In fact, the dramatic scaling of solar manufacturing capacity is just what’s needed to keeps costs dropping
The renewable energy industry is central to addressing many national problems: Climate change, national security, and job growth. Its biggest international challenge is the Green Giant – the competition from China’s full-court press into clean energy.
Seemingly every week there’s another story about how China is upping the U.S. in the race to develop clean energy. This week’s news is in the solar sector, where Chinese officials say they plan to deploy 50 GW of cumulative capacity in the country by 2020. China only has about 1 GW of solar PV installed today (and no concentrated solar thermal power). But assuming it can meet those targets and continue scaling manufacturing (the country currently holds 57% of global solar cell manufacturing in the world), China is poised to become a vertically-integrated solar leader – not just an exporter of technology.
This story on the Forbes blog seems to have misunderstood the implications of China’s strategy:
“The epic expansion planned for the latter part of this decade may create the world’s first solar-energy bubble. The existing solar supply chain is likely too shallow to sustain growth on this scale. Unless the industry develops scalable infrastructure over the next four years, China’s planned installation of 8 GWs of solar capacity annually between 2015 and 2020 is likely to create severe bottlenecks in the solar supply chain. These bottlenecks could radically inflate the price of basic materials like silicon and create labor shortages that would affect the costs of manufacturing solar modules, designing and installing new solar systems and operating and maintaining already installed systems.”
So are we really going to see a solar energy bubble? That’s extremely unlikely, says Shayle Kann, a leading solar analyst with GTM Research.
“It’s actually nothing crazy,” he says. “I have a hard time seeing this creating a global undersupply – we’ll have 50 GW of module manufacturing capacity by the end of this year. The goal is doable.”
That’s a pretty amazing feat. When one of the fastest growing, energy-intensive countries in the world decides to build 50 GW of solar in a relatively short period of time, and the solar industry can keep pace with it – you know the industry has begun to reach true scale.
In fact, Kann sees prices continuing to fall due to a structural oversupply of modules – exactly the opposite of what the Forbes piece suggests. In 2011, we could see a 10% decline in module pricing and another 15% decline in 2012. While that’s ultimately a good thing for consumers and installers, it puts the squeeze on manufacturers – but that also forces producers to continue innovating and dropping costs, thus benefiting the industry overall.
And for anyone who doubts that the cost-curve for solar is not coming down, take a look at this chart from a recent IPCC report outlining the possibility of a 77% global clean energy target by 2050:
Experience curve in logarithmic scale for the price of silicon PV modules…. Reductions in the cost or price of a technology per unit of capacity understate reductions in the levelized cost of energy of that technology when performance improvements occur
As an aside, Steve Sawyer, Secretary General of the Global Wind Energy Council, says of this figure, “I was there in Abu Dhabi. The US numbers come from Ryan Wiser, and the Danish from the Danish Energy agency, so I think they’re reasonably accurate. The way these cost figures are tabulated, the hangover from the price spikes of 2007 and 8 are reflected on installation costs in 2009, 10 and to some extent 11. The (sales) price indeed dropped a little in 09, a lot in 10 and 11, but these aren’t reflected in these data.” Back to China.
So what about the competitiveness angle? Can the U.S. keep up with China? In manufacturing, it looks like China will continue to dominate. But in installation, where job creation is higher, it appears that the American market will indeed keep pace with its strongest competitor.
In comparison, the U.S. currently has about 2.6 GW of solar PV capacity installed. This year, we may see anywhere between 1.5 GW and 2 GW of installations and, according to analysts at GTM Research, the U.S. could see about 20 GW of cumulative capacity. (Given the scattered, local, on-again/off-again nature of the U.S. market, it’s difficult to project out beyond 2015. However, the Solar Energy Industries Association says it’s not unrealistic to assume the American market will put 10 GW each year online by 2020.)
While it’s impossible to make any definitive predictions in the constantly-changing solar sector, one thing is clear: The industry is poised for radical growth and the supply chain is maturing enough to keep up.
“” Stephen Lacey
JR: One more point. The Chinese target appears to be for all solar, not just PV. Let’s not forget concentrated solar thermal power. It has great potential in China (see this 2009 thesis). And the good news is that China is now pursuing CSP: Last year, a U.S. solar thermal firm made a deal for 2 GW project with biomass. So I would not be surprised if a substantial fraction of the 50 GW target were met with CSP.