China Eliminates Solar Export Tax Incentives, Ending the Era of Falling Prices

2026-02-04 economy

Beijing, Wednesday, 4 February 2026.
Solar prices may surge 15% as China eliminates export tax rebates this April. This fiscal pivot, alongside rising silver costs, officially ends the era of ultra-cheap renewable energy.

The End of Deflationary Solar

The global renewable energy sector is bracing for a significant recalibration of project economics as the long-standing era of manufacturing deflation comes to an abrupt halt. In a decisive move that signals a major fiscal pivot, China’s Ministry of Finance and State Taxation Administration issued a joint announcement on February 2, 2026, confirming the complete elimination of value-added tax (VAT) export rebates for photovoltaic products [8]. Effective April 1, 2026, this policy shift removes a critical subsidy that has historically suppressed global module prices, with analysts now projecting costs could rise by approximately 10% to 15% by late 2026 [2][7]. This regulatory change coincides with a broader tightening of market conditions, marking a transition from policy-driven tailwinds to a landscape defined by input inflation and fragmentation [1].

A Fiscal Pivot: Restructuring Export Incentives

The elimination of the export rebate represents the final step in a gradual reduction of state support for overseas buyers. Previously, rebate rates had been cut from 13% to 9% at the end of 2024, a system the China Photovoltaic Industry Association noted had begun to function merely as a discount for foreign importers rather than a benefit for domestic manufacturers [3]. Under the new regime taking effect in April, the rebate for solar photovoltaic modules and wafers will drop to zero [7]. Simultaneously, the export support for battery products is being phased out; the rebate rate will decrease from 9% to 6% between April 1 and December 31, 2026, before being completely abolished on January 1, 2027 [2][5]. This tiered removal underscores Beijing’s intent to consolidate its green technology sector and address the margin compression that has plagued its domestic producers [3].

The Silver Squeeze and Input Inflation

Beyond fiscal policy, manufacturers are grappling with a severe raw material shock centered on silver, which has overtaken polysilicon as a primary cost driver [1]. By early 2026, silver accounted for approximately 16% to 17% of total module costs, driven by a staggering price surge of 180% throughout 2025 to reach 23,000 yuan per kilogram ($110 per troy ounce) in January 2026 [1][4]. This inflationary pressure is exacerbated by a technological shift in the industry; as manufacturers migrate from PERC cells to more advanced TOPCon and HJT technologies, silver intensity has risen from roughly 7–8 mg/W to as high as 17–20 mg/W [1]. Consequently, the industry is facing a “three-way squeeze” of trade enforcement, fiscal tightening, and rising input costs, forcing companies like Longi to accelerate the transition to copper contacts starting in the second quarter of 2026 [1][4].

Geopolitical Fragmentation and Future Outlook

The supply chain is further complicated by aggressive trade enforcement measures in key Western markets. The United States has ramped up tariffs, with the Department of Commerce announcing rates as high as 3,521% on certain exporters from Southeast Asia in April 2025, alongside intensified enforcement of the Uyghur Forced Labor Prevention Act [1]. Meanwhile, the European Union, where solar power became the largest source of electricity in June 2025, is preparing for its own forced-labor regulation to apply from December 14, 2027 [1][3]. As these geopolitical barriers rise and cheap Chinese exports are disincentivized, the global market is witnessing a regime shift that fundamentally alters how solar capacity is financed and procured [1]. With turnkey system costs already hovering between €1,100 and €1,500 per kilowatt-peak in January 2026, developers must now account for higher capital expenditure requirements in the immediate future [4].

Sources

Trade Policy Solar Energy