Jul. 07, 2025
As the fastest growing source of clean energy globally (generation growing by 26% per year for the last eight years), solar power is an essential instrument in decarbonisation, and is set to dominate electricity generation. Given its low cost and rapid deployability at a range of scales from single panels upwards, solar is also logically the cornerstone of programmes to increase electrification and energy access in countries where people lack it – and there are an estimated 675 million people without even minimal access to electricity, the majority in sub-Saharan Africa. Even with such impressive growth in deployment, the boom in manufacturing means demand is running behind supply, and the world is therefore set to realise less than half of the benefits that the solar power production line could deliver this decade.
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In this report, we analyse the scale of the benefits that would accrue through supporting deployment of panels produced with this ‘spare’ manufacturing capacity.
Supporting use of ‘spare’ solar capacity would also benefit communities where the panels are made, safeguarding manufacturing jobs and investment. With 80-85% of the solar manufacturing industry based in China, this is the country that stands to lose the most if factories close or have to run at low capacity – and already, Chinese companies are feeling the pinch, with workers being laid off and investment withheld. Further contraction is inevitable unless demand is supported in the next few years.
Fifteen years ago the Chinese government prevented its nascent solar manufacturing industry from contracting, in the face of similarly difficult circumstances, by supporting deployment within China. Now, the most obvious opportunity for supporting deployment lies overseas, in countries with low levels of per-capita GDP and energy access, and most immediately at risk from climate change impacts. These countries are the ones with the most to gain from a fast solar rollout, but are largely missing out due to the high cost of capital for financing renewable energy build.
The existence of such abundant and cheap quantities of ‘spare’ solar capacity is also an opportunity for developed nations, which have an acknowledged responsibility to support the Global South in delivering both the Sustainable Development Goals and global climate change targets, to make up for lost time. Solar panels are going to remain cheap for the foreseeable future even if deployment ramps up, creating a unique and immediate opportunity.
Stimulated by the exponential growth of solar power in the previous decade, manufacturing companies ramped up investment in new production lines in the early s. The manufacturing capacity of factories worldwide tripled from to , and is set to reach 1,100 GW per year by the end of . About 80-85% of manufacturing capacity is based in China, which is also the clear market leader in upstream parts of the supply chain.
However, forecasts for deployment this decade suggest that more than half of this manufacturing capacity will lie unused, with neither government targets nor project pipelines running at a commensurate scale. Solar panel prices are accordingly at a historic low of about US$ 0.10 per watt, having virtually halved during .
This is already having an impact on manufacturers. In the first quarter of alone, Chinese companies cancelled or delayed an estimated US$ 8.3 billion of planned investments. Shares of major Chinese manufacturers have fallen by more than half since January . Longi, one of the world’s biggest solar panel producers, is laying off 5-30% of its workers, with its President Li Zhenguo saying recently that at current prices, ‘Most companies are barely surviving.’
Unless installation rates ramp up quickly, market analysts believe that a contraction in manufacturing capacity is inevitable, with production lines shuttered or mothballed. But there is no obvious route to market expansion. Export volumes from China have flatlined over the last year, having tripled in the previous four. Exports to Europe, the biggest market, are currently down by a quarter year-on-year.
In China itself, deployment rose by 50% in alone, and in the first four months of was up a further 24% year-on-year. But it is encountering a range of constraints including lack of grid capacity, reducing the scope for a further acceleration.
While a shortfall in demand could partially serve to weed out older and less efficient manufacturing plants, it will obviously carry negative consequences for jobs and the economy in communities where factories are located. Chinese companies may be particularly exposed to falling market conditions given that in other countries with substantial manufacturing capacity, such as India and the United States, governments are aiming primarily for domestic use, whereas Chinese companies are targeting both domestic and global markets.
The International Energy Agency (IEA) projects that global solar manufacturing capacity will rise from 1,100 gigawatts (GW) in to 1,300 GW in . It forecasts that annual deployment of solar panels will run at under half of that level, rising from 400 GW in to 532 GW in .
