power grid. Firms are investing in energy storage, zero-carbon industrial parks and early pathways for green hydrogen and renewable-based fuels, hoping to stabilise utilisation as grid-connected renewable power reaches its limits. The next phase of China’s solar boom is thus likely to depend less on factory output than on whether power-market rules and system integration evolve quickly enough to keep pace.
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