Government and academic analysts say that cheaper labor in China is not the reason for Asian dominance in solar panels, but rather larger-scale manufacturing and resulting supply-chain benefits.
Echoing the government, these analysts say performance efficiencies, like innovations in crystalline solar cell technology, could equalize prices by enhancing access to materials and expanding manufacturing scale across all regions.
The National Renewable Energy Laboratory (NREL) and Massachusetts Institute of Technology (MIT) analysts drafted their own bottom-up cost model to try and examine the underlying causes for the dominance of photovoltaics in China rather than the US and Europe. The analysts attempted to adopt the perspective of a multi-national firm evaluating locations for a solar panel manufacturing facility in either the US or China. They predicted how the firm would decide by creating a metric for Minimum Sustainable Price (MSP) for monocrystalline silicon solar panels manufactured in each region. The MSP represents the minimum price at which a company can sell its products while providing an adequate return for the company.
Using industry-validated figures from the first half of 2012, they estimated an MSP of $1.19 per Watt for US solar panels, compared to $0.91 per Watt for Chinese solar panels, representing a price advantage of 23 percent for a China-based manufacturer. But when they examined country-specific factors for this price difference, they found that China's advantage of low-cost labor was balanced by other regional issues, and that the dominant reason behind its success is primarily the scale of solar panel manufacturing in the region, enabled by access to capital and a less restrictive business and regulatory environment.
Both of those were tried since 2009. American taxpayers spent $72 billion in renewable energy efforts over a four-year period, which was 140 times as much as investments annually before that. Alternative energy companies received almost no regulatory scrutiny and got subsidies but the efficiencies still never resulted. The authors of the new paper say that lack of American manufacturing and its cost benefits instead make the difference. But that is the cost of labor and regulations, it just isn't direct cost for solar companies. If suppliers can't be in the US because there can be no density of production or cost-benefit of using local suppliers due to regulations and labor, then a China-based manufacturer does still gain access to cheaper materials and machinery, along with labor. These scale and supply-chain advantages provide a China-based solar panel factory with a significant MSP advantage of $0.28 per Watt.
Al Goodrich, Senior Analyst at NREL and lead author of the study said, "These advantages, which are not indigenous to China, could be replicated by manufacturers based in other countries if comparable scale could be achieved. But for solar power, there's a chicken and egg problem: consistent demand is needed to provide manufacturers with access to the capital required to achieve large scale production, but large-scale production will be necessary for solar power to compete as an energy source without subsidies.
"Future innovations in silicon solar panels – which may be most quickly and effectively realized through global collaborative effort – have the potential to reduce key investment risks for manufacturers. This would enable manufacturing on an equivalent scale across most regions, bringing the benefits of high volume production to them all."
Professor Tonio Buonassisi, associate professor at MIT and co-author of the study added, "The 'holy grail' is a photovoltaic module that gives the biggest bang for its buck – with high efficiency, lower materials costs, streamlined and scalable manufacturing and unquestionable reliability. The photovoltaic modules you can buy today have a few of these attributes, but not all of them together.
"The glass industry between the 1880s and the 1950s underwent innovations that streamlined the process to one integrated tool, where you put feedstock in one end and get one product out at the other end. We envisage a similar evolution for solar panel manufacturing. Practical innovations in photovoltaic technologies will accelerate the convergence of solar power and traditional energy sources in the future, terms of both price and scale.
"This common goal, for the benefit nations across the world, is an opportunity for international cooperation that leverages our complementary strengths."
Quite true, American glass today is not a labor-cost issue, they use very little American labor. 45% of the world's glass is made in China.
Citation: Alan C. Goodrich, Douglas M. Powell, Ted L. James, Michael Woodhouse and Tonio Buonassisi, 'Assessing the drivers of regional trends in solar photovoltaic manufacturing', Energy Environ. Sci., 2013, DOI: 10.1039/C3EE40701B
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