How China Made Solar Energy Cheap?
Like most countries, China has worked on solar cell technology since the 50s. China’s first solar cell was a single-phase solar cell. By 1971, China was putting its own indigenously developed solar cells on its space satellites. In the 80s, the government acquired a few companies and research institutes, but still develop slowly.
Starting in 1991, the German government began promoting a subsidy scheme emphasizing renewable energy sources. In this new “feed-in-tariff” system, anyone generating electricity from solar, wind, or hydro would get a guaranteed payment of up to 4 times the market rate for twenty years. This led to strong new demand for solar energy from European utilities. The leading German company would be Q-cells, founded at the end of 1999, the company began producing solar cells in 2001 with just 19 employees. Just eight months later, their first plant broke even with 17.3 million euros in sales. The company quickly scaled up and in 2004 was selling about 75 megawatts of solar cells. Q-cells was the European leader in the solar industry. Their solar cells were proudly made right in Germany.
In China, a new industry began to take its first steps towards global dominance. First, let’s talk about the development process of the solar industry. Companies that make and purify the silicon into the super-pure type suitable for solar cells – a form called polysilicon. Companies that cut the polysilicon into ingots and produce cells. And then companies that turn those cells into solar modules for usage. There also are companies that produce the other parts of the solar installation such as the mounting equipment, cables or wiring, and the inverter. By being the company that installs and uses solar installation, you’ll make more money. If you want to bring a competing product into the market and make a splash, you do not need much more than to cough up the capital to buy and install the manufacturing equipment.
At first, Chinese companies are just going ahead and buying the most advanced solar cell manufacturing equipment available. Most of it is from Germany. And Chinese workers’ cheap salaries gave those Companies a real price advantage, in some cases as high as 20%. In 1999, renewable energy technologies were included as one of the Chinese government’s key fields of emphasis. At the end of 2001, China entered the World Trade Organization and turbocharged its export machine. China brings its solar industry to the leading edge since then. Chinese solar products were quite competitive because we bought the best manufacturing equipment. Chinese companies were able to offer solar panels in line with the best in the market. China’s lower production costs and increased productive competitiveness won the overall solar cell market. And Chinese solar companies began localizing solar cell manufacturing equipment. Local equipment held a strong cost advantage up to a third of what it cost to import equipment from abroad and eventually performed better. So Chinese solar panels have a price advantage.
The fact that Chinese companies could buy advanced German equipment to first produce solar cells, The threat from climate change is global. It affects everyone. Solar and other renewable are part of the solution. The technical progression in solar technology from the Chinese and the rest of the world has helped make it that way.
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