In the weeks since China announced its timeline for ending export subsidies for solar photovoltaic (PV) parts, prices for panels and their components have surged – leaving some Southeast Asian project proponents feeling the heat.
Industry players told Eco-Business that while the change in policy was expected, the announcement coincided with an ongoing rise in raw material prices for silver paste, aluminium, polysilicon and wafers, increasing input costs. China is the world’s largest manufacturer and exporter of solar PV products.
China’s Ministry of Finance and State Taxation Administration said on 9 January that it would remove value added tax (VAT) export rebates for solar panels effective April this year. The measure is aimed at curbing overcapacity in the solar PV market, stabilising domestic prices and diffusing international trade tensions.
The regulators are also lowering the rebate for battery products to 6 per cent from 9 per cent between April and December this year. It will be removed completely beginning 1 January 2027.
Prior to the announcement, the prices of solar modules were already on the rise, going up about 20 per cent from under 9 cents per watt to over 10 cents per watt, a source at China-headquartered TCL Solar told Eco-Business. The decline of the renminbi against the US dollar also added to costs.
“The [coincidence of all these factors] have caused buyers to panic quite a bit, as internal rates of return (IRR) are coming into question,” said the source, suggesting that prices could go up by nearly 40 per cent or more from the start of the year.
Demand remains strong for solar PV products in Southeast Asia, however, with some buyers willing to accept limited price increases, said Davis Chong, executive director and group chief executive officer of Malaysian solar company Solarvest.
“Buyers will continue to buy at 10-12 cents and at those prices, projects won’t stop and harm demand, But any increase over 12 cents could soften buyer interest,” he told Eco-Business.
Solarvest, which has secured contracts to develop solar farms for end-users including technology giant Google, expects to see a minimal impact on its projects, as it has locked in prices since mid-2025 for a blanket order of 2 gigawatts (GW) of solar panels.
“This order will provide cost visibility for the next 18-24 months, supported by bank guarantees,” Chong said, adding that the strengthening of the Malaysian ringgit is also helping to offset costs.
Thin margins
Elsewhere in Southeast Asia however, the price increases could spell more trouble for future interest in solar power. This is especially as returns on investment for solar projects range between 11-16 per cent in Indonesia and the Philippines, according to research by energy think tank Ember. The IRR for solar projects under maximum power purchase agreements is lower in Vietnam, at 6.1 per cent.
“For solar projects in Southeast Asia where the prices of solar panel components were discounted by Chinese exporters using the tax rebates, [the increase in cost] certainly risks future development of the projects,” Dinita Setyawati, senior energy analyst for Asia at Ember told Eco-Business.
“However, if solar panel components and battery prices are increasing, the profit might be too low for developers to take interest,” she said.
On the bright side, ongoing solar projects in Southeast Asia are expected to remain unaffected, said Jigar Shah, head of sustainability research at Maybank Investment Banking Group (MIBG). It is unlikely that projects will be cancelled, although some may be delayed if contract terms do not factor in increased raw material prices, he told Eco-Business.
“There will surely be front loading of buying activity in the current quarter before the new export tax rebate policy takes effect,” said Shah.
The prices of solar photovoltaic components are raw materials are typically calculated under a solar power project’s capital expenditure, or CAPEX. The diagram shows how much returns would change for the project if factors such as CAPEX go up or down by 10 percentage points. Image: Ember
Spotlight on domestic manufacturers
Shah also expects more sourcing for solar PV components to be done within Southeast Asia itself. Southeast Asian solar PV manufacturers were dealt a blow in April last year, when the United States announced record-high tariffs against exports from Cambodia, Malaysia Thailand and Vietnam.
The US Commerce Department said that a number of solar PV makers in these countries received subsidies from the Chinese government, which it described as anti-competitive transnational subsidies, leading to products being sold below market price in the US.
However, this means that there is still significant manufacturing capacity for solar PV products in Asean, Shah pointed out. The Asean region had capacity to produce 86 GW of solar PV modules in 2024, with this capacity expected to increase to 94GW in 2027. Similarly, solar cell capacity was 51GW in 2024 and anticipated to increase to 70GW in 2027.
“We believe these capacities will now be used to fulfil domestic demand. We do not anticipate capacity addition, but we do expect the export-linked capacities to be used for domestic consumption, thereby the price increases will be lower,” he said.
To encourage this, Southeast Asian governments can use a combination of demand and supply side policies to support local manufacturers, suggested Ember’s Setyawati.
“What would benefit Southeast Asia is if solar panel and battery manufacturing can be spread across the region, while maintaining quality standards and aligning PV production with intellectual property practices,” she said. This diversification could help countries avoid the concentration of supply from just one market, with countries playing equal roles in the supply chain.
Setyawati added that governments in the region should focus on stimulating domestic PV consumption alongside production, balancing manufacturing capacity with demand. “The region would also benefit if it can absorb the PV components that it produces.”
“The market demand for PV products can be leveraged with greater incentives for developers, household consumers, as well as commercial and industrial users,” she said.
Can Chinese manufacturers recover?
China, which has been accused of dumping solar panels for below-cost prices in the global market, has spent the last two years shifting away from subsidising solar PV products.
This is especially as Chinese solar manufacturers have suffered years of losses due to oversupply. In recent earnings projections, China’s top solar panel makers forecast losses of US$5 billion or more for 2025, according to news reports.
Many have been raising prices to address this. Longi Green Energy Technology Co, which recently warned that it expects a net loss of US$861 million for its 2025 financial year, for instnace, has more than doubled prices. Its competitor, Trina Solar, has raised its average selling prices by over 3 per cent, Citibank analysts said.
Batteries are also expected to become more expensive. The price of lithium, a core component of batteries, has also surged in response to China’s rollback of the export rebate. Lithium carbonate hit RMB164,131 (US$23,564) per tonne on 14 January, its highest level since late 2023, according to Trading Economics data.
As such, the cancellation of the solar PV export rebates was welcomed by the China Photovoltaic Industry Association, which said that the move would help stop the excessive decline of export prices in the long run.
“Timely reduction or cancellation of export rebates for photovoltaic products can help promote a rational return of foreign market prices and reduce the risk of trade frictions,” it said.
Exports for China’s solar panels stagnated in the first half of 2025, data from Ember showed, with Asia buying fewer panels than Europe. However, exports of solar cells and wafers, which are components in the panels, have surged, growing over 70 per cent as countries such as India seek to grow panel manufacturing capacity.