We extend these projections out to , to allow for easy comparison with the target that governments agreed at the UN climate summit of tripling renewable energy capacity from the level by .
Based on the IEA’s figures, and taking into account that the utilisation rates of production lines are unlikely to exceed 85%, we calculate the cumulative manufacturing capacity over the period -30 to be 7,310 GW. We calculate cumulative projected deployment over the same period at 3,473 GW. (See Appendix 2 for methodology).
The difference is 3,837 GW. This can be regarded as ‘spare’ manufacturing capacity, representing solar panels that could be produced, installed and used, but under current targets and deployment projections, will not be.
According to the IEA’s estimates, the currently projected deployment of solar would raise globally installed capacity from 1,550 GW in to 5,023 GW by . Deploying the ‘spare’ solar capacity of 3,837 GW in addition to this would raise the global installed capacity in by over 75%, to a total of 8,855 GW.
The UN’s most recent assessment of progress towards Sustainable Development Goal 7, which aims to deliver ‘affordable, reliable, sustainable and modern energy for all’ by , concludes that delivery is off track. At current rates of progress, it estimates that 660 million people around the world will still lack electricity access in , the majority in sub-Saharan Africa.
In large part this is because the renewables revolution, much like the Green Revolution in agriculture half a century ago, is largely passing Africa by. While investment globally in clean energy is rising, less than 2% of it reaches Africa.
The negative impact this situation will have on prospects for social and economic development is compounded by the fact that many countries with poor energy access are also highly vulnerable to climate change impacts.
As things stand, the global transition to a clean energy system, with all the benefits it brings, is set to be deeply unjust. Countries and communities that would benefit from it most are set to miss out, and where it does take place in the developing world, it is set to be relatively more costly than in the more prosperous Global North.
Utilisation of ‘spare’ solar manufacturing capacity could significantly advance the energy transitions of countries that need it most, increasing energy access and avoiding the need to build new fossil fuel power stations.
This analysis looks at a group of countries generally positioned below the global average in terms of development, including many with limited energy access. These nations are in general vulnerable to impacts of climate change and supportive of a global clean energy transition. We define this group via membership of three blocs: the Least Developed Countries (LDCs), Alliance of Small Island States (AOSIS), and Climate Vulnerable Forum (CVF).
Collectively, this group comprises 95 countries – 45 in Africa and the Middle East, 29 in Asia and the Pacific, and 21 in Latin America and the Caribbean (full list in Appendix 1). Seven of these countries were omitted from the calculations in this report owing to absences of data, leaving 88 in the final analysis (44 in Africa and the Middle East, 23 in Asia and the Pacific, and 21 in Latin America and the Caribbean). As the population of the seven omitted countries is less than 1% of the total, their omission does not materially affect the conclusions.
Assuming that the rate of electricity demand growth seen across the 88 countries in recent years continues for the rest of this decade, we estimate the additional demand in at 676 terawatt hours (TWh). Meeting this additional demand entirely with solar would entail deploying a capacity of 454 GW before (for details on methodology, see Appendix 2). Deploying more solar capacity would reduce the proportion of electricity that each country obtains from fossil fuel generation, constraining greenhouse gas emissions, reducing import dependence and reducing exposure to fossil fuel price spikes.
Levels of electricity access vary widely across this group of countries. Twenty-five countries are at 100%, and many more close to it. But in some sub-Saharan African countries the level is much lower – 11% in Chad, 10% in Burundi and 8% in South Sudan. Across the 88 countries, the combined population without access to electricity currently numbers 519 million people. Given projected population growth, that number would be expected to rise to 809 million in , in the absence of measures to increase access.
As an indicative exercise, we calculated the additional electricity demand incurred in if electricity access were to be extended to the entire population of each country. Our estimate is that this would require 843 TWh of electricity compared with – 167 TWh higher than just meeting the expected demand growth. This could be delivered by deploying an additional 112 GW of solar capacity, bringing the required deployment to 566 GW, which is just one-seventh of the ‘spare’ solar manufacturing output.
