By Carol Ryan
While everyone obsesses over what happens to oil flows in the Strait of Hormuz, a solar-power revolution is under way in some emerging countries.
Unfortunately, investors will struggle to make money from the trend because of China's suffocating dominance. But another side effect of the war could provide some breathing room: rising protectionism.
China's exports of solar components doubled from February to March, reaching a record-high 68 gigawatts of capacity. Fifty countries set all-time highs for Chinese solar imports in March, says clean-energy think tank Ember.
Some demand was driven by buyers who wanted to get ahead of price increases. From April, Chinese manufacturers will no longer be able to get a refund from the government for value-added taxes on exported solar components, and they are expected to raise prices as a result. But consumers and businesses in countries such as Malaysia, India, and Ethiopia, where the energy crunch is most severe, are switching to solar in growing numbers.
Nigeria's imports of Chinese solar panels rose 519% in March compared with February. Diesel prices have more than doubled since the war broke out, so Nigerian households have an incentive to scrap their diesel generators. The savings they make from substituting from diesel can pay for the roughly $60 cost of a 420-watt solar panel in three months, down from six months before the war, Ember analysis shows.
A similar boom happened after the 2022 energy crisis triggered by the Ukraine war. Solar went from generating around 3% of Pakistan's electricity in 2020 to 32% today, according to government data. The surge wasn't caused by national policy, but the individual decisions of hundreds of thousands of consumers and small businesses who swapped expensive-to-run diesel generators for rooftop solar panels. Defection to solar has been so fast and uncontrolled that Pakistan's energy utilities are struggling with falling sales.
But don't rush out to buy Chinese solar stocks. China's solar giants continue to lose money and their share prices are down since the start of the Iran war. Longi Green Energy Technology, a leading maker of solar wafers, cells and modules, lost the equivalent of $280 million in the first quarter, compared with a $210 million loss for the same period of 2025. Other top Chinese manufacturers, JinkoSolar and Trina Solar, were also loss-making in the quarter.
The problem is that China is producing twice as many solar components as the world needs. This flood of supply has pushed down prices, encouraging uptake of the technology but destroying profitability.
"No country may ever compete on price with China's vertically integrated solar firms," says Michael Davidson, associate professor in mechanical and aerospace engineering at University of California San Diego. "The global market will be dependent on trade barriers."
This creates a dilemma for countries rethinking their reliance on fossil fuel, following the second energy crisis in four years. Europe, for instance, wouldn't want to swap that reliance for one on Chinese solar imports. To produce more energy securely at home, it needs to protect domestic clean-energy companies from the flood of cheap Chinese equipment.
Earlier this month, the European Union said it would no longer fund any project that uses Chinese inverters, a critical component in solar power systems. Politicians are concerned that inverters could be controlled remotely, creating new vulnerabilities in the region's power system. Shares in German inverter maker SMA Solar Technology have risen 99% this year, although this is also because of strong demand from the U.S.
The U.S. has long used antidumping rules, tariffs and restricted access to federal subsidies to shield domestic solar-energy companies from Chinese competition. Unlike their Chinese rivals, U.S. solar stocks are up since the start of the war.
SolarEdge is a U.S.-listed solar-equipment maker based in Israel that has gained over 90% so far in 2026. California-based Enphase Energy, which also has a large residential solar business, has gained 55%. Both companies operate in Europe, where consumers are being squeezed by high gas prices and have an incentive to switch to solar power. "Investors remember what happened after the Ukraine war and are hoping that [Europe] will rebound," says Jeff Osborne, an analyst at TD Cowen.
By comparison, Sunrun, a residential solar-power company based in California, is down this year as it is completely reliant on the U.S. market. A tax credit for installing solar panels expired last year, which has damped enthusiasm for residential solar stocks -- although this is less of an issue for Sunrun's subscription-based model. But the company added fewer new customers in the first quarter than it did last year, and defaults on existing leases are ticking up.
Meanwhile, utility-scale companies like First Solar are seeing continued demand from the artificial-intelligence power build-out. Nextpower, which makes utility-scale solar trackers, has gained 55% this year.
Solar stocks have a patchy record with investors. A $100 bet on the Invesco Solar ETF in 2008 would be worth $34 today, hence solar energy's reputation as a profitless growth story.
That is a good description of what is happening right now in emerging markets. But trade barriers will make it more appealing to invest in solar elsewhere.
Write to Carol Ryan at carol.ryan@wsj.com
(END) Dow Jones Newswires
May 19, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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