According to a new report by Wood Mackenzie, impending policies from the Chinese government and substantial production cuts will likely result in increased prices for solar and storage components starting from the fourth quarter of 2023. After a prolonged period of declining prices that saw solar module costs drop to historic lows of $0.07-0.09 per watt, these changes are expected to reverse the trend.
Chinese manufacturers have been forced to lower prices significantly to remain competitive amid a persistent oversupply, resulting in losses for major industry players. In fact, China’s leading solar manufacturers reported combined losses of $1.54 billion during the first half of this year due to this ongoing price drop. Wood Mackenzie’s analysis indicates that factors like market consolidation, cuts in production capacity, and changes to tax policies are contributing to a rebound in module prices.
As part of market consolidation, polysilicon producers in China have been instructed to reduce the utilization of their manufacturing facilities under new guidelines, leading to drastic cuts of 55-70% in output rates among top manufacturers. This has already contributed to a significant increase—nearly 48%—in the free on board (FOB) prices since September 2025. Reports earlier this summer indicated that several key polysilicon firms, including GCL Technologies and Tongwei, planned to shut down roughly one-third of the nation’s production capacity.
Further compounding the situation are supply-side cuts in manufacturing, which have led to a decline in operational rates among solar module producers of up to 60% by midyear. This decline particularly affects the older passivated emitter rear contact (PERC) technology, which is being phased out in favor of newer methods like tunnel oxide passivated contact (TOPCon).
Moreover, the elimination of a 13% rebate on value-added tax (VAT) for exports of solar modules and storage systems is poised to have a global impact on benchmark pricing. According to Yana Hryshko, a senior research analyst at Wood Mackenzie, manufacturers have alerted international customers to anticipate about a 9% hike in prices in the fourth quarter due to this VAT change. As alternative supply options are not on the horizon, developers will have to accept these increased costs.
Hryshko noted that this evolution could ultimately benefit the industry’s sustainability. It offers manufacturers the chance to reinvest and innovate while prompting global developers to rethink their procurement strategies. Additionally, it serves as a reminder for policymakers about the vulnerabilities linked to concentrated supply chains.