Improving electricity access is a complex issue, and the indicative calculation above should not be taken as implying that ‘spare’ solar represents a complete solution. In some of the 88 countries, particularly those where electricity is already available around the clock and levels of access already good, solar panels would need to be properly integrated with the national system, potentially entailing buildout of the grid and flexibility measures such as storage. In other settings, where levels of electricity access, hours of availability per day and per-capita consumption are much lower, minimal additional infrastructure would be needed. But in these settings, a much more substantial rise in generation would be needed to raise the amount of electricity available per person per day to levels seen in more prosperous countries, while deployment of batteries alongside solar would extend electricity availability into the evening. However, the scale of the ‘spare’ capacity relative to the size of the expected demand increase highlights the fact that the ‘spare’ solar capacity could make a significant contribution, if deployment were supported appropriately.
Now, with Chinese manufacturers similarly hard-pressed, the option of significantly accelerating domestic deployment is far less feasible because deployment is already happening at significant scale and pace and running up against constraints. The US is again erecting trade barriers; and India, hitherto a rapidly expanding market for Chinese exports, is planning to meet national demand with domestic manufacturing. Against this backdrop, supporting deployment across the developing world is an obvious option if the Chinese government wants to keep as much as possible of the industry running through this difficult period.
The second gain is diplomatic. Western nations have acknowledged their responsibility to support the Global South’s energy transition on numerous occasions, from the UN climate convention onwards. They are also committed to supporting delivery of the Sustainable Development Goals. But they have repeatedly failed to provide the agreed collective sums of climate finance, are currently not delivering reforms to the international financial system (such as via the Bridgetown Agenda) that would speed up clean energy deployment by de-risking investment, and are not supporting implementation of SDG 7 well enough to ensure delivery.
‘Spare’ solar offers an opportunity for China to step into the breach. It is after all allied with all but one country in our analysis through common membership of the G77/China group, the 134-strong bloc which exists to ‘…provide the means for the countries of the [Global] South to articulate and promote their collective economic interests… and promote South-South cooperation for development.’ Given the severe climate impacts already affecting small island developing states and other climate-vulnerable nations, there could hardly be a more significant example of beneficial South-South cooperation than supporting the rollout of affordable solar energy in countries that need it the most.
The figures in this report show the global benefits that would accrue from supporting deployment of ‘spare’ solar capacity.
This single move would ensure that governments collectively exceeded their target of tripling renewable energy capacity by by a substantial margin. Deploying just one-seventh of it in the countries that most need clean electricity would contribute to improving energy access and energy independence.
Supported solar energy deployment in Global South countries would bring a range of added development benefits to those countries. Solar would create jobs in the installation and maintenance whilst reducing fossil fuel import costs; but cheaper and more plentiful electricity would also provide a boost to industry and support countries’ underlying clean development. Parts of the supply chain could be relocated in-country, as is already happening in Southeast Asia where companies are progressively moving from solar panel assembly to the manufacturing of upstream components such as solar cells and silicon wafers. Given the synergy between solar generation and battery storage, solar panel deployment on a significant scale would make countries more attractive destinations for investment in battery manufacturing, as is already happening in North Africa.
These wider benefits could, in turn, contribute to a more sustainable mode of development that would bring long-term sustainable prosperity.
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What emerges overall is an opportunity for South-South-North collaboration that has the potential to markedly accelerate progress towards agreed international goals on both climate change and development:
Although global geopolitics might appear unpromisingly frosty, China and the US cooperation on climate change endures, as evidenced by the joint Sunnylands Statement which saw the two governments reaffirm ‘their commitment to work jointly and together with other countries to address the climate crisis’. China and the EU also constantly maintain a dialogue on climate issues.
From the perspectives of clean energy access, development and climate change, the conventional representation of the current situation is flawed. The situation is not, as it is often described, one of over-production, but of under-deployment. The spectre of supply chain shortages is often cited as an obstacle to rolling out clean energy globally. Here, the supply chain is clearly in robust health; but governments and multilateral institutions are electing not to utilise the full extent of goods that it can produce, despite the social and economic advantages doing so would bring.
