China Solar Output Up 40% as Industry Nears Historic Shift

China’s solar power generation surged more than 40 percent year-on-year in the first half of 2026, with the country’s photovoltaic installed capacity reaching 1.27 terawatts (TW) by end of June — poised to overtake coal-fired power as the nation’s largest electricity source within the year, according to People’s Daily. During summer midday peaks, solar output already accounts for one-third of total power generation.

The milestone reflects China’s accelerating energy transition under its dual-carbon goals, but the headline growth masks a deepening crisis within the photovoltaic sector itself: new installations have collapsed, major manufacturers are bleeding cash, and regulators have stepped in with a new industry-wide cost accounting standard to curb what officials describe as destructive price wars.

From Boom to Bust: The Paradox of China’s Solar Sector

China’s solar industry has experienced explosive expansion over the past five years. Annual new solar installations surged from 120 gigawatts (GW) in 2022 to a record 315 GW in 2025, according to data from the National Energy Administration. By the end of 2025, combined wind and solar capacity had reached 1,840 GW, with solar alone accounting for 1,200 GW.

The Saurenergy report, citing the China Electricity Council, projects that wind and solar combined will account for roughly half of total installed capacity by the end of 2026, with non-fossil energy sources reaching approximately 2.7 TW — about 63 percent of the country’s total power fleet.

Yet this rapid capacity buildout has created severe overcapacity across the entire photovoltaic supply chain. In the first half of 2026, new solar installations totaled just 72.07 GW, a staggering 66 percent decline from 212.21 GW during the same period in 2025. Equipment utilization has also fallen, with average operating hours dropping 113 hours year-on-year to 1,392 hours in H1 2026.

Industry Bleeds as Price Wars Intensify

The capacity glut has triggered brutal price competition across all four major photovoltaic manufacturing segments — polysilicon, wafers, cells, and modules — with prices consistently falling below production costs. According to Securities Times, 24 major publicly traded solar companies posted cumulative losses exceeding 20 billion yuan (approximately $2.8 billion) in the first half of 2026.

Describing the situation as a “triple-loss predicament,” Tianhe Yangneng (Trina Solar) Chairman Gao Jifan warned that the price war damages companies (“capital drain”), the industry (“momentum loss”), and end-users (“trust erosion”). “Low-price vicious competition in the photovoltaic industry is by no means a healthy form of market economy,” Gao told Securities Times.

New ‘Cost Yardstick’ Aims to Curb ‘Involution’

In response, China’s photovoltaic industry association, under the guidance of the State Administration for Market Regulation and the Ministry of Industry and Information Technology, released a new group standard — the General Rules for Cost Accounting Models in the Photovoltaic Industry — in July 2026.

The standard establishes a unified cost calculation framework across the entire supply chain, dividing costs into three tiers: cash costs (direct out-of-pocket expenses), production costs (including depreciation), and full costs (including administrative, sales, and financial expenses).

Liu Yiyang, executive secretary-general of the China Photovoltaic Industry Association, explained the rationale: “When quoted prices no longer genuinely reflect resource consumption and operational investment, it becomes impossible to distinguish between cost advantages from technological progress and price strategies that simply exchange losses for market share.”

The new standard provides a legally enforceable benchmark, giving teeth to the existing Bidding Law, which prohibits winning bids below cost. Yan Dazhou, director of the National Engineering Research Center for Silicon-Based Material Preparation Technology, said the standard “ends the industry chaos of ‘everyone telling their own cost story’” and provides an actionable technical yardstick for regulatory enforcement.

Gao Jifan called the standard a clear “cost yardstick” and “traffic light for competition” that, if fully implemented, could “effectively push the photovoltaic industry out of its internal-consumption quagmire.”

Outlook: A Pivotal Year for China’s Energy Transition

The coming months will test whether China can navigate the tension between its ambitious renewable energy targets and the painful market correction underway in its flagship solar industry. With solar generation continuing to grow rapidly and installed capacity on the verge of overtaking coal, 2026 marks a historic inflection point — but one accompanied by deep structural adjustment.

The success of the new cost accounting standard in curbing below-cost pricing and channeling industry focus back to technological innovation and quality will be critical. On the international front, China’s solar exports — long a driver of global renewable energy deployment — could face pricing shifts as the industry moves toward more sustainable margin structures, potentially easing trade friction concerns while reshaping the global solar supply landscape.