Friday, January 19, 2024

China's solar panel dominance must be tackled

The solar energy industry has gone from strength to strength over the last few years, one of the few bright spots in a difficult period for renewables, which is facing something of a backlash in many places. Solar accounted for three fifths of the new renewable energy capacity worldwide.

But, when I say the "solar energy industry", I really just mean the energy production side of things. The solar panel industry is dominated by just one country, China. Just a decade ago, China supplied 40% of the world's solar panels; today that share is over 80%. Hundreds of billions of dollars of Chinese investment over the last twenty years or so is paying handsome dividends now. Integrated supply chains, innovative techniques, and consistent government support have effectively left everyone else in the dust. 

China itself has four times the installed solar capacity of the next largest player, the USA. But it is its solar exports that are the most significant, increasing 34% year-on-year in 2023. More than half of Chinese solar power exports go to Europe. 

But it gets worse. At least a third to a half of the world's solar-grade polysilicon is produced in the Xinjiang Uyghur Autonomous Region. Many countries have rules against using Xinjiang-sourced products because of the repression and forced labour policies used there. But even solar panels imported from Vietnam, Thailand and Cambodia (which is where most US solar panels come from these days) use Chinese components, and the majority of the global production of solar modules can be traced back to the Uyghur region.

Furthermore, the majority of China's electricity is still coal-based, and specifically up to 77% of the electricity used in the Uyghur region is from coal, so that Chinese solar panel production creates about 30% more greenhouse gases than the equivalent panels produced in the USA, for example.

Chinese solar panels are about 20% cheaper than American-produced panels. This is significant, but perhaps not a deal-breaker, and it probably does not represent the difference between success and failure of the US solar industry. China has a huge head-start in the industry, but that does not have to continue, and policy decisions can make a big difference (the US Inflation Reduction Act, for example, is a great start in that direction, assuming it is not hamstrung by a Donald Trump election).

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