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China’s Solar Binge Is Turning Into a Hangover

Record growth in the first half of 2016 sounds great for renewable energy, but the country has far more solar power than it can use.

China’s epic solar binge accelerated in the first six months of 2016, as the country added more than 20 gigawatts of new solar installations. That’s nearly three times as much as the same period last year, and is more than the total installed capacity of all but Germany, Japan, and the United States.

But signs are growing that the boom is starting to fade. Investment firm Macquarie Capital said last month that many of the solar farms built this year were hastily completed to meet the deadline of July 1, when government subsidies for new solar were cut. Further cuts are expected next year as the government tries to rein in runaway development.

China now has around 63 gigawatts of solar power capacity, more than any other country. And wind, solar, nuclear, and hydro projects continue to be built out even though energy demand in China is nearly flat. Beijing is also having trouble meeting its financial commitments to solar developers: some 21 billion yuan ($3.16 billion) in solar subsidies have yet to be paid.

The government is expected to announce its latest five-year plan for the energy sector soon, and analysts expect that the average targets for new solar installations could drop to 15 gigawatts a year—still huge by the standards of any country other than China, but well below this year’s likely total.

Much of the new solar generation, particularly in the desert provinces of western China, is not even hooked up to the grid. That means much of the power is going to waste—39 percent in Gansu Province and more than half in Xinjiang, according to the Photovoltaic Industry Association. It’s part of a long-term supply glut that plagues China in the coal, steel, and concrete industries as well.

“We all know how prone China is to over-investment leading to massive overcapacity,” Mark Clifford, executive director of the Hong Kong-based Asia Business Council, wrote last month. “Why should electricity be any different?”

(Read more: South China Morning Post, Forbes, Reuters, “China Is on an Epic Solar Power Binge”)

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