China unleashed the full force of its solar energy industry last year. It has installed more solar panels than the United States in its history. It cuts the wholesale price of the panels it sells by almost half. And its exports of fully assembled solar panels climbed 38 percent while its exports of major components nearly doubled.
Get ready for an even bigger display of China’s solar energy dominance.
As the United States and Europe try to revive renewable energy production and help companies stave off bankruptcy, China is leading the way.
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 speed up the construction of solar panel farms as well as wind and hydroelectric projects.
With China’s economy in decline, ramped-up spending on renewable energy, mainly solar, is a cornerstone of a big bet on emerging technologies. Chinese leaders say a “new trio” of industries — solar panels, electric vehicles 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 construction sector. China hopes to tap emerging industries such as solar power, which Mr. Xi as “new productive forces,” to reinvigorate an economy that has slowed for more than a decade.
The emphasis on solar power is the latest installment in a two-decade program to make China less dependent on energy imports.
China’s solar exports have already drawn immediate responses. In the United States, the Biden administration introduced subsidies that cover the large cost of manufacturing solar panels and part of the higher cost of installing them.
The alarm in Europe was very good. Officials are bitter that a dozen years ago, China subsidized its factories to make solar panels while European governments offered subsidies to buy panels made even where. That led to an explosion of consumer purchases from China that hurt Europe’s solar industry.
A wave of bankruptcies swept through European industry, leaving the continent increasingly dependent on Chinese products.
“We have not forgotten how China’s unfair trade practices have affected our solar industry – many young businesses have been pushed out by heavily subsidized Chinese competitors,” said Ursula von der Leyen, president of European Commission, to him. State of the Union Address last September.
The remnants of Europe’s solar industry are now disappearing. Norwegian Crystals, an important European producer of raw materials for solar panels, filed for bankruptcy last summer. Meyer Burger, a Swiss company, announced on Feb. 23 that it will stop production in the first half of March at its factory in Freiberg, Germany, and try to raise money to complete factories in Colorado and Arizona.
The company’s projects in the US could tap renewable energy manufacturing subsidies provided by President Biden’s Inflation Reduction Act.
China’s cost advantage is formidable. A European Commission research unit calculated in a January report that Chinese companies could produce solar panels for 16 to 18.9 cents per watt of generating capacity. In contrast, it costs 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 market prices. State-owned banks lent heavily at low interest rates even as solar companies lost money and some went bankrupt. And Chinese companies figured out how to build and supply factories cheaply.
China’s low electricity prices make a big difference.
The production of the main raw material for solar panels, polysilicon, requires a large amount of energy. Solar panels typically must produce 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 lowering costs even further by installing solar farms in the deserts of western China, where public land is free. Companies then use the electricity from those fields to make more polysilicon.
In contrast, Europe has expensive electricity, especially after it stopped buying natural gas from Russia during the war in Ukraine. Land used in Europe for solar farms is expensive. In the Southwestern United States, environmental concerns have slowed the installation of solar farms, while zoning issues have blocked permits for the delivery of renewable energy.
China’s coal consumption has made it the world’s largest annual contributor to greenhouse gas emissions. But the country’s key role in making solar panels cheaper has slowed the rise in emissions.
“If Chinese manufacturers hadn’t lowered the cost of the panels by more than 95 percent, we wouldn’t have seen so many installations around the world,” said Kevin Tu, a Beijing energy expert and non-resident associate at Center 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 southwestern Chinese provinces, Qinghai and Yunnan. But most of the polysilicon is produced in the Xinjiang region of northwest China. The United States bans imports made with materials or components produced by forced labor in Xinjiang, where China has suppressed mostly Muslim minorities such as the Uyghurs.
That led the United States to block some shipments of solar panels from China, while the European Union is considering similar action.
Chinese companies increasingly do the initial, high-cost 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. Some of China’s largest solar panel manufacturers are building final assembly plants in the United States to tap subsidies offered as part of the Inflation Reduction Act.
The law includes extensive subsidies to revive the American solar panel industry, which nearly collapsed a decade ago in the face of cheap imports from China. But building an industry that can stand on its own will be difficult.
China manufactures most of the world’s equipment for making solar panels, and supplies almost all of the components of solar panels, from wafers to special glass.
“Someone knows how to do it, and it’s all in China,” said Ocean Yuan, the chief executive of Grape Solar, a company in Eugene, Ore., that works with Chinese solar companies to set up operations. meeting in the United States.
That knowledge used to be in the United States. As recently as 2010, Chinese solar panel producers relied mainly on imported equipment, and faced long and costly delays if something broke.
“It took days or weeks to get replacement parts and engineers,” said Frank Haugwitz, a longtime solar energy consultant who specializes in the Chinese industry.
In 2010, Applied Materials, a Silicon Valley company, built two sprawling labs in Xi’an, the western Chinese city famous for its terra-cotta warriors. Each lab is the size of two football fields. They aim to make the final test for assembly lines with robots that can make solar panels with almost no human labor.
But for several years, Chinese companies have figured out how to do it. Applied Materials has greatly reduced its production of solar panel tooling and focused on making similar equipment that makes semiconductors.
Now anyone trying to manufacture solar panels outside of China faces potential delays in installing or repairing the equipment.
As Europe considers whether to follow the United States’ example with its own subsidies and import restrictions on solar products, Mr. Haugwitz said, “It will remain a challenge for the Europeans to compete.”
Joy Dong and Li You contributed research.
