China’s energy bosses push for tighter rules as overcapacity bites

The chairmen of China’s battery and solar giants have called for more top-down regulations to rein in cutthroat competition, warning that unchecked overcapacity is squeezing profits and threatening the industry’s stability. Despite tailwinds including the Middle East conflict that could increase demand for renewable products, overcapacity remains a major challenge for industry players. Zhang Tianren, chairman of Tianneng Holding Group – ranked second behind Contemporary Amperex Technology Ltd (CATL) in a 2025 list of global top 500 new energy firms compiled by the state-backed China Institute of Energy Economics – urged authorities to tighten approvals for new projects. “Policies should not only guide the industry but also provide a plan for it,” Zhang told the South China Morning Post. He said top-down planning was needed to avoid overlap and overcapacity in projects across mainland cities. Zhang, whose company produces lead-acid and lithium batteries as well as industrial energy storage systems (ESS), said overcapacity in batteries was the legacy of decades of economic competition among local governments, which he described as the biggest issue. He warned that excess capacity now exceeded market demand by multiples, in some cases running into triple-digit percentages. Although top policymakers mentioned “involution” for the first time in July 2024, addressing the need to tackle cutthroat competition, Zhang said there was still a long way to go to end domestic competition, even though the anti-involution campaign was taking effect. Trina Solar chairman Gao Jifan, speaking as a delegate at the National People’s Congress in March, suggested banning new low-level production capacity without technological edge. Longi Green Energy Technology chairman Zhong Baoshen advocated new standards and financial rules for the quality development of the solar industry. In a written response to the SCMP, Zhong said there was an urgent need to establish mandatory sales standards for modules and incorporate technical quality into procurement evaluations, fostering a “quality-for-price” orientation. Zhong, who leads the world’s second-largest solar manufacturer by shipments, also suggested China should introduce regulatory rules similar to the “three red lines” in the property sector to monitor financial indicators such as debt-to-asset ratios of solar firms and limit expansion of high-risk producers. Batteries and solar power are among the major manufacturing sectors in China caught in overcapacity in recent years. Lithium batteries designed for energy storage logged an average capacity utilisation rate of only 50 per cent in 2023, while some solar manufacturers saw their utilisation rates slide below 40 per cent in 2024. Amid the competition, manufacturers suffered profit squeezes. Tianneng Power International – the Hong Kong-listed entity controlling Tianneng Holding Group – recorded a net profit of 1.44 billion yuan (US$210 million) last year, 42 per cent lower than in 2021. Shanghai-listed Longi posted a net loss for the second consecutive year in 2025, estimated at up to 6.5 billion yuan. The proposals came even as the energy bosses recognised growth potential from geopolitical tensions and global investment in artificial intelligence. Tianneng’s Zhang said volatility in crude oil prices could be a new opportunity for China’s new energy industry to expand globally. Longi’s Zhong said demand from power-hungry AI would be inelastic and could extend into 2026 and beyond. The capacity race that Zhang warned about appears to have resurfaced. Nineteen battery makers from CATL to BYD announced new projects in the first quarter to boost production capacity by over 900 gigawatt-hours, involving investments totalling more than 180 billion yuan, according to Shenzhen-based industry consultancy GGII. Regulators, however, are stepping in. On April 9, the Ministry of Industry and Information Technology and three other agencies summoned power and ESS battery makers and vowed early intervention measures to curb irrational competition, including promoting production capacity warnings, regulation and guidance to local governments in attracting investments.