The opportunity to capitalise on the potential of solar energy will not last indefinitely. The workforce layoffs and investment delays already witnessed in solar manufacturing would be expected to deepen quickly unless governments act to support the market. The win-win-window will not be open for long.
Projections of solar panel manufacturing capacity and deployment - were sourced from the International Energy Agency’s Renewables report. The IEA projects that global solar manufacturing capacity will rise from 1,100 gigawatts (GW) in to 1,300 GW in . Taking 1,200 GW as an average annual production figure for the period - gives a cumulative nameplate output of 6,000 GW. At an 85% utilisation rate, this gives a total feasible output of 5,100 GW.
We conservatively extend the manufacturing capacity time series to by assuming that the figure of 1,300 GW per year does not increase from to . This gives a cumulative manufacturing output - (assuming an 85% utilisation rate) of 7,310 GW.
The IEA forecasts that annual deployment of solar panels will rise from 400 GW in to 532 GW in , a cumulative capacity addition over the period -28 of 2,292 GW.
We extend this estimate to by projecting that the average annual percentage capacity addition for the period - (7%) continues for and . This gives the cumulative solar capacity added - as 3,473 GW.
We extend the IEA’s baseline projection for overall renewable capacity forward to by assuming that the average annual growth rate forecast for the period -28 (14%) continues for two more years.
Data on annual electricity demand, and renewable and solar generation for the countries in this report were sourced from Ember’s electricity data. Installed capacity figures were sourced from the International Renewable Energy Agency (IRENA). The year was taken as the most recent year for which there is comprehensive data available on all parameters for the countries analysed. Data on access to electricity was taken from the World Bank Data Portal; figures for are not available, therefore figures were used.
Due to issues with data availability, Ember does not collect or publish data on four of the 95 countries – Republic of the Marshall Islands, Federated States of Micronesia, Palau and Tuvalu. The World Bank does not publish energy access figures for a further three – the Cook Islands, Niue and Palestine. With a combined population of 5.4 million, these seven states account for less than 0.5% of the population across the 95 countries, and were excluded from all calculations.
For each country, electricity demand was forecast for by assuming that the average annual rate of demand growth during - continues for the period -. Using average growth figures for this recent decade, rather than for the last one or two years, reduces the impact of exceptional circumstances caused by the Covid pandemic, the Russian invasion of Ukraine, or more localised factors. The amount of additional solar generating capacity needed to meet all the growth in demand was then calculated based on IRENA’s global average capacity factor of 17%.
The number of people across the 88 countries without access to electricity now was calculated using the World Bank energy access figures and population data in the Ember database. Population forecasts to were obtained by assuming that the average annual rate of population growth during - continues for the period -. The proportion of the population expected to have electricity access in was calculated by assuming that the average annual rate of energy access growth during - continues for the period -. These two figures were used to calculate the number of people in these countries expected to be without electricity access in , and this was used to calculate the additional demand necessary to extend access to the entire population. The additional solar capacity needed to bring access to the 100% level in all countries was then calculated using the same 17% capacity factor.
This approach does not address wider inequalities in electricity access nor barriers to it, but provides a rough indication of the capacity needed to extend the current level of per-person energy access seen in each country, for those who have it, across the entire population.
Despite frequent claims that China’s rise in global solar photovoltaic (PV) industries was the realization of strategic central government industrial policy, the development of China’s solar PV sectors initially followed a bottom-up pattern. Its developmental patterns can be understood in three distinct stages. First, until the financial crisis, China’s solar PV industry primarily developed as an export-oriented manufacturing policy with the support of subnational governments. Second, after the financial crisis led many governments in Europe to remove subsidies for solar PV installation, China’s central government intervened with the creation of domestic solar markets to save a now sizable solar PV industry. Third, beginning in , and somewhat unsuccessfully, the Chinese central government began removing domestic subsidies and again focused on technological efficiency, production cost, and grid integration in its treatment of the domestic solar PV industry.
