China bans construction of new solar energy module manufacturers

September 27, 2013 0 By John Max

Ban may be a boon for the solar energy sector

The Chinese government has instituted a ban on the construction of new solar panel manufacturing facilities which may, oddly enough, be a benefit for the country’s solar energy sector. China is considered one of the most prolific manufacturers of solar panels. The country has invested its industrial might in producing solar technologies and shipping them to foreign markets, where they have found a great deal of success in terms of sales. The problem, however, is that the success of solar energy has become a troublesome issue for many Chinese companies, as well as their counterparts outside of China’s borders.

Supply outweighs demand

China’s aggressive manufacture and exportation of solar panels were initially well received around the world. As new solar panels entered into the global market, the overall cost of solar energy began to plummet. This trend made it easier for consumers and businesses alike to adopt clean energy systems. The excess supply of solar panels did, however, cripple the capabilities of some European manufacturers, many of whom were unable to produce solar panels at the pace that Chinese manufacturers could. This lead to trade disputes between European countries and China.

Solar Energy - solar panelsHigh production shuts down numerous companies

While the trade disputes have been resolved, China has been working to reform its domestic solar energy sector. The boom of solar panels made it difficult for some of China’s larger manufacturers to sell products. For these companies, supply had begun to overshadow demand and the gratuitous production of solar panels became a major expense. Many of the country’s large manufacturers have closed down or were acquired by their more financially stable counterparts.

Ban may bring stability to solar energy sector

The ban on new solar panel manufacturing facilities is expected to be a benefit to the domestic solar energy sector in the short term. The measure may help reduce the overwhelming supply of solar panels by slowing production significantly over the coming years. It may also give manufacturers and the country’s solar energy companies a chance to establish a more formidable economic foundation, making them resilient to any turbulence that may emerge in the solar energy market in the future.