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Determinants of overcapacity in China’s renewable energy industry: Evidence from wind, photovoltaic, and biomass energy enterprises

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  • Yu, Shiwei
  • Lu, Tingwei
  • Hu, Xing
  • Liu, Lancui
  • Wei, Yi-Ming

Abstract

This study uses data on 116 listed Chinese equipment manufacturing or material production enterprises in the non-hydropower renewable energy industries (i.e., wind, photovoltaic (PV), and biomass energy) to explore the determinants of overcapacity in the renewable energy industry. A data envelopment analysis model is applied to measure the overcapacity of these enterprises. Relevant data from 2008 to 2016 are regressed using a panel Tobit model with a bootstrap method and accordingly, the mechanism of overcapacity formation is identified from the perspectives of enterprises' profitability level, government subsidy, and the domestic and foreign market structures. The results show that overcapacity differs among China's non-hydropower renewable energy industries—it is the most serious in the PV industry, followed by the wind and biomass industries. Enterprise profitability, government subsidy, and market structure all significantly impact the overcapacity of the PV industry. Further, the increase in the number of policies will aggravate the overcapacity of the PV industry, but an increase in coordination degree of renewable energy industrial policies and financial support could mitigate it. Excessive government subsidy and the unbalanced market structure at home and abroad are the main reasons for the overcapacity in the wind and biomass industries, respectively. To reduce overcapacity, subsidy standards and thresholds for entering and exiting industries should be rigidly controlled by the government. In addition, PV enterprises should focus on improving enterprises' return on assets and pay more attention to domestic market demand, while biomass enterprises should actively explore overseas markets. Finally, more attention should be paid to the policies' synergy of the photovoltaic industry and its related industrial rather than the number of policies.

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  • Yu, Shiwei & Lu, Tingwei & Hu, Xing & Liu, Lancui & Wei, Yi-Ming, 2021. "Determinants of overcapacity in China’s renewable energy industry: Evidence from wind, photovoltaic, and biomass energy enterprises," Energy Economics, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:eneeco:v:97:y:2021:i:c:s0140988320303960
    DOI: 10.1016/j.eneco.2020.105056
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    8. Wang, Xiaolei & Deng, Renxin & Yang, Yufang, 2023. "The spatiotemporal effect of factor price distortion on capacity utilization in China’s iron and steel industry," Resources Policy, Elsevier, vol. 86(PA).
    9. Luo, Jiahui & Dong, Jingrong & Tan, Zhixiong & Zhang, Haitao & Zhang, Wenqing, 2024. "Relatedness, digital economy and renewable energy product evolution—based on product space perspective," Energy Policy, Elsevier, vol. 186(C).
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    11. Wang, Zhan-ao & Zheng, Chengsi, 2022. "Is technological innovation the cure for overcapacity? Exploring mediating and moderating mechanisms," Journal of Business Research, Elsevier, vol. 147(C), pages 348-361.
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    16. Qing Guo & Wenlan You, 2023. "Evaluating the International Competitiveness of RCEP Countries’ Biomass Products in the Context of the New Development Paradigm," Sustainability, MDPI, vol. 15(5), pages 1-27, February.

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    More about this item

    Keywords

    Overcapacity; Renewable energy industry; Tobit model; Market supply and demand structure; Subsidy;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • L0 - Industrial Organization - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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