China's solar energy sector booming despite challenges

The country is the world's largest emitter of greenhouse gases, thanks to its huge population (1,4 billion people) and its status as a manufacturing nation with many factories. But it is also building nearly twice as much solar and wind infrastructure as the rest of the planet combined.

The Ningxia region in northern China is an example of national industrial policy.

It is home to a solar park in the Tengger desert, at one time the largest in the world, thanks to hundreds of rows of photovoltaic panels capable of producing 1,5 gigawatts of electricity.

But they now pale in comparison to new facilities with twice the capacity.

Ningxia, famous for its vineyards, is sparsely populated and relatively sunny.

Its location makes it a prime location for generating solar-generated electricity, which is then sent to provinces in eastern and southern China where demand for electricity is high.

Weight of coal

"China's solar energy is developing at an unprecedented scale and pace," said Wu Di, an analyst at Peking University's Institute of Energy.

China increased its solar power generation capacity by more than 55 percent last year, according to the National Energy Administration.

According to Mr. Wu, the country is home to more than 40% of the world's production capacity in this area.

China has pledged to stabilize or decrease its carbon emissions by 2030 and then achieve carbon neutrality by 2060.

This target was set as part of the Paris climate agreement, which aims to limit warming to 1,5°C since the pre-industrial era (the world is already at around 1,2°C).

The country still relies heavily on its coal-fired power plants, a highly polluting fossil fuel, to meet rising demand for electricity.

The Asian giant is also struggling to transport some of its renewable energy, that produced in remote regions, to the densely populated economic centres of the east.

This could slow down the energy transition wanted by Beijing, warns David Fishman of the specialist firm Lantau Group, which follows the electricity sector in China.

Waste

The rapid development of solar electricity production has not kept pace with the distribution network, leading to wasted energy.

The loss rate reached 4% in the first quarter of 2024 and the US financial rating agency Fitch warned in May that it could increase further.

"If it wants to keep (this rate) within a suitable range, China still has a lot to do," warns analyst Wu Di.

Moreover, transporting energy from west to east is not "the most cost-effective approach" either, stresses Gao Yuhe of the environmental protection organisation Greenpeace.

In addition to the giant solar parks in the north of the country, China also relies on decentralized production based on photovoltaic panels installed on the roofs of residential and commercial areas, which reduces transmission losses.

But China's solar panel industry is plagued by oversupply, causing prices to fall and driving companies out of business.

Government subsidies also cause friction with foreign trading partners.

In 2024, the European Union launched investigations targeting Chinese groups in solar energy, including the world number one in the sector, suspected of having received subsidies distorting competition on the European market.

Beijing insists that its industrial policies are not unfair practices. In retaliation, China has launched a series of investigations targeting imported European products, at the risk of aggravating trade tensions with an essential partner.