How China came to dominate the world in solar energy
China unleashed the full might of its solar industry last year. It installed more solar panels than the United States has in its history. It cut the wholesale price of the panels it sells by almost half. And exports of fully assembled solar panels increased by 38 percent, while exports of key components almost doubled.
Get ready for an even bigger demonstration of China’s dominance in solar energy.
While the United States and Europe are trying to revive renewable energy production and help companies stave off bankruptcy, China is racing far ahead.
At the annual session of China’s parliament this week, Premier Li Qiang, the country’s second-highest official after Xi Jinping, announced that the country would accelerate the construction of solar panel farms and wind and hydropower projects.
As China’s economy stumbles, ramped-up spending on renewable energy, especially solar, is a cornerstone of a big bet on emerging technologies. China’s leaders say a “new trio” of industries – solar panels, electric cars and lithium batteries – have replaced an “old trio” of clothing, furniture and appliances.
The aim is to help offset a steep slump in China’s housing sector. China hopes to leverage emerging industries such as solar energy, which Mr Xi is keen to describe as “new productive forces”, to revive an economy that has slowed for more than a decade.
The emphasis on solar energy is the latest step in a two-decade program to make China less dependent on energy imports.
China’s solar exports have already sparked urgent responses. In the United States, the Biden administration has introduced subsidies that cover much of the cost of making solar panels and some of the much higher costs of installing them.
There is a great sense of alarm, especially in Europe. Officials are bitter that a decade ago China subsidized its factories to make solar panels, while European governments offered subsidies to buy panels produced everywhere. That led to an explosion in consumer purchases from China, which hurt the European solar industry.
A wave of bankruptcies swept across European industry, leaving the continent largely dependent on Chinese products.
“We have not forgotten how China’s unfair trade practices affected our solar industry – many young companies were displaced by heavily subsidized Chinese competitors,” European Commission President Ursula von der Leyen said in her report. State of the Union address last September.
The remnants of Europe’s solar industry are now fading. Norwegian Crystals, a major European producer of raw materials for solar panels, filed for bankruptcy last summer. Meyer Burger, a Swiss company, announced on Feb. 23 that it would halt production at its factory in Freiburg, Germany, in the first half of March and try to raise money to complete plants in Colorado and Arizona.
The company’s U.S. projects could benefit from subsidies for renewable energy production provided by President Biden’s Inflation Reduction Act.
China’s cost advantage is formidable. A research unit of the European Commission calculated in a report in January that Chinese companies can make solar panels for 16 to 18.9 cents per watt of generating capacity. In contrast, it cost European companies 24.3 to 30 cents per watt, and American companies about 28 cents.
The difference partly reflects lower wages in China. Chinese cities have also provided land for solar panel factories at a fraction of the market price. State banks have borrowed heavily at low interest rates, even as solar companies have lost money and some have gone bankrupt. And Chinese companies have figured out how to build and equip factories cheaply.
The low electricity prices in China make a big difference.
The production of the most important raw material for solar panels, polysilicon, requires enormous amounts of energy. Solar panels typically need to generate electricity for at least seven months to recoup the electricity needed to make them.
Coal supplies two-thirds of China’s electricity at a low cost. But Chinese companies are cutting costs further by installing solar farms in the deserts of western China, where public land is essentially free. Companies then use the electricity from those farms to make more polysilicon.
Europe, on the other hand, has precious electricity, especially after the country stopped buying natural gas from Russia during the war in Ukraine. Land used for solar parks in Europe is expensive. In the southwestern United States, environmental concerns have slowed the installation of solar farms, while zoning issues have blocked permits for renewable energy transmission.
China’s coal consumption has made it the largest annual contributor to greenhouse gas emissions in the world. But the country’s pioneering role in making solar panels cheaper has slowed the increase in emissions.
“If Chinese manufacturers hadn’t reduced the cost of panels by more than 95 percent, we wouldn’t be seeing as many installations around the world,” said Kevin Tu, a Beijing-based energy expert and nonresident fellow at the Center on Global Energy Policy from the Center on Global Energy Policy. Columbia University.
Annual installation of solar panels has almost quadrupled worldwide since 2018.
Some of the new solar farms generating electricity for polysilicon production are located in two provinces in southwestern China, Qinghai and Yunnan. But much of the polysilicon is made in the Xinjiang region of northwest China. The United States bans the import of materials or components made by forced labor in Xinjiang, where China has oppressed predominantly Muslim minorities such as the Uighurs.
That has led to the United States blocking some solar panel shipments from China, while the European Union is considering similar measures.
Chinese companies are increasingly doing the initial, high-quality stages of solar panel production in China, then shipping the components to overseas factories for final assembly. This allows the shipments to avoid trade barriers, such as tariffs that President Donald J. Trump has imposed on many Chinese imports. Several of China’s largest solar panel makers are building final assembly plants in the United States to take advantage of subsidies offered as part of the Inflation Reduction Act.
The law includes expanded subsidies to revive the U.S. solar panel industry, which nearly collapsed a decade ago due to cheap imports from China. But it will be difficult to build an industry that can stand on its own.
China produces virtually all the world’s equipment for making solar panels, and almost the entire range of every solar panel component, from wafers to specialty glass.
“There is know-how for it, and it’s all in China,” says Ocean Yuan, the CEO of Grape Solar, a company in Eugene, Oregon, that works with Chinese solar companies setting up assembly operations in the United States. States.
That knowledge used to be in the United States. As recently as 2010, Chinese solar panel manufacturers relied primarily on imported equipment and faced long and costly delays when something broke.
“It took days or weeks to get replacement parts and technicians,” said Frank Haugwitz, a longtime solar consultant specializing in the Chinese industry.
In 2010, Applied Materials, a Silicon Valley company, built two extensive laboratories in Xi’an, the western Chinese city known for its terracotta warriors. Each laboratory was the size of two football fields. They were intended to conduct final tests for robot assembly lines that could produce solar panels with virtually no human labor.
But within a few years, Chinese companies had figured out how to do it themselves. Applied Materials has significantly scaled back production of solar panel tools and focused on making similar equipment that makes semiconductors.
Today, anyone trying to make solar panels outside of China faces potential delays in installing or repairing equipment.
As Europe ponders whether to follow the United States’ lead with its own subsidies and import restrictions on solar energy products, Mr Haugwitz said: “It will remain a challenge for Europeans to compete.”
Joy Dong And Li you research contributed.