China's interventions make solar modules more expensive

07.10.2025

Source: E & M powernews

Prices for solar modules and storage systems will rise from the end of 2025. According to Wood Mckenzie, this is due to political intervention and production cuts in China, which are reorganizing the market.

After a year and a half of historically low prices, solar and storage developers worldwide are facing a turnaround. According to a new analysis by Edinburgh (Scotland)-based energy analysis company Wood Mackenzie, solar modules and energy storage systems will become around 9 percent more expensive from the fourth quarter of 2025. This is mainly due to political decisions in China, which will put an abrupt end to the previous price momentum.

The analysts see three main reasons for the price increase:

• Firstly, the government of the People's Republic of China is carrying out a consolidation in the polysilicon sector. Between 2022 and 2024, production capacity for the solar industry's key raw material quadrupled, driving prices down. In the meantime, the Ministry of Industry and Information Technology has restricted the expansion of new plants and obliged companies to reduce their capacity utilization. As a result, leading manufacturers are now only producing at 55 to 70 percent of their capacity. These measures led to a 48% increase in the price of polysilicon in September 2025 alone. Polysilicon is the key raw material for solar cells, as it is processed in the wafers from which photovoltaic modules are manufactured.
  
• Secondly, the cuts are affecting the entire value chain. According to Wood Mackenzie, manufacturers of solar cells and modules have cut back their production, as many older PERC (Passivated Emitter and Rear Cell) production lines have been shut down in the course of the switch to more efficient N-type technologies. As the new production capacities are not yet fully operational, the supply of modules is falling - and prices are rising.
  
• The third and decisive factor cited by the Scottish analysts is fiscal measures: From the end of 2025, China will abolish the previously applicable VAT refund of 13 percent for exported solar modules and battery systems. As the country supplies more than 80 percent of the modules produced worldwide and around 90 percent of lithium iron phosphate battery packs, this decision will have a direct impact on global prices. According to the analysis, inverters are also likely to become more expensive if the tax breaks in this area are also abolished.

Existing supply contracts also affected

Yana Hryshko, Senior Research Analyst and Head of Global Solar Chain at Wood Mackenzie, explains that the market interventions end a phase of unsustainably low prices. In 2024 and 2025, modules were sometimes traded for just 0.07 to 0.09 US dollars (equivalent to around 7 to 9 euro cents) per watt - values that were unsustainable in the long term. Manufacturers may have gained market share, but at the same time incurred high losses and halted investments.

According to the analysts, this development marks a structural change in the global solar market. Ruinous price wars are being replaced by a phase of more sustainable margins, which is enabling Chinese producers to invest in research and development again. For project developers in Europe and North America, however, this means rising procurement costs. According to Wood Mackenzie, the increase in prices in the USA could have a particular impact on storage projects, which have so far almost exclusively sourced components from China.

Even existing supply contracts will not be spared from the new market situation. According to the study, many customers who ordered at the old conditions in 2025 will have to renegotiate their contracts for deliveries after November.

Necessary correction process

Wood Mackenzie nevertheless sees the latest steps taken by the Chinese government as a necessary corrective process. They put an end to a phase in which short-term price wars had hindered innovation and quality. The analysis therefore sees the interventions not as a temporary market disruption, but as a "structural correction" towards more stable conditions. Analyst Hryshko emphasizes that the development could ultimately benefit all players: Manufacturers would regain planning certainty, developers would have to adjust their calculations and political decision-makers would reassess their dependence on individual supplier countries.

According to Wood Mackenzie, the increased costs in the coming years could also create incentives to establish alternative supply chains and strengthen production in other regions. In the short term, however, China will remain the dominant source of solar modules and battery systems, according to the analysts.

Author: Davina Spohn