The case of solar is unusual in that the initiative to grow an entire industrial sector resulted almost entirely from local government action, at least initially without guidance or input from central government actors. The center never fully managed to gain control of the sector. Even as it began to intervene in the solar industry in , it continued to primarily address unintended consequences caused by misaligned incentives for subnational governments, which frequently resulted in overcapacity.
In contrast to other new energy industries in China, which were often dominated by state-owned enterprises that entered these sectors following central government directions, most of China’s early solar firms were established by returning entrepreneurs. Solar firms were frequently founded by Chinese scientists educated in solar PV research laboratories abroad, in particular at the University of New South Wales in Australia.
Rather than relying on licensing and joint development agreements, as was prevalent in other high-technology sectors in China, China’s foreign-trained researchers returned to their hometowns and indigenously developed solar PV technologies, drawing on government funding. Also, Chinese solar PV technology came from installing American- and European-manufactured equipment embedded with critical technologies. This allowed Chinese manufacturers to produce solar PV products without having to develop core technologies in-house.
Chinese solar PV firms excelled in bringing these cell technologies to mass production. Even though Chinese laboratories generally lagged in solar PV conversion efficiencies achieved under laboratory conditions, as early as , Chinese solar PV companies were mass-producing solar modules with cell efficiencies on par with or better than those of their competitors.
However, a lack of central government subsidies for domestic solar PV deployment prevented domestic solar markets in China, requiring Chinese solar PV manufacturers to export more than 90 percent of their production. This contrasts with the wind industry, for which China’s central government introduced subsidies and other demand-stimulating policies for domestic markets as early as .
The / financial crisis put an end to generous subsidies that had created demand for Chinese solar panels in several European export markets. Chinese solar PV manufacturers, which had to date exported most of their products to European markets and had grown into a sizeable industrial sector, were suffering rapidly declining sales. At the same time, cost declines because of scale economies and cut-throat competition had made once uncompetitive solar PV technologies more and more affordable.
In the context of broader economic stimulus efforts, China’s central government for the first time created incentives for domestic solar demand. Notable in the case of solar is that such central government efforts to shape and support the industry came after nearly a decade of development primarily driven by private sector initiative and subnational government support. Starting in , a first nationwide central government subsidy for solar energy sold to the electric grid subsequently created a small but growing domestic market for solar PV technologies. Additional direct subsidy programs were available to support both the installation of residential and utility-scale solar PV installations. However, these subsidies took a while to take effect—it was not until that central government support at last led to growing domestic markets. Until then, China’s solar PV firms continued to export the vast majority of their production.
The inclusion of solar PV on the list of strategic emerging industries in and the goals set in the 12th Five-Year Plan (–) for the solar industry greenlighted subnational government plans to support their local solar firms. As a result, China’s solar firms had access to large sums of capital through bank loans, provided by state-owned banks and frequently guaranteed by local government entities or state-owned companies.
Credit lines to expand manufacturing capacity were brokered and backed by local governments and state-owned firms, even in the years after the global financial crisis when the collapse particularly of European markets led to overcapacity in global solar markets. Providing loans was a way to improve local GDP growth rates, employment rates, and other indicators of economic development used to determine cadre performance and promotions. Solar PV’s status, first as a designated high-technology sector, and, starting in , as a strategic emerging industry in central government plans further encouraged local government officials and state-owned banks to continue lending to China’s solar PV sector.
The incentives for government officials to support the expansion of manufacturing capacity of local firms and the ability of firms to draw on financial support and bank loans to fund such expansions permitted solar PV firms to increase their manufacturing capacity, even during periods of overcapacity in global solar PV markets.
The mismatch between production capacity and market demand suggests that subnational governments envisioned solar PV sectors primarily as export-oriented industries over the course of the 12th Five-Year Plan period (–).
