The world's solar manufacturing capacity is set to remain at more than double annual installations in the coming years, with the dynamics of oversupply continuing to depress panel prices, the International Energy Agency said Jan. 11.

Global solar production capacity reached almost 800 GW at the end of 2023 with 330 GW of new manufacturing plants built during the year, the IEA said in its "Renewables 2023" market report. Based on the project pipeline, the total is set to surpass 1,100 GW in 2024 and 1,300 GW by 2028.

By contrast, the IEA forecasts global solar project capacity additions of 402 GW in 2024, rising to 540 GW by 2028.

This "significant supply glut" has already created an environment of low panel prices and led to a stockpiling of imported Chinese modules in Europe and the US, the IEA said.

The organization said some 90 GW of modules were sitting in warehouses in the European Union at the end of 2023 with a further 45 GW in the US, though some manufacturers have disputed the scale of the stockpiling.

Nevertheless, the ongoing oversupply led to module spot prices dropping roughly 50% between January and December 2023, the IEA added.

It expects prices to continue falling in the coming years, from an average of about $250,000/MW in 2023 to roughly $150,000/MW by 2028.

At the same time, the world's solar manufacturing utilization rate will also decline, the IEA said. Having already fallen to 60% in 2023 — a year-over-year decrease of about 10 percentage points — the rate is set to drop further still, to below 40% in 2024 to 2028.

Utilization rates in China, the world leader in solar panels, are set to be even lower than the global average in the coming years, the IEA said.

Still, China will account for the vast majority of the manufacturing capacity expansion to 2028, ranging from 85% for solar modules to 95% for polysilicon.

The IEA described the recent growth of the country's solar market as "extraordinary," as China installed as much new photovoltaic capacity in 2023 as the entire world did in 2022.

Other parts of the world will also grow their solar manufacturing footprint, driven by policy measures designed to boost domestic production. That includes the US, where planned investments in manufacturing capacity under the Inflation Reduction Act should be sufficient to meet 35% of the region's solar demand by 2028, the IEA said.

The outlook is less optimistic for the European Union, which aims to meet 40% of its annual solar deployment needs with domestic manufacturing by 2030, equating to about 30 GW.

The IEA said insufficient EU policy support for manufacturers and a lack of demand-side policies promoting the use of domestically made products had so far resulted in only a limited number of project announcements in Europe.

As such, the region is expected to be just 10% self-sufficient by 2028 and remain the largest solar import market, continuing to predominantly rely on Chinese panels.