Summary of Key Points
In the first half of 2026, China's photovoltaic (PV) industry experienced a decline in installed capacity (a year-on-year decrease of 66%), but this was a rational return to normal after the "pulsatile high growth" seen in 2025. Exports, on the other hand, showed a counter-trend increase (a total increase of 24.3%), particularly for PV modules, which saw a decrease in volume but an increase in price. Although production shrank due to supply-demand mismatches, the industry's long-term positive fundamentals remain unchanged: power generation increased by more than 40%, and PV is set to overtake coal power as the largest source of electricity this year. Domestic demand is expected to turn around in the second half of the year, and there is enormous potential for growth over the next decade. The industry needs to focus on technological innovation and compliance upgrades to facilitate transformation.
1. Installed Capacity Decreases by 60%: Not a Recession, but a Rational Return from "Rapid Growth" to "Stable Development"
The new PV installed capacity in the first half of the year was 72 GW, a year-on-year decrease of 66%. However, this does not indicate a decline in the industry's performance. The main reason for this is that the installed capacity in the same period of 2025 soared to 212 GW (a year-on-year increase of 107%), which was too fast to sustain annually. More importantly, the fluctuations in monthly installed capacity this year were the smallest in the past five years (the lowest coefficient of variation). In the past, there might have been significant increases or decreases in one month followed by a sharp drop in the next; now, the growth is more consistent, indicating a shift from "pulsatile growth" to "normalized development," which is healthier for the industry.
2. Exports as a Bright Spot: Fewer Modules Sold, but Higher Profits; Strong Overseas Demand for Silicon Wafers and Batteries
The total value of PV product exports in the first half of the year was $17.183 billion, a year-on-year increase of 24.3%, which was a boost for the industry:
- PV Modules: Although the export volume decreased by 2.5%, the export value increased by 14% due to higher prices (for example, more efficient modules sold at a higher price).
- Silicon Wafers and Batteries: Many countries abroad are building new PV capacity and need to purchase silicon wafers and batteries from China, leading to significant export growth, with battery exports accounting for nearly 20% of the total.
This shows that Chinese PV products remain highly competitive globally.
3. Stable Fundamentals: Power Generation Hits a New High, on Track to Become the Largest Source of Electricity
Despite a decline in production (batteries and modules decreased by more than 20% and 30%, respectively), the industry's foundation is solid:
- Power Generation: Year-on-year growth exceeded 40%. During the summer peak hours, PV power generation accounted for one-third of the country's total electricity consumption, helping to manage the demand surge.
- Installed Capacity: As of the end of June, the national PV installed capacity was 12.7 GW, and it is expected to surpass coal power this year to become the largest source of electricity in China.
- Long-Term Goals: By 2035, the combined installed capacity of wind and PV power is planned to reach 36 GW, with at least 200 GW added each year over the next decade, indicating vast potential for growth.
4. Domestic Demand Expected to Turn Around in the Second Half of the Year: Policy, Energy Storage, and Electricity Prices Will Drive Growth in 2027
Experts predict that domestic demand will improve in the second half of the year:
- Positive Policies: Simplified procedures for distributed PV grid connection, policies for direct connection of green energy, and zero-carbon parks are being implemented.
- Improved Energy Consumption: Large-scale deployment of energy storage has solved the problem of unused generated electricity.
- Electricity Price Increases: The recovery of pricing mechanisms makes PV projects more profitable.
- Global Market: Although demand in China, the US, and Europe is temporarily adjusting, emerging markets such as India and the Middle East are filling gaps, maintaining overall high demand.
Analysts predict that domestic installed capacity will grow again in 2027, with global installations reaching 864 GW by 2030.
5. Industry Adjustment Directions: Technological Innovation, Compliance Upgrades, and Green Development Are Key
The industry needs to shift from focusing on increasing volume to improving quality:
- Technological Progress: Leading companies should invest in research and development of next-generation batteries (such as more efficient perovskite cells), key equipment, and smart manufacturing.
- Compliance Upgrades: Implement mandatory national standards, promote technological upgrades, and phase out non-compliant capacity.
- Green Development: Explore new models such as integrated building PV systems and green hydrogen production using PV power.
- Improving Mechanisms: Improve the green energy certification system to realize the environmental value of green electricity, standardize bidding processes, and prevent unfair competition through low-price dumping.
In the long term, PV will become more integrated with electricity consumption (for example, factories installing their own PV systems for use), reducing reliance on long-distance power transmission and improving efficiency.
Conclusion
The first half of 2026 was a period of adjustment for the PV industry, but it was not a period of decline. The short-term setback was a return to rationality, and the long-term positive trend remains unchanged. Domestic demand is expected to rebound in the second half of the year, and there is tremendous potential for growth over the next decade. The key to success lies in technological innovation and compliance upgrades to enhance quality and efficiency. In simple terms, the PV industry is like a rapidly growing child that has slowed down to breathe and is now developing in a more sustainable way.