Solar’s growth is hurtling ahead. China did that

Source: By John Fialka, E&E News reporter • Posted: Monday, December 16, 2019

Second in a three-part series. Read the first story here.

A crucial moment that helped put solar power on the path to becoming one of the world’s dominant energy sources came in the Chinese city of Wuxi near Shanghai in 2000.

That’s when a strange brew of socialism and venture capitalism got mixed together with cheap labor and dumb luck.

Wuxi, with a population of 1.3 million, was a textile and rice marketing center that in 1994 had been given access to a stream of federal tax revenue by China’s central government. A dream of Wuxi officials was to lure high-tech industries that would generate more tax revenues. In 2000, Shi Zhengrong, a Chinese-born scientist with a doctorate in solar cell research from Australia, arrived to start a company that manufactured solar modules.

At least, he hoped so.

The company needed financing. Prospects looked bleak at first, but a colonel with the Chinese army pressured five local companies to contribute $6 million. The army’s budget had been cut, so it was setting up manufacturing businesses to help finance its own operations.

Shi put together a company called Suntech Power. He bought used equipment to make solar modules from the United States, had it repaired in Germany, and began using Wuxi’s cheap, but skilled, laborers to make modules. They were snapped up by German companies. Germany had created a huge subsidized market whose demands for solar modules had outstripped its supplies.

“Shi was taking big gambles and trying to create something where nothing existed,” said Gregory Nemet, a professor at the University of Wisconsin, Madison, who pieced together the early days of China’s booming solar industry as part of a book that was released earlier this year: “How Solar Energy Became Cheap: A Model for Low-Carbon Innovation.”

“It was really a kind of Wild West period from 2000 until about 2007,” Nemet explained in an interview. The beginnings of China’s solar industry were entrepreneurial. “In a way, it was pretty magical. Shi used human creativity and got a sense of what works, and then started investing in things that had some validation” in the marketplace.

Speed was one of the crucial factors in building Shi’s company, according to Nemet. Shi spent three evenings a week training his employes to keep up a “frenzied pace.” There were often arguments, but Shi managed to build a company culture that worked through problems.

It created a supply chain that supported module-making and earned a profit of $20 million in 2004. According to Nemet, Shi was able to pay off his old investors and list his company on the New York Stock Exchange. His success inspired eight other Chinese module-making companies to copy his approach. U.S. stock investors and pension funds took notice and began pumping money into the growing Chinese industry.

Nemet said he wrote his book because he felt scholars saw the importance of the evolving photovoltaic (PV) process, which uses elements like silicon to turn sunlight into electricity, but they didn’t have a good grasp of how knowledge that improved the process flowed around the world.

One of the biggest gaps was that solar energy always remained too expensive for most earthly uses. After U.S. scientists demonstrated solar energy in the 1950s and used it in a space satellite, “people were snooping around from other countries and getting ideas that worked,” said Nemet, who describes the process as “knowledge spillover.”

“No one country did it themselves,” he said.

Thanks for solar energy, China

Australian scientists were among the earliest and most influential snoopers. They visited the United States in the 1970s and began doing experiments with PV in Australia. That soon attracted a stream of Chinese students to Australia seeking doctorates in fields related to PV.

One of the earliest students to arrive was Shi, who knocked on the door of Martin Green, a professor at Australia’s University of New South Wales. His laboratory had staged experiments that significantly raised the efficiency of solar modules.

Green taught his tricks to Shi and several other technology experts who later helped launch China’s solar companies. Green published his own version of the “knowledge spillover” story this year in Joule, a scientific journal.

He calls it the “butterfly effect” after a saying that originated in weather prediction. It warns scientists that they should always be aware that small causes, like the flapping of butterfly wings, might contribute to a tornado somewhere else. He was referring to subsidy programs in Germany, Japan and California; they heightened national ambitions elsewhere. So did U.S. venture capital firms, whose financing sped up the formation of solar module factories in China.

Green says it was Shi’s lucky timing that stirred up what amounts to a tornado of solar experiments and solar marketing that is still whirling in China. “Without this manufacturing shift to China and strong U.S. investor support,” he wrote, “photovoltaics would likely have remained promising, but still too expensive for widespread uptake.”

That’s because in 2008, after nine Chinese solar companies were listed on U.S. stock exchanges, a global financial crisis stopped most international funding. That influenced China’s central government — which had shown little interest in solar energy up to then — to step in and establish massive subsidy programs.

Nemet, the professor in Wisconsin, estimates that China provided about $20 billion in government loans to its growing solar industry. One German expert told Nemet that the huge burst of aid suggested that China was not just trying to protect its new companies from the stock market slump. Its real intention, the expert suspected, was China’s ambition to dominate the global solar market.

That soon began to happen. By 2013, China had the world’s largest solar PV market. By 2017, Chinese companies were manufacturing over half of the solar modules used worldwide. Its global market was seven times larger than Germany’s in 2012, according to Nemet.

‘Breathtaking’

China’s growth, which is continuing, coincided with a sharp decline in solar module prices. That is also continuing. Nemet believes the price dropped in part because of the competition between China’s growing companies, and their efforts to make modules more efficiently. That created a surplus of new products, driving world prices sharply down.

“The low-cost solar that emerged at the end of this period was China’s own gift to the world,” Nemet asserted.

The standings, measured in terms of solar modules manufactured and delivered around the world, are like ice hockey scores. They tell you who won a fast-moving, often hard-hitting game, but not necessarily how they did it.

For example, in 2009, First Solar Inc., a U.S. company based in Tempe, Ariz., was ranked in first place among the world’s top 10 module makers. While early solar modules had about a 7% efficiency in making electricity, First Solar’s modules were working toward 18% using a proprietary thin-film PV coating on a sheet of glass.

In rankings by Wood Mackenzie, a U.S. consulting firm, First Solar was followed in 2009 by seven other U.S. solar companies, one Chinese firm and a Japanese company.

In 2019, according to statistics gathered by PVTECH, a London-based company, First Solar ranked last among the top 10. It was beaten by seven China-based companies and a Canadian firm, Canadian Solar Inc., which has major research laboratories and module-making facilities in China.

According to the International Energy Agency (IEA), based in Paris, the growth of the world solar energy business is now a large, fast-moving game with much higher stakes. It recently announced that the PV market is “set for spectacular growth over the next 5 years.”

It predicts that the world’s renewable energy business, which also includes wind power, will grow by 50% between 2019 and 2024. That is equivalent to 1,200 gigawatts — or the total electric power capacity of the United States.

IEA estimates that 60% of that growth will be attributable to the growth of the global solar industry, which “is dominated by Asia, particularly China.”

Fatih Birol, the executive director of IEA, predicted that solar costs will “continue to fall” and that its potential environmental impacts, including lowering greenhouse gases, are “breathtaking.”

“The IEA,” he said in a statement, “is ready to advise governments on what is needed to take full advantage of this rapidly emerging technology without jeopardising electricity security.”

Next: Where does solar grow from here?