Chinese solar manufacturers say any boost to global demand for renewable energy from the oil supply shock caused by the Iran war is unlikely to significantly ease the industry's overcapacity, leaving producers worried about their survival.
Chinese green energy stocks rallied more than 10 per cent to nearly five-year highs after the US-Israeli attacks began on February 28, before paring back some of their gains.
The conflict has sent oil prices to nearly $100 per barrel and is threatening the global economy, forcing many governments to reassess fossil fuels within the energy mix. But while markets are betting this could drive up demand for solar panels and other green energy products from China, the producers themselves are less optimistic.
The solar industry is widely seen as one of the sectors most affected by overcapacity - an endemic problem in the Chinese economy, which has fuelled a record trade surplus but weighed on manufacturers' profits and fuelled diplomatic tensions.
"Prices might go up slightly, or global demand might increase a little bit, but it won't seriously impact the overall supply-demand dynamics," one solar industry executive said, asking - like four other executives who spoke with Reuters for this story - for anonymity due to the sensitivity of the matter.
"Some companies will make it and some won't," the source said. "The problem is that the capacity is still there. It hasn't been shut down, cleared out or truly exited the market."
As of 2025, China's solar factories had enough capacity to cover the estimated global demand this year nearly twice over, even after taking into account the Iran war impact in its demand forecast, Morningstar estimates. Parts of the supply chain saw further capacity expansion last year despite government and industry-led efforts to pare it back. Manufacturing capacity in polysilicon, wafers, and cells rose by 9 per cent, 11 per cent, and 7 per cent, respectively, compared to 2024, according to Morningstar. Module capacity declined by 5 per cent.
"Overcapacity is very serious and won't be cleared in the short term," said a sales manager at a major solar manufacturer in China. "The industry is under extreme pressure."
China's solar industry is in 'off-season'
Two other China-based solar executives told Reuters they had not noticed any increase in demand since the Iran war started. One reason, they said, is that buyers had front loaded orders before Beijing's long-flagged removal of export tax rebates for the industry on April 1 - one of its measures to curb capacity. One of the executives said his company had already shipped most of what it expected to sell in the second quarter to overseas warehouses, to get ahead of the rebate removal. Other producers had made similar moves, which meant the industry was "currently in the off-season," the executive added.
"In April, things actually cooled off a bit, because shipments obviously had to go out before the rebate was cancelled," the other executive said. The other reason for pessimism is that it is unclear where any surge in demand would come from. About 70 per cent of new global solar installations were in the US, the EU and China last year. Tariffs and other restrictions are preventing significant sales to the United States. Reuters reported on Wednesday that China was weighing curbs on exports to the U.S. of the most advanced equipment being used in making solar panels, a move that would expand Beijing's export controls and further inflame tensions between the two countries. In China, demand is actually expected to drop in the wake of last year's renewable power pricing reforms that introduced a market-based auction mechanism and removed guaranteed returns over a coal-price benchmark, said Morningstar analyst Cheng Wang. That leaves Europe. But Wang does not expect a repeat of the solar installation boom that followed Russia's invasion of Ukraine in 2022.
At that time European natural gas prices rose relatively more sharply than during the current Iran war, from 60 to 70 euros per million British thermal units in January 2022 to 340 euros per mmBtu by August 2022. They last traded at 43 euros per mmBtu, from around 33 euros before the Iran war.
"This time the impact is much more moderate," Wang said of the gas prices.
"The Iran war will have only a marginally positive impact on global solar demand," he said. "I do not expect a surge."