QUICK-GROWING solar equipment makers in China, forecast to meet half of global demand by the mid-2020s, are ramping up overseas sales to stave off closure after the elimination of government subsidies pushed domestic installations to a five-year low.

Exports of key solar components this year have already exceeded last year’s total, and executives expect growth to continue next year.

“Solar makers are indeed really struggling with overcapacity in the domestic market. But if  they have to dump the inventory, why not dump it on the overseas market where the prices are better?” a manager involved in the solar business at a major Chinese firm said.

Players such as GCL-Poly Energy Holdings Ltd. and LONGi Green Technology Co. were beneficiaries of rapid expansion in domestic solar capacity, driven by a subsidy received by generators for each kilowatt-hour of power produced.

In 2017 alone, equipment makers added a record 53 gigawatts (GW) of solar capacity to China’s grid, more than the United States had managed in its entire history. That sparked talk of grid price parity, the sector’s Holy Grail, where electricity from solar and coal are priced the same.

With costs plunging and a subsidy payment backlog exceeding 100 billion yuan (US$14.21 billion), the government last year devised a timetable to reduce subsidies to zero.

New installations subsequently plunged to 15.99 gigawatts (GW) in the January-September period – a third of the 2017 level – leaving manufacturers saddled with a price-sapping surplus having rapidly expanded amid expectations of sustained demand growth.

Domestic capacity growth is now forecast to slow to 10 percent in five years, from 56 percent over the last three years, showed data from domestic solar equipment manufacturer TrinaSolar.

Daiwa Securities analysts said some manufacturers have already panicked and tried to dump inventory after prices of some products fell below the costs of higher-grade producers.

Official January-September data showed exports of solar modules – electronics such as data sensors for solar panels – were the equivalent of 58 GW, versus 41.6 GW for all of 2018.

Executives said the domestic slowdown could be the new norm, particularly because the government plans to lower coal-fired power prices next year as part of a stimulus package.

The situation has pushed some solar equipment makers to the brink, with at least five bankruptcies this year in China. Even GCL-Poly Energy Holdings Ltd., China’s biggest producer of polycrystalline silicon used in solar panels, booked a 9.98 million yuan loss for the January-June period.

“We are alive because there are still subsidies,” said a marketing manager at a silicon material firm in Shaanxi Province. “But the cutback will force more silicon suppliers and solar panel makers to close because they cannot maintain cash flow.”

Chinese manufacturers faced with overcapacity tend to raise production to be ready to win the customers of fallen rivals. In solar equipment, though domestic installation fell, output rose.

Producers made 82.2 GW of solar panels and 75 GW of modules in the January-September period, up a respective 48.6 percent and 32 percent from a year earlier, showed data from the China Photovoltaic Industry Association.(SD-Agencies)