In May, photovoltaic installed capacity increased nearly fourfold year-on-year. Can the rapid growth continue in the second half of the year?

On June 23rd, the National Energy Administration (NEA) released data showing that new photovoltaic capacity installed in the first five months of 2025 was approximately 198 GW (gigawatts), while the first four months saw 105 GW installed. This means that May alone saw 93 GW installed.

It is reported that for the entire year of 2024, China's new photovoltaic capacity will reach 278 GW; the monthly installations in May of this year are equivalent to the four months of last year. The surge in installations in May has raised concerns within the industry about whether this will overdraft demand for photovoltaic installations in the second half of the year.

However, some industry insiders have suggested that there may be a situation where applications are submitted before installation and grid connection.

The "rush to install" effect was evident in the first half of the year, with photovoltaic installations increasing by 388% year-on-year in May.

In fact, new photovoltaic capacity began to increase significantly year-on-year in April 2025.

According to NEA data, new photovoltaic capacity installed in April was 45 GW, a year-on-year increase of 215%. Soochow Securities reported that April's installed capacity set a new monthly record for new photovoltaic capacity added in the first half of the year; in May, new installations soared further to 93 GW, a year-on-year increase of 388%.

The significant growth in installed capacity in April and May is largely due to the "Notice on Deepening the Market-Oriented Reform of New Energy On-Grid Electricity Prices and Promoting the High-Quality Development of New Energy," issued in February of this year. The document stipulates that existing projects commissioned before June 1, 2025, will have their electricity prices aligned with current policies through price differential settlement, ensuring they remain within the local coal-fired power benchmark price. For incremental projects commissioned on or after June 1, 2025, the amount of electricity included in the mechanism will be dynamically adjusted based on the progress of regional new energy development targets as defined by the state, with the mechanism electricity prices determined by local governments through market-based bidding.

This has also led to uncertainty in the profitability of incremental projects commissioned after June 1, triggering a rush to install capacity in the photovoltaic industry.

A CITIC Securities research report shows that from January to April this year, China added 141 GW of new installed capacity, including 105 GW of new photovoltaic capacity, a year-on-year increase of 74.6%, demonstrating a significant "rush to install" effect in the photovoltaic sector.

PV module production declined month-over-month in May. Can supply and demand balance be achieved in the second half of the year?

In terms of the upstream supply chain, according to data from SMM (Shanghai Nonferrous Metals Network), my country's photovoltaic module production in March 2025 increased by approximately 41.1% month-over-month compared to February. In April, actual module production increased month-over-month, by approximately 16.5%.

However, in May, production actually declined. SMM stated that all module manufacturers significantly reduced production in May, with output falling by approximately 12.7% month-over-month.

Regarding production schedules for June, SMM stated that distributed photovoltaic demand decreased significantly in June, while industrial and commercial photovoltaics saw some support, while centralized photovoltaics adopted a wait-and-see approach. Therefore, output is expected to continue to decline month-over-month in June.

Data released by market research firm InfoLink shows that module production schedules for May this year have slightly decreased from 60.7GW in the previous period (April), to 58GW to 59GW. June's monthly output is estimated to be only around 53GW. InfoLink believes this is primarily due to a sharp drop in demand following the rush to install solar panels, and anticipates that June and July will be a distinctly off-season.

Looking at supply chain production schedules, upstream production cuts have already begun. Regarding the supply and demand situation in the photovoltaic industry in the second half of the year, SMM believes that the rush to install solar panels at the end of the second quarter significantly reduced market demand in the second half of the year, and overall demand pressure in the second half of the year is likely to be significant.

Regarding photovoltaic module demand, InfoLink advises that attention should be paid to the support point in late June, which is currently weak and market uncertainty is high. Demand may remain sluggish until August, and manufacturers' recent order situation is uncertain. Manufacturers anticipate insufficient support for module prices, and there is a risk of a subsequent weakening trend.

However, Mao Tingting, a senior photovoltaic analyst at SMM, told the National Business Daily: "There are projects that were first applied for and then installed and connected to the grid in May, but the components for some of these projects haven't been shipped yet. This can support component demand in the third quarter to a certain extent. So, the installed capacity data is simply reflecting this in advance."

Lv Jinbiao, a consultant to the China Photovoltaic Industry Association and deputy director of the expert committee of the Silicon Branch of the China Nonferrous Metals Industry Association, also told reporters: "Projects with poor local consumption have definitely been brought forward, but because component prices remain low at 0.6 to 0.7 yuan, and with the green electricity direct supply to the manufacturing industry and the green electricity wall-mounted electricity sales policy, it is highly likely that photovoltaic and storage microgrid projects will maintain double-digit growth throughout the year."

In other words, although photovoltaic installations may face pressure in the second half of the year, there is a high probability that they will continue to grow and transform throughout the year.