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Key takeaways:
According to China’s National Energy Administration (NEA), by the end of July 2026 the country’s installed solar photovoltaic (PV) power capacity had reached 1.286 billion kW, comprising 704 million kW of utility-scale PV and 582 million kW of distributed PV.
For the first time, installed solar capacity exceeded coal-fired power capacity, making solar China’s largest power source by installed capacity. Coal-fired capacity stood at 1.285 billion kW.
The milestone is widely viewed as a significant step in China’s energy transition. Although coal-fired power generation is expected to continue playing a stabilizing role in the country’s power system in the near term, market participants expect future energy investment to become increasingly concentrated in power grids, energy storage facilities and renewable-energy equipment.
As a result, many industry participants believe the shift will create new demand for CRGO, a key material used in transformers.
Growth in installed PV capacity is no longer viewed as the primary challenge for China’s energy sector. Instead, the focus is shifting to how rising volumes of renewable electricity can be delivered efficiently to end users.
China’s PV installation landscape is characterized by large-scale solar farms in western regions, while distributed solar projects dominate capacity growth in central and eastern China.
According to NEA data, the five provinces with the largest cumulative grid-connected photovoltaic capacity by the end of June 2026 were Jiangsu, Shandong, Hebei, Xinjiang and Zhejiang.
Although energy-intensive industries and some new-energy manufacturing facilities are increasingly relocating to western China, electricity consumption remains concentrated in economically developed regions such as the Yangtze River Delta, the Pearl River Delta and the Beijing-Tianjin-Hebei region.
Because the regions with the largest PV generation capacity do not fully overlap with those exhibiting the highest electricity demand, China’s need for transmission and distribution infrastructure continues to increase.
At the same time, the intermittent nature of solar power generation is driving greater investment in energy-storage systems.
The NEA has outlined plans to add approximately 160 GW of new energy storage capacity during the 2026-2030 period, with the country’s total installed energy storage capacity expected to reach 300 GW by 2030, underscoring growing investment in grid modernization and renewable energy integration.
CRGO, which is widely used in transformers, therefore plays an important role in both grid expansion and the integration of energy-storage facilities.
Zhuo Chen, the expert with the China Iron & Steel Association estimated that China’s annual CRGO demand could increase to 4.37 million tonnes by 2030. According to the Chinese Society of Metals (CSM), the consumption of CRGO was 2.38 million tonnes in 2024.
Demand for high-magnetic-induction (Hi-B) CRGO is expected to grow faster than that for conventional grades because of increasing deployment of ultra-high-voltage (UHV) transmission networks, market participants said.
For example, Hi-B CRGO grades with thicknesses of 0.23 mm and iron loss of no more than 0.85 W/kg are more commonly used in the production of transformers for UHV transmission networks.
Despite the favorable long-term demand outlook, market participants remain cautious about CRGO market fundamentals due to concerns over capacity expansion and intensifying competition.
According to CSM, China’s CRGO production totaled 2.95 million tonnes in 2024, and capacity stood at 3.26 million tonnes.
Additional CRGO projects are scheduled to come on stream during the next few years, potentially increasing total capacity to around 4.2-5 million tonnes by the end of 2027, according to industry analysts.
“The increase in capacity is outpacing demand growth, which has placed considerable downward pressure on CRGO prices,” a trader in eastern China said.
Another trader based in central China said the benefits of PV-related investment are not being shared evenly across the downstream sector.
“Some major transformer producers have sufficient order books, while many smaller manufacturers are struggling to maintain operating rates,” the trader said.
Fastmarkets’ fortnightly price assessment for electrical steel, cold-rolled grain-oriented, ex-whs Eastern China was $1,548-1,608 per tonne on September 4, down from $1,636-1,725 per tonne on August 21.
Fastmarkets assessed the grade with a thickness of 0.23 mm and iron loss of 0.85 W/kg.
“Price competition is squeezing profit margins throughout the supply chain, which is not conducive to the healthy development of the CRGO industry,” the first trader added.
Industry analysts said some low-grade CRGO production capacity should eventually be phased out and warned that mills should remain cautious about adding new capacity, even in higher-grade segments.
While installed solar capacity continues to expand, some market participants believe the industry’s rapid growth phase may be slowing because of persistent oversupply and weak profitability.
Solar companies that cannot generate adequate profits are either reducing generation from existing power plants or suspending or scaling back unprofitable new projects, market sources said.
“If fewer new solar projects are developed in the future, growth in demand for transformers, transmission infrastructure and energy-storage systems may also moderate, limiting the pace of CRGO demand growth,” a market source said.
China will impose a 2% consumption tax on photovoltaic cells from April 1, 2027, with the rate increasing to 4% from April 1, 2028, ending a decade-long tax exemption for the sector.
In addition, three mandatory national standards covering energy-efficiency requirements for crystalline-silicon PV modules and inverters will take effect on January 1, 2027.
Industry participants expect the new tax policy and stricter efficiency requirements to accelerate the elimination of outdated and less-competitive production capacity. While this could improve the long-term health of the solar sector, it may also slow the pace of PV capacity additions, reducing the growth rate of demand for grid infrastructure, energy-storage systems and, consequently, CRGO products.
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