Debate about the world’s dependence on the Chinese solar manufacturing industry has been constant over two decades and particularly intense since the nation’s supremacy was confirmed before the onset of the 2008 global financial crisis.
Despite years of trade wars, anti-dumping measures and retaliations, the Chinese PV industry is at its apogee while European manufacturers struggle to survive despite talk of a revival and their U.S. counterparts have been only partially revived thanks to President Trump’s protectionism. India has thus far failed to live up to its promise of becoming a solar manufacturing superpower and South Korea, Taiwan and Japan have seen their module and cell makers cede ever more ground to the Chinese giants in recent years.
The disruption caused by Covid-19 on Chinese manufacturing prompted arguably the first jolt on the global solar supply chain, with the resulting shortage of PV components compounding virus containment measures around the world to disrupt the industry.
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With governments grappling with the spread of the novel coronavirus as the global death toll mounts, questions such as whether the world should rely on one nation for such a strategically important industry have been shelved for now.
However, an Asian Development Bank (ADB) representative recently returned to the issue. Yongping Zhai, chief of the energy sector group in the sustainable development and climate change department of the multilateral lender, wrote in his blog: “Ever since the epidemic started, many solar PV developers in Asia and other parts of the world have experienced protracted delays in importing solar PV modules and other supplies. The global solar PV value chain is particularly affected because manufacturing capacity is concentrated.”
Asian diversification
The ADB commentator suggested developing countries in the Asia-Pacific region should consider developing PV manufacturing capacity and engaging with the solar value chain to become less dependent on foreign countries when it comes to the energy transition.
“Solar energy is a natural resource in every country,” Zhai wrote. “However, if solar PV equipment and parts have to be sourced abroad, the energy transition of these countries will be incomplete.”
Such a development might even benefit Chinese manufacturers grappling with surplus production, rising labor costs and global tensions related to trade imbalances, according to the ADB blogger. “The People’s Republic of China, with about 150 GW of solar manufacturing capacity – an amount that is more than the current global demand – has already started to relocate some of this capacity in neighboring countries such as Vietnam and India,” Zhai wrote.
Local solar industries could be developed even for countries with a limited market, if regional neighbors band together, according to Zhai. “These options include forming a joint venture among neighboring countries that will put up sub-regional manufacturing hubs,” said the ADB representative.
No threat to China
Far from aiming to challenge Chinese solar supremacy, Zhai appeared to be hinting at building bridges between the nation and its regional neighbors, and pointed out such geographical diversity might mitigate the harmful effects of future catastrophic occurrences such as the Covid-19 epidemic ravaging the world at present.
Should nations outside China welcome the idea of developing domestic solar markets, added Zhai, the ADB would be ready to lend a hand. “[The] ADB can expand its support to members to play an active role in the solar PV value chain to build manufacturing capacity and human resources,” he wrote.
Covid-19
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Dependence on China? Can’t be – or is it rather that we cannot build those panels quite as cheaply as China does? But why is China able to do what others can’t. Well, if you are OK with destroying your own country to sell a bit cheaper to the world, you pay through the suffering of your people and the rest of the world. Every time someone in China breathes the horrible air in Bejing or other big cities they pay. Pay with every breath. Every time babies are deformed for stuff in the water that does not belong there they pay. And another reason for lower prices is that China is a predator that dumps on the market to destroy all competition in order to rule the roost. This stuff is not as cheap as you liked to believe. And you will out now.
Both Germany and China have embraced globalization and the free trade in goods and services. This has led to a global division of labor, where Germany has focused on high-end products such as production equipment and cars and China on products which are closer to commodities, including solar panels. This served both countries very well but might prove a challenge as multilateralism and the notion of free global trade are being questioned. While Germany scaled up its machinery and car production, China did likewise with solar panels. As we know very well in the global PV industry, economies of scale matter a great deal in this business. China’s innovation on the PV technology front should also not be underestimated and this capability has been boosted not only by scaling up the supply side, but by creating a PV installation market that continues to be the largest by far globally (30.11 GW installed last year compared to just under 4 GW in Germany). Both countries are going through an “Energiewende”, or energy transition, but in China’s case the dimensions of this transformation are staggering with just the power generation capacity in China amounting to around 2,010 GW. It will take time for a country of this size to wean itself from dirty coal but looking at its leading cities, such as Beijing, one can already see major improvements with more “blue sky” days than just a few years ago. This is not to say that all is good and that there is a level playing field when it comes to producing modules in China, versus Europe. But it’s a multifaceted picture and at pv magazine we try to report on these various facets, including the good, bad and the ugly.
pv magazine publisher Eckhart Gouras