Q4 2025: China Policy Shifts, Production Cuts to Push Solar Prices Up 9%, Says Report

Solar and storage developers are bracing for a major shake-up as Chinese government policy changes, coupled with recent price hikes and supply-side production cuts, bring an end to the 18-month era of rock-bottom prices, according to a Wood Mackenzie report. The pricing trends, if they play out, will have far reaching impact beyond China, considering the massive share of Chinese manufacturers in the global solar supply chain.  

Starting Q4 2025, developers are set to face a sharp jump in equipment procurement costs. Three converging factors—polysilicon consolidation, supply cuts, and the cancellation of China’s 13% VAT export rebate—are expected to push solar module prices up by around 9%, with further increases likely through 2026.

The research warns that even developers who locked in supply agreements earlier in 2025 may have to renegotiate production contracts scheduled after November, as the new pricing reality takes hold.

Wood Mackenzie's analysis indicates this represents a structural correction away from destructive price wars toward sustainable margins, rather than a temporary market adjustment. "This shift will ultimately benefit the industry's long-term health," Yana Hryshko, senior research analyst and head of Global Solar Supply Chain at Wood Mackenzie explained. "For manufacturers, it represents a welcome opportunity to reinvest and innovate. For developers globally, it means adjusting procurement expectations. And for policymakers, it's a timely reminder of the risks inherent in concentrated supply chains."

Factors contributing towards ending this trend are:

1.       Polysilicon consolidation,

2.       Supply-side production cuts,

3.       Cancellation of China's 13% VAT export rebate

The research shows that solar module prices fell to historic lows of US$0.07–0.09 per watt during 2024 and early 2025, as Chinese manufacturers engaged in price competition despite posting heavy losses. This unsustainable situation has now reached a turning point due to coordinated government intervention. The research anticipates the following effect on the market from the Chinese policy changes

Effect of Chinese government policy changes

• Polysilicon prices increase 48% in September 2025

The policy would impact Chinese polysilicon capacity, which expanded fourfold between 2022 and 2024, creating a massive oversupply and driving down prices. Now, with the new government guidelines having restricted expansion and mandated utilization cuts, production rates are expected to be 55-70% among leading producers. This has resulted in a dramatic 48% increase in polysilicon prices in September 2025 alone.

• Restricted Expansion, Utilization Cuts Set Production at 55–70%

By mid-2025, the module operating rates among leading manufacturers also saw a drop to 55-60%, while obsolete passive emitter and rear cell (PERC) production lines were phased out, further reducing available capacity.

• China To Cancel 13% VAT Rebate

The research anticipates that from Q4 2025, China will cancel the 13% VAT rebate previously applied to exports of solar modules and storage systems.

China currently produces over 80% of the world’s solar modules and 90% of lithium iron phosphate battery packs used in energy storage. Experts predict that the recent policy changes will have a direct impact on global benchmark prices.

For the US market, this is expected to drive higher costs for storage projects that rely on Chinese-made equipment. Analysts also anticipate that the VAT rebate could be scrapped for inverters, further increasing expenses for solar projects in the U.S. Hryshko noted. "With no possibility of alternative supply in the short term, developers will have little choice but to absorb these higher costs."

For Indian developers, who couldn't really benefit from the full extent of the drop in Chinese costs thanks to the protection accorded to local manufacturers, a rise in inout costs from China is likely to be passed on quickly, as most manufacturers importing wafers or even cells currently don't usually keep inventory beyond 3 months.