China unleashed the full power of its solar energy industry last year. Installed more solar panels than the United States in its history. It reduced the wholesale price of the panels it sells by almost half. And its exports of fully assembled solar panels increased by 38 percent, while its exports of key components almost doubled.
Prepare for an even greater demonstration of China’s solar energy dominance.
As the United States and Europe try to revive renewable energy production and help companies avoid bankruptcy, China is far ahead.
At the annual session of China’s legislature 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 parks, as well as wind and hydroelectric projects. .
With China’s economy faltering, increased spending on renewable energy, primarily solar, is the 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 goal is to help offset a sharp decline in China’s home construction sector. China hopes to harness emerging industries such as solar energy, which Xi likes to describe as “new productive forces,” to revitalize an economy that has slowed for more than a decade.
The emphasis on solar energy is the latest installment of a two-decade program to make China less dependent on energy imports.
China’s solar exports have already generated urgent responses. In the United States, the Biden administration has introduced subsidies that cover much of the cost of manufacturing solar panels and part of the much larger cost of installing them.
The alarm in Europe is particularly great. Officials are bitter that a dozen years ago China was subsidizing its factories to make solar panels, while European governments offered subsidies to buy panels made anywhere. That sparked an explosion of consumer purchases from China that hurt the European solar industry.
A wave of bankruptcies devastated 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 driven out by heavily subsidized Chinese competitors,” said Ursula von der Leyen, president of the European Commission, in her speech. State of the Union last September.
The remains of Europe’s solar industry are 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 February 23 that it would stop production in the first half of March at its factory in Freiberg, Germany, and that it would try to raise money to complete factories in Colorado and Arizona.
The company’s U.S. projects could take advantage of renewable energy manufacturing subsidies provided by President Biden’s Inflation Reduction Act.
China’s cost advantage is formidable. A European Commission research unit estimated in a January report that Chinese companies could make solar panels for between 16 and 18.9 cents per watt of generating capacity. By contrast, it costs European companies between 24.3 and 30 cents per watt, and American companies around 28 cents.
The difference partly reflects lower wages in China. Chinese cities have also provided land for solar panel factories at a fraction of market prices. State banks have provided large loans 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 economically.
Low electricity prices in China make a big difference.
Manufacturing the main raw material for solar panels, polysilicon, requires enormous amounts of energy. Solar panels typically must generate electricity for at least seven months to recover the electricity needed to manufacture them.
Coal provides two-thirds of China’s low-cost electricity. But Chinese companies are cutting costs even 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 produce more polysilicon.
By contrast, Europe has expensive electricity, particularly after it stopped buying natural gas from Russia during the Ukraine war. The land used in Europe for solar parks is expensive. In the American Southwest, environmental concerns have slowed the installation of solar farms, while zoning issues have blocked permits for the transmission of renewable energy.
China’s coal consumption has made it the world’s largest annual contributor to greenhouse gas emissions. But the country’s pioneering role in making solar panels less expensive has slowed the rise in emissions.
“If Chinese manufacturers hadn’t reduced the cost of panels by more than 95 percent, we wouldn’t be able to see so many installations around the world,” said Kevin Tu, a Beijing-based energy expert and nonresident fellow at the Center for Energy Policy. Peking University Global. Columbia University.
Annual solar panel installations have nearly 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 prohibits imports made with materials or components made through forced labor in Xinjiang, where China has repressed predominantly Muslim minorities such as the Uyghurs.
That has led the United States to block some shipments of solar panels from China, while the European Union has been considering similar action.
Increasingly, Chinese companies perform the high-value initial stages of solar panel manufacturing in China and then ship the components to overseas factories for final assembly. This allows shipments to avoid trade barriers, such as tariffs imposed on many Chinese imports by President Donald J. Trump. Several of China’s largest solar panel manufacturers 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 broad subsidies to revive the U.S. solar panel industry, which almost completely collapsed a decade ago in the face of low-cost imports from China. But building an industry that can sustain itself will be difficult.
China produces virtually all of the world’s equipment for manufacturing solar panels and nearly all of the supply of all solar panel components, from wafers to specialty glass.
“There’s technical know-how and it’s all in China,” said Ocean Yuan, CEO of Grape Solar, a Eugene, Oregon, company that works with Chinese solar companies that are setting up assembly operations in the United States. State.
That know-how used to be in the United States. As recently as 2010, Chinese solar panel producers relied primarily on imported equipment and faced long and costly delays if something broke.
“It took days or weeks to get spare parts and engineers,” said Frank Haugwitz, a longtime solar energy consultant specializing in the Chinese industry.
In 2010, Applied Materials, a Silicon Valley company, built two sprawling laboratories in Xi’an, the western Chinese city famous for its terracotta warriors. Each laboratory was the size of two football fields. They were intended to perform final tests for assembly lines with robots that could produce solar panels with virtually no human labor.
But within several years, Chinese companies figured out how to do it themselves. Applied Materials significantly reduced its production of solar panel tooling and focused on making similar equipment that makes semiconductors.
Today, anyone trying to manufacture solar panels outside of China faces potential delays in installing or repairing equipment.
As Europe mulls whether to follow the United States’ lead with its own subsidies and import restrictions on solar products, Haugwitz said: “It will continue to be a challenge for Europeans to compete.”
Joy Dong and Li you contributed to the research.
