Ch8: The Long Story of China's Global Solar Dominance

Shine a spotlight on the global solar energy stage, and one star burns brightest: China.

75% of the world's solar panels? Made in China. Over 80% of the global manufacturing capacity? Again Chinese.

This isn't a gradual ascent. It's a lightning strike, transforming China into the undisputed Solar Sultan, bathing the world in its photovoltaic glow.

Today, we delve deeper into China's colossal share in the global polysilicon, solar cell, and panel manufacturing sectors, alongside its soaring solar energy production capacity.

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Pre 1980s:

• The journey began in 1958 with the development of China's first monocrystalline silicon, marking the early research phase.
• This progressed into solar cell development for space satellites in 1968, and by 1975, domestic solar cell production commenced in Ningbo and Kaifeng.
• However, these were all very early days, and no major Government or private money had gone into building a solar manufacturing industry in China.

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1980-1995:

• The government's role became evident with the Sixth Five-Year Plan (1981-1985) of the Chinese Communist Party (CCP) which marked the first instance of policy support for solar PV panel manufacturing, a trend that continued in subsequent plans.
• But, the market opportunity remained too small, the technology was still evolving, and the cost of manufacturing was too high.
• Hence, much of the developments remained concentrated towards academic research.

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1995-2000:

This was the period when the CCP switched gears.

• Identifying solar energy as a sun-rise sector which could change the very fabric of the global power generation ecosystem, the Chinese Government declared sweeping incentives and subsidies to attract private investments into the manufacturing of solar panels and the whole supply chain behind that.
• As a result, by 1998, solar energy demonstration projects began, with companies like Yingli and Trina emerging as early producers. But, the developments remained in the pilot and demonstration phases.

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2000-2008:

This marked a pivotal turning point with China committing to becoming a global leader in renewable energy, backed by policies, financial incentives, and aggressive expansion strategies.

• It launched the Golden Sun Program and Top Runner Program which awarded private sector players with rich incentives for technological advancements and market expansion. These can very well be compared to production-linked incentive (PLI) schemes which the Government of India is now pursuing over 20 tears later.
• As a result, a significant leap occurred in 2002 with Suntech Power's 10 MW solar cell production line, which triggered a surge in solar cell production and installation. This might seem like really small in the present day, but over two decades ago, this was a huge capacity!
• By 2008, China was already the world's largest producer of solar panels, but the global stage beckoned.

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But, This was a Different Era.

And in 2008 that changed. Why do I say that?

• Because, until then, the price of solar manufacturing and the end products (panels) was too high for a developing nation like China to use.
• Thus, the whole industry was built to cater to the growing demand for solar energy in richer Western nations like Germany, France, the UK, and of course, the US.
• But, following the 2008 financial crisis, a string of big Western solar energy generation companies turned bankrupt, killing the demand for China’s solar panel manufacturing industry.

And that’s when China’s Government changed tacks.

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The Advent of China’s Solar Energy Affair.

The Chinese Government had begun experimenting with the use of solar energy in the country’s rural hinterlands as way back as in 1998.

• However, it was only after the fall of Western demand after the 2008 financial crisis that China looked to build domestic demand via the large-scale use of solar energy to meet the electricity needs of its booming economy.
• In a bid to save the years of investments made by the Chinese Government and the private sector, the former announced a string of incentives focused on two things: Research & development, and building scale to dramatically bring down the price of solar panels and push the use of solar energy.

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Come 2013.

With the industry starting to deliver a scale-driven fall in the price of solar panels, the Government was clear, the time had come.

• China's ambition wasn't satisfied with panel production. It set its sights on the entire solar supply chain – silicon wafers, polysilicon, and even raw materials like quartz sand.
• Identifying this as one of the most critical pieces of its strategy to end China’s pollution woes, in its Air Pollution Action Plan of 2013 the CCP determined to adopt solar energy in a big way.
• And it acted so well on this plan, that by 2017 China had already become the world’s largest investor in solar energy capacity generation, surpassing the US and Europe.

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Come 2020.

This is where the Chinese industry and the Government’s efforts have unleashed the trifecta of technological superiority, scale and efficiency.

• Result? The price of solar panels had fallen by a jaw-dropping 90% in a decade, crushing the competitors from the US and Germany and cornering 80%+ of the market.
• And with that, the Government went all in announcing feed-in-tariffs and incentives for the private and public sector enterprises, as well as, local provincial governments to install solar power plants and increase the use of cheap sun-powered electricity.
• Outcome? A wave of solar installations began sweeping the whole nation, its vast deserts, water reservoirs, on the top of its industries and households, and everywhere else.

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But, it Surprised the World.

How? Just have a look at China’s total solar power capacity, by year.

• 2020: 253GW
• 2021: 306GW
• 2022: 392GW
• 2023: 550GW+

Just for perspective, 550GW is higher than the combined solar, wind, hydro and all other forms of renewable energy that India’s aiming for by 2030.

Of course, India’s energy needs are much lower, given its economy is much smaller for now, and consumes a lot less power. However, even the US has just 161GW of solar power capacity.

That’s almost what China added in 2023 alone!

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A Sunlit Future with Shadows (2023 and Beyond)

China's solar dominance has undoubtedly fueled the global green energy transition.

As mentioned above, solar panel prices have plummeted by over 90% since 2010, making renewable energy accessible to developing countries and accelerating the shift away from fossil fuels

However, this dominance also raises concerns:

• Geopolitical Repercussions:?China's dominating control over the entire supply chain creates dependence and vulnerability for other countries.?Imagine a scenario where geopolitical tensions disrupt the flow of solar panels – the global transition could grind to a halt.
• Environmental Concerns:?China's mammoth production comes with its own environmental baggage – pollution from silicon wafer production and concerns about waste disposal from discarded panels.

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The Road Ahead: A Collaborative Sunlit Future?

The future of solar energy demands a nuanced approach.

• While China's dominance has played a crucial role in bringing us this far, a healthy global industry needs diversification and collaboration.
• But to be clear, compared to China’s 75% share of the world's solar panel production, US and India today stand far behind at just 7% and 3% respectively.
• And worse, even the 7% and 3% market share held by the US and India is majorly built on top of China’s cost-effective supply of polysilicon and cells, where it holds a 90%+ and 80%+ market share respectively.
• This is also evident in the case of Mukesh Ambani-led Reliance which is set to operationalise a fourth of its 20GW solar panel factory in 2024 but will be using cells made by Chinese player Suzhou Maxwell Technologies.

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Subscribe and stay tuned for more updates in this fascinating saga of studying China’s rise!

See you tomorrow morning 7.30 am with another edition.

Best,

Jayant Mundhra