https://www.straitstimes.com/business/how-china-came-to-dominate-the-world-in-solar-energy
2024-03-10
BEIJING – China unleashed the full might of its solar energy industry in 2023. It installed more solar panels than the United States has in its history. It cut the wholesale price of panels it sells by nearly half. And its exports of fully assembled solar panels climbed 38 per cent, while its exports of key components almost doubled.
Get ready for an even bigger display of China’s solar energy dominance.
While the US and Europe are trying to revive renewable energy production and help companies fend off bankruptcy, China is racing far ahead.
At the annual session of China’s legislature earlier in March, Premier Li Qiang, the country’s second-highest official after President Xi Jinping, announced that the country would accelerate the construction of solar panel farms, as well as wind and hydroelectric projects.
With China’s economy stumbling, the ramped-up spending on renewable energy, mainly solar, is a cornerstone of a big bet on emerging technologies.
China’s leaders say that a “new trio” of industries – solar panels, electric cars and lithium batteries – has replaced an “old trio” of clothing, furniture and appliances.
The goal is to help offset a steep slump in China’s housing construction sector. China hopes to harness emerging industries like solar power, which Mr Xi likes to describe as “new productive forces”, to re-energise an economy that has slowed for more than a decade.
The emphasis on solar power is the latest instalment in a two-decade programme to make China less dependent on energy imports.
China’s solar exports have already drawn urgent responses.
In the US, the Biden administration has introduced subsidies that cover much of the cost of making solar panels and part of the much higher cost of installing them.
The alarm in Europe is particularly great.
Officials are bitter that, a dozen years ago, China subsidised its factories to make solar panels, while European governments offered subsidies to buy panels made anywhere.
That led to an explosion of consumer purchases from China that hurt Europe’s solar industry.
A wave of bankruptcies swept the 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 businesses were pushed out by heavily subsidised Chinese competitors,” Dr Ursula von der Leyen, president of the European Commission, said in her State of the Union address in September 2023.
The remnants of Europe’s solar industry are now fading away.
Norwegian Crystals, an important European producer of raw materials for solar panels, filed for bankruptcy in 2023.
Meyer Burger, a Swiss company, announced on Feb 23 that it would halt production in the first half of March at its factory in Freiberg, Germany, and would try to raise money to complete factories in Colorado and Arizona.
The company’s US projects could tap renewable energy manufacturing subsidies provided by US President Joe Biden’s Inflation Reduction Act.
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China’s cost advantage is formidable. A research unit of the European Commission calculated in a report in January that Chinese companies could make solar panels for 16 US cents (21 Singapore cents) to 18.9 US cents per watt of generating capacity.
By contrast, it cost European companies 24.3 US cents to 30 US cents per watt, and US companies about 28 US 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-owned banks have lent heavily at low interest rates, even though solar companies have lost money and some have gone bankrupt. And Chinese companies have figured out how to build and equip factories inexpensively.
Low electricity prices in China make a big difference.
Manufacturing the main raw material for solar panels, polysilicon, requires huge amounts of energy.
Solar panels typically must generate electricity for at least seven months to recoup the electricity needed to make them.
Coal provides two-thirds of China’s electricity at low cost.
But Chinese companies are reducing 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.
By contrast, Europe has costly electricity, particularly after it stopped buying natural gas from Russia during the Ukraine war.
Land used in Europe for solar farms is expensive. In the south-western US, 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 increase in emissions.
“If the Chinese manufacturers had not brought down the cost of panels by more than 95 per cent, we could not see so many installations across the world,” said Mr Kevin Tu, a Beijing energy expert and non-resident fellow with the Centre on Global Energy Policy at Columbia University.
Annual solar panel installations have nearly quadrupled worldwide since 2018.
Some of the new solar farms generating electricity for polysilicon production are in two provinces in south-western China, Qinghai and Yunnan. But much of the polysilicon is made in the Xinjiang region of north-western China.
The US bans imports made with materials or components manufactured by forced labour in Xinjiang, where China has allegedly repressed predominantly Muslim minorities like the Uighurs.
That has led the US to block some shipments of solar panels from China, while the European Union has been considering similar action.
Chinese companies increasingly carry out the initial, high-value stages of solar panel manufacturing in China, and then ship the components to overseas factories for final assembly.
This allows the shipments to avoid trade barriers, like tariffs imposed on many Chinese imports by former US president Donald Trump.
Several of China’s biggest solar panel manufacturers are building final assembly plants in the US to tap subsidies offered as part of the Inflation Reduction Act.
The law includes extensive subsidies to revive the US 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 stand on its own will be difficult.
China produces practically all of the world’s equipment for making solar panels, and almost all of the supply of every component of solar panels, from wafers to special glass.
“There is know-how to it, and it’s all in China,” said Mr Ocean Yuan, the chief executive of Grape Solar, a company in Eugene, Oregon, that works with Chinese solar companies that are setting up assembly operations in the US.
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That know-how used to be in the US. As recently as 2010, Chinese producers of solar panels relied mainly on imported equipment, and faced long and costly delays if anything broke down.
“It took days or weeks to get replacement parts and engineers,” said Mr Frank Haugwitz, a long-time solar energy consultant specialising in the Chinese industry.
In 2010, Applied Materials, a Silicon Valley company, built two extensive labs in Xi’an, the city in western China famous for terracotta warriors.
Each lab was the size of two football fields. They were intended to do final testing for assembly lines with robots that could churn out solar panels with practically no human labour.
But within several years, Chinese companies had figured out how to do it themselves. Applied Materials considerably cut back its production of solar panel tooling and focused on making similar equipment that makes semiconductors.
Today, anyone who tries to make solar panels outside China faces potential delays in installing or fixing equipment.
While Europe is mulling over whether to follow the US’ example with its own subsidies and import restrictions on solar products, Mr Haugwitz said: “It will remain a challenge for Europeans to compete.” NYTIMES
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