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Clean Power

Production Scale (Not Cheap Labour) Gives China Solar Advantage

Originally published on the US Department of Energy Website

Production scale, not lower labor costs, drives China’s current advantage in manufacturing photovoltaic (PV) solar energy systems, according to a new report released on September 5 by the Energy Department’s National Renewable Energy Laboratory (NREL) and the Massachusetts Institute of Technology (MIT). Although the prevailing belief is that low labor costs and direct government subsidies for PV manufacturing in China account for that country’s dominance in PV manufacturing, the NREL/MIT study shows that a majority of the region’s competitive advantage comes from production scale—enabled, in part, through preferred access to capital (indirect government subsidies) —and resulting supply-chain benefits. The study’s findings suggest that the current advantages of China-based manufacturers could be reproduced in the United States.

Perovo Solar Farm

Chinese solar modules at Perovo Solar Park
Image Credit: Zachary Shahan / CleanTechnica (CC BY-SA license)

 

“Assessing the Drivers of Regional Trends in Solar Photovoltaic Manufacturing,” co-authored by NREL and MIT, and funded by the Energy Department through its Clean Energy Manufacturing Initiative, was published in the peer-reviewed journal Energy & Environmental Science. By developing manufacturing cost models, the team of researchers examined the underlying causes for shifts from a global network of manufactures to a production base that is now largely based in China. The study shows that China’s historical advantage in low-cost manufacturing is mainly due to advantages of production scale, and is offset by other country-specific factors, such as investment risk and inflation. The authors also found that technology innovation and global supply-chain development could enable increased manufacturing scale around the world, resulting in broader, subsidy-free PV deployment and the potential for manufacturing price parity in most regions.

See the Energy Department Progress Alert and the complete reportPDF.

 
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