On January 21, the Chinese National Energy Administration (NEA) revealed that the nation had added a record of 277 GW Zonne-Zon in 2024. This rose by 28% on the 216 GW 2023, which strengthened the global solar status of China.
However, a dive into important data and current market trends reveals underlying care, in particular for 2025. Projections suggest a possible decrease in solar installations, especially in the small-scale, distributed solar segment.
In 2022, distributed PV accounted for 58% of the total solar capacity of China. In China, most PV installations that are smaller than 6 MW fall in the definition of the NEA of distributed PV, and it can include systems up to 50 MW, depending on the access conditions of the net. The following year, the total share of distributed PV fell to 45%, largely due to the explosive growth in the field of utility scale, despite the fact that projects up to 50 MW in size can still be classified as distributed if they can connect to low -voltage grilles. Although the total share of distributed systems became smaller, their absolute volume still saw growth on an annual basis.
In the first half of 2024 the share of distributed solar installations was 52%, but by the second half it had fallen to 38%.
Solar power
The increase in China in solar installations in 2023 and 2024 can be attributed to various factors. The collapse of polysilicone prices led to significant cost reductions in the solar cooling chain, whereby the module prices decreased from CNY 2 ($ 0.27)/W from generation capacity in 2020 to CNY 0.70/W in 2024, which reduced the installation costs 40% to 50%.
State property of energy companies such as State Power Investment Corp. (SPIC), China Energy Group and Huaneng Energy also raised investments in distributed solar energy to meet the 14th five-year-old plans of the country, which determine an increase in the capacity of renewable energy. These companies have not only invested heavily in new distributed projects, but also bought existing to achieve their goals. This led many private companies to quickly develop and build new projects that can be sold to energy companies owned. Installation figures were also encouraged by the completion of projects delayed by the Pandemic period 2020-22.
In 2020, Chinese President Xi Jinping set ambitious carbon neutrality goals for 2030 and 2060 that were later central in the energy strategy of the country. Under the guidance of the National Development and Reform Commission and the NEA, those goals developed by 2030 to a 1.2 TW -Zoelwit for installations for renewable energy and decks both wind and solar sun. By the end of 2024, however, China had already reached 890 GW solar capacity and 520 GW wind energy – a total of 1.4 TW – the goal surpassed six years earlier than planned. Early achieving those goals was an important achievement, but it also meant that the resources and policy that was designed to support growth had been used six years earlier than expected, making future growth more challenging.
Important obstacles
Residential PV in China saw a significant decrease in 2024. According to the NEA, in the first quarter of 2024, only 6.9 GW of PV capacity of residential PV was added, with 23% compared to the first quarter of 2023. That meant the first year-on-year decrease in five years. The decline became steeper in the second and third quarter, with falls of 26% in residential and 39% in commercial projects. The share of the residential PV in the total distributed installations also decreased, from a peak of 75% to around 25% in the second half of 2024.
The primary cause of the decline is the growing restrictions on the grid connection due to the intermittent availability of renewable electricity due to wind and solar energy. Many regional governments, including those in Shandong, Hebei and Henan, have designated large areas as “yellow” or “red” zones, so that the ability of residential PV projects to connect to the grid. In addition, policy changes in provinces such as Shandong and Jiangxi have imposed stricter requirements for solar projects on the roof, reducing access to government stimuli and forcing more residential users to participate in grid regulation programs.
Commercial and industrial distributed PV, which usually includes larger investments from companies, is also confronted with several challenges. Since 2024, the grid connection restrictions that initially focused on residential PV have also started influencing commercial projects. In provinces, including Hubei, Hunan and Guangdong, many local authorities have suspended the approval of new distributed solar projects due to the limits of the network capacity.
For provinces without direct project adjustments, authorities have introduced market-driven measures, such as adjusting the floor and peak electricity prices on local schedules, which both the costs for buying electricity from the purchase of grid and the available income from solar energy to the grid. These price adjustments disrupt the financial models for distributed solar projects before construction, so that developers reconsider their investments. In response, some of the state-owned companies that invested heavily publicly announced their exit from the distributed solar market.
In various regions there is also a direct adjustment to the guaranteed purchase hours for existing projects. The most striking examples are the provinces of Jiangsu, Sichuan and Shanxi. The province of Jiangsu, an important solar energy hub in East -China, has, for example, a reduction in the guaranteed annual purchase hours for PV projects to 400 hours, far below the average solar use of 1,050 hours of the province, as determined by rules. This means that guaranteed purchase amounts are now covering less than 40% of the expected PV project output, reducing the stability of income from PV projects and a larger part of the generated electricity is forced on the spot market. That generally means lower prices and even exposure to negative prices during periods of peak price.
Similarly, Sichuan and Shanxi have considerably reduced their guaranteed purchase hours to 300 and 293 hours respectively. This seems to be in direct contradiction with the full guaranteed purchase and price provisions set out in the law of China’s Renewable Energy, although flexibility and compromises usually take into account different regional situations.
As the outlook for distributed solar energy worsens, many stop their projects. Spic has transferred the ownership of numerous solar projects with a combined value in hundreds of millions of Yuan. Other state-owned companies, including State Grid and Three Gorges New Energy, also want to sell their solar assets, often with a discount, which indicates a growing concern about the sector’s profitability.
New technology
Innovations such as grid-forming energy storage (GFES) and virtual power plants (VPPs) have been advertised as potential solutions to stabilize the market, but they still face considerable challenge for the operation on a scale. GFEs, although offering improvements compared to traditional, grid-following storage systems, is more expensive and technically demanding to implement. A lack of uniform technical standards and protocols further complicates system integration. Similarly, despite receiving the NEA policy support from the NEA, VPPs are still struggling with unclear business models, regulating challenges and concern about data privacy, which limits their immediate impact.
The rapid growth of the Chinese sun sector from 2023 to 2024 has tense critical resources, including financial capital, network capacity and government support. The industry is confronted with a difficult process to resolve a large oversupply in the production sector and to balance its rasters to make more intermittent renewable energy sources possible. In combination with regulatory and market shifts, distributed PV installation figures in China can still see an important decrease in 2025. This year it is expected that this is a period of adjustment for the distributed PV segment, with the possibility that projects can start for Nuts scale to make similar challenges in 2026. After years of fast expans, the industry is now a delay, with recovery to two to three years.
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