China’s solar energy sector has entered a more challenging phase after years of record expansion, as the pace of new capacity installations slowed alongside the transition of renewable energy projects to more market-based pricing models, the persistence of significant manufacturing overcapacity, and the accelerating shift toward higher-efficiency panel technologies.
Data from China’s National Energy Administration showed that solar additions during the first half of 2026 reached 72.07 gigawatts, compared with 71.77 gigawatts during the same period according to the data provided in the source, bringing the country’s total photovoltaic capacity to 1.27 terawatts. Solar power plants generated 655.5 billion kilowatt-hours, with an average utilization rate of 91.4%.
Nevertheless, these figures represent a clear slowdown compared with 2025, when China added more than 315 gigawatts of solar capacity. TaiyangNews data also indicated that installations in January and February declined by more than 17% year on year, following a wave of accelerated project completions before the expiration of the existing feed-in tariff system.
New Economics for Solar Energy Projects
Starting in 2026, new renewable energy projects increasingly began operating under market-based electricity pricing, a shift that is changing how solar projects are evaluated. Installed capacity alone is no longer the decisive factor; instead, project timing and location, along with the grid’s ability to absorb its output, have become more important considerations for developers.
This is occurring alongside the rising share of variable generation sources. China’s wind capacity reached 679 gigawatts by June 2026, alongside 1.27 terawatts of solar capacity, with wind and solar together accounting for nearly half of the country’s total installed generation capacity. This expansion is presenting grid operators with the challenge of managing large volumes of variable output.
Storage Emerges as a Strength
Against this backdrop, new energy storage capacity rose to 153 gigawatts, or 396 gigawatt-hours, by the end of June, an annual increase of 61%. This indicates that storage has become a practical part of managing surplus wind and solar generation, rather than merely a supporting technology removed from the core of the sector’s expansion.
Electricity trading also expanded, with traded electricity reaching 3.685 trillion kilowatt-hours during the first half of 2026, up 24.2% from the previous year. This reflects the sector’s shift from focusing on capacity construction to improving its integration and operation within an electricity system that relies more heavily on market mechanisms.
Manufacturing Surplus Drives Companies Abroad
Despite the slowdown in the domestic market, China remains the world’s main manufacturing base for solar energy. Panel exports exceeded 35 gigawatts during January and February, but declined by 9% compared with the same period in 2025, while solar cell exports rose by 44%, as Chinese companies moved to supply cells and components to overseas production chains.
Exports of modules, cells, and wafers reached a record 68 gigawatts in March, before the value-added tax rebate on photovoltaic product exports was abolished on April 1, 2026. The measure, announced in January, was intended to reduce trade frictions and address manufacturing overcapacity. Exports declined noticeably in May and June, while shipments to Southeast Asia, South Asia, and Africa continued to grow.
Technical Efficiency as a Competitive Tool
Efficiency remains an important factor in improving project economics. During the first half of 2026, commercial module efficiency reached 25% for back-contact products, 24.1% for TOPCon products, and 23.8% for heterojunction products. These gains, particularly in large-scale projects, help reduce balance-of-system costs and improve project viability in a market that has become more constrained.
At the same time, domestic electricity demand provides additional room for renewable energy growth; national electricity consumption rose by 5.3% in the first half of 2026, while consumption by high-tech industries and equipment manufacturing increased by 9.8%, and consumption by internet services and data centers surged by 44% because of the expansion of data centers.