– – –present Role of central government Government created domestic solar market through subsidies; inclusion of solar PV as a strategic emerging industry and listed in the 12th Five-Year Plan (–) Government created domestic solar market through subsidies; inclusion of solar PV as a strategic emerging industry and listed in the 12th Five-Year Plan (–) Central government began to remove domestic subsidies, pushing technological efficiency, production cost, and grid integration; ad hoc policies to increase the role of domestic markets; Top Runner program started in Funding Support of subnational governments Increased access to bank loans, expanding local capacity for support and expansion Several incentives for subnational government investments were removed Subsidies EU government subsidies for solar PV installation EU subsidies reduced; central government subsidies announced in and implemented in Central government reduced domestic subsidies Demand focus (export/domestic) Export-oriented manufacturing policy Domestic growth but subnational governments largely envisioned solar PV sectors as export-oriented Further increased the role of domestic markets Level of production Domestic installation was less than 2% of production; exported more than 90% of production Increasing domestic focus but a vast majority of production was exported; domestic installation was 4% of production in and 15% of production in ; 55% of production was exported in ; overproduction In , China accounted for 36 percent of solar demand, but 97 percent of wafer, 75 percent of module, and 85 percent of cell manufacturing.Beginning in , the central government began to intervene more aggressively to manage the overcapacity that had begun to build in China’s domestic solar industry, both because of continued investment in additional manufacturing capacity and insufficient demand in both domestic and international markets. Central government interventions during this period primarily focused on shaping domestic solar PV markets to both encourage scale and continued investments in technological innovation among domestic solar firms. Policies tended to be ad hoc responses to ever new problems growing out of the activities of subnational governments. The immediate focus of central government policies was to further increase the role
of domestic markets.
To manage the growing cost of subsidies paid to solar energy generators through a bonus payment on top of regular electric prices, the National Development and Reform Commission in announced that it would begin lowering subsidy rates, starting in December of the same year. Subsidies created windfall profits for renewable energy developers as the cost of solar PV technologies continued to decline, and the central government sought to align subsidies with falling technology costs in a series of steps. Solar subsidies were lowered year over year. Despite such reductions, China reached its solar installation targets three years ahead of schedule, prompting the decision in the central government to wean the industry off demand-side subsidies altogether and move to a bidding system for new installations.
In the central government launched a so-called Top Runner program. Top Runner projects injected incentives to deploy advanced solar PV technologies and retire the production of dated technologies. Module cost continued to fall because of these incentives, while module efficiency continued to increase. Particularly installations of high-efficiency panels in Western China were able to achieve grid parity because of those incentive changes, yet broader issues, including the perpetual underfunding of the renewable energy fund, the low profitability of domestic manufacturers, overcapacity, and broader trade tensions remained unresolved.
In contrast to industries such as wind power, and to some extent electric vehicles, where central government policy used domestic markets strategically to build technological know-how and weed out nonperforming firms, the Chinese solar industry started as an export-oriented sector driven by local government investments in manufacturing capacity.
While the center enabled the role of subnational actors to some degree—not least by designating solar a strategic emerging industrial sector, which allowed local administrations to turn on the spigot of policy lending for manufacturing expansion—the center responded to local actions more than it guided them. Subnational investments created a dilemma for the center in , when export markets collapsed in the wake of the global financial crisis and even China’s highest-performing solar firms were hanging on by a thread. China responded with incentives to drive domestic demand and avoid the looming wave of bankruptcies.
While the central government has taken a more active role in shaping domestic markets since its first intervention in the domestic solar industry in , it has continued to primarily address unintended consequences caused by misaligned incentives for subnational actors. Investments in production capacity expansion continued to trail growing domestic demand, even as generous feed-in tariffs offering subsidies based on the solar resources available in each province were slow to adjust to falling prices and created rapidly accelerating domestic installations.
China succeeded in solar primarily by unleashing unprecedented capital investments for manufacturing expansion using practices grounded in the local developmental state of the s. Rather than be an example of strategic industrial policy intervention, China’s solar PV industry is a study in addressing unintended consequences without fixing their underlying causes.
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