BEIJING (BLOOMBERG) – China stepped up efforts to crack down on surging prices of solar materials, with high costs threatening to slow installations as the country accelerates its clean power build-out.

Three central government agencies asked the local authorities to “rigorously crack down” on illegal actions in the solar industry such as price gouging and monopolistic behaviour, according to a notice jointly issued by the Ministry of Industry and Information Technology, State Administration for Market Regulation, and National Energy Administration.

The price of polysilicon, a key solar material, has soared this year to the highest in more than a decade, pushing up panel prices and leading to some project cancellations and delays.

It is also hitting profit margins for some of the world’s biggest solar companies, which are all based in China.

Longi Green Energy Technology Co. said in an earnings report yesterday that margins fell to 17.6 per cent in the first half this year from 22.7 per cent a year earlier.

Polysilicon is selling for about US$39 (S$54) a kg, up from an all-time low near US$6 in June 2020. Companies have not been able to build new factories to produce the material fast enough to keep pace with strong global demand for solar panels amid aggressive government climate targets and soaring fossil fuel prices.

Industrial power curbs in China’s Sichuan province have also affected output this month.

The central government asked the local authorities to coordinate the speed of supply chain expansion to avoid bottlenecks, and strictly ban hoarding and profiteering.

The government also encourages companies across the supply chain to develop longer-term cooperation mechanisms to secure supply and stabilise market expectations.

Chinese firms produced 490,000 tonnes of polysilicon last year. New factories will increase annual capacity to 1 million tonnes by the end of this year, and more than 2 million tonnes by the end of 2023, according to the China Nonferrous Metals Industry Association.