Polysilicon energy standard issued: Aging capacity faces closure or transition amid limited phaseout

Standard officially released, with requirements further tightened from the draft for comments

The standards—the Norm of Energy Consumption per Unit Products of Polysilicon and Germanium and the Norm of Energy Consumption per Unit Products of Monocrystalline Silicon—whose drafts were released for public comment last September, were officially issued on June 27, with the final texts made publicly available in July. They are scheduled to take effect on January 1, 2027, following a six-month compliance rectification period. The industry can therefore anticipate the timeline for capacity phase-outs accordingly and assess subsequent strategies in advance.

The compliance requirements are clearly defined: existing production lines must meet at least Grade 3 energy-consumption standards, while new, expanded, and retrofitted projects must meet Grade 2 standards. A comparison between the draft and the final document shows that gthe minimum requirements for existing capacity (Grade 3 limits) have been tightened for both technology routes—the limit for the trichlorosilane process was lowered from 6.4 to 6.3 kgce/kg, while that for the silane fluidized-bed process was significantly tightened from 5.0 to 4.6 kgce/kg, indicating stronger-than-expected policy determination.


 

Threshold lands precisely at the critical margin for some rod-polysilicon production lines, but the capacity actually facing shutdown may fall short of the market’s initial expectations

For granular polysilicon (silane fluidized-bed process), the comprehensive energy consumption of existing producers generally ranges from 3.7-4.2 kgce/kg, corresponding to benchmarks between Grades 2 and 3. Under the Grade 3 limit, most existing granular polysilicon capacity is compliant.

For chunk polysilicon (trichlorosilane process), InfoLink estimates that, after excluding idle capacity, current annualized effective operating capacity stands at approximately 1.693 million MT. Based on the industry average that comprehensive electricity consumption accounts for around 90% of comprehensive energy consumption, most facilities operated by leading producers have reduced comprehensive electricity consumption to 48–50 kWh/kg. At some leading production bases, electricity consumption during the reduction stage has fallen to 47 kWh/kg, while waste-heat utilization rates have risen above 80%, bringing comprehensive energy consumption within the Grade 3 limit, with some facilities even meeting the Grade 2 limit. According to InfoLink’s facility-by-facility assessment, approximately 60% of operating capacity, or 1.01 million MT, would already meet the Grade 3 limit without further upgrades, while the remaining roughly 40%, or 683,000 MT, is estimated to sit near the threshold. Producers are working to reduce energy consumption per unit of output by raising capacity utilization rates, improving waste-heat recovery, and optimizing the operation of distillation and reduction systems.

More importantly, the new energy consumption standard is intended to make it difficult for idled, outdated, and chronically uneconomic capacity to re-enter the market, rather than forcing large volumes of mainstream operating capacity to shut down in the near term.
 

Limited economic viability for retrofitting

Retrofit costs vary significantly among producers, depending on the scope of equipment upgrades required. For newer production lines, if improvements are limited to process control, higher waste heat utilization, reduced steam losses, or adjustments to comprehensive electricity consumption after stable full-capacity operation is achieved, the required investment is relatively limited and mainly involves equipment optimization and operational adjustments. However, for older rod polysilicon production bases, upgrades involving reduction furnaces, distillation columns, cold hydrogenation systems, and tail-gas recovery units can often require investments exceeding RMB 100 million, making rectification difficult to complete with only tens of millions of RMB.

Given current polysilicon prices hovering at low levels of RMB 31–33/kg and low capacity-utilization rates, most producers are under cash flow pressure. Investing more than RMB 100 million to retrofit an old production line that already lacks cost competitiveness would therefore be difficult to justify economically. As a result, uneconomic older production bases are highly likely to be shut down outright or repurposed, with conversion to silane gas production representing one possible pathway. At present, some older production lines appear likely to be retired, mainly because several production bases have already long remained idle. However, developments at some production lines commissioned in recent years still warrants attention, particularly whether Qiya and Baofeng intend to resume production. Whether any such restart will ultimately materialize remains uncertain.
 

Energy consumption standard provides a tool for capacity phase-out, but market improvement still requires proactive supply-side cooperation

Overall, the greatest significance of the new energy consumption standard lies in establishing a practical mechanism to eliminate idle and outdated capacity and prevent its restart. It also accelerates phase-out decisions for aging, energy-intensive production lines through the economics of required retrofit, while further strengthening the competitive advantages of granular polysilicon and next-generation, low-energy-consumption rod polysilicon production lines.

However, in terms of actual operating capacity, the volume that could be effectively shut down is relatively limited, and the standard’s overall impact on capacity elimination remains modest. Supply contraction will therefore continue to depend primarily on producers voluntarily controlling output. In the near term, the standard’s impact on the market will be reflected more in preventing outdated capacity from restarting, raising the entry threshold for new capacity, and prompting producers to reassess and dispose of assets at aging production bases.

Whether polysilicon supply-demand fundamentals can materially improve will ultimately depend on whether producers proactively control output, retire uneconomic older capacity, and continue to reduce inventories. The energy consumption standard is a policy tool to accelerate capacity differentiation and phase-outs, but it is insufficient on its own to drive a reversal in polysilicon prices. A return to market stability will still require supply-side discipline across the industry together with genuine demand.