New York Times: China hopes to boost its economy with new industries like solar power

Last year, China‘s solar energy industry exploded, with more solar panels installed in a year than the total in the history of the United States. It also reduced the wholesale price of battery panels by nearly half. The export of fully assembled solar panels from China has increased by 38%, and the export volume of key components has almost doubled.

While the United States and Europe are working hard to restore renewable energy production and help businesses avoid bankruptcy, China is already far ahead.

At the annual meeting of the National People‘s Congress held this week, Premier Li Qiang announced that China will accelerate the construction of photovoltaic power plants, as well as wind and hydropower projects.

For China, increasing investment in renewable energy (mainly solar energy) is an important part of the country‘s high stakes in emerging technologies. The "new three samples" represented by solar cells, electric vehicles, and lithium batteries have replaced the "old three samples" represented by clothing, furniture, and household appliances.

The goal of developing the "new three types" industry is to help offset the sharp decline in China‘s real estate industry. China hopes to use emerging industries such as solar energy (known as "new productive forces") to boost economic growth.

The emphasis on solar energy is the latest initiative implemented by China in a 20-year plan to reduce its dependence on energy imports.

China‘s export of photovoltaic products has triggered an urgent response from the outside world. The Biden administration has launched a subsidy program that covers most of the production costs of solar panels, as well as a portion of higher installation costs.

Europe is particularly vigilant. What angers European officials is that more than a decade ago, China provided subsidies for factories producing solar panels, while European governments provided subsidies for consumers to purchase panels produced anywhere. This has led to a surge in consumer purchases of Chinese products, damaging the solar energy industry in Europe.

The wave of bankruptcy has swept across the solar energy industry in Europe, and the remaining companies in the industry are currently disappearing. Norwegian Crystals, an important European manufacturer of solar panel raw materials, filed for bankruptcy last summer. Swiss company Meyer Burger announced on February 23 this year that it will cease production at its factory in Freiburg, Germany by mid March and will strive to raise funds to complete the construction of factories in Colorado and Arizona, USA. This company‘s project in the United States can utilize the subsidies provided by President Biden‘s Inflation Reduction Act for renewable energy production.

China‘s cost advantage is enormous. A research department of the European Commission calculated in a January report that Chinese companies can produce solar panels at a price of 16 to 18.9 cents per watt of electricity generated. In contrast, the cost per watt for European companies is 24.3 to 30 cents, while for American companies it is approximately 28 cents.

Behind the cost difference, it is due to the land rent reduction policies of Chinese cities for solar energy factories, as well as the large amount of loans issued by state-owned banks to solar energy enterprises at lower interest rates. Although some companies have suffered losses and some have gone bankrupt, Chinese companies have also found ways to build factories at low costs and provide them with production equipment.

China‘s low electricity prices have played a crucial role in solar energy production.

The main raw material for producing solar panels, polycrystalline silicon, requires a large amount of electrical energy. Solar panels typically require at least seven months of electricity to make up for the electricity needed to manufacture them.

Low cost coal-fired power provides two-thirds of China‘s electricity. But Chinese companies are further reducing costs by installing solar power plants in the deserts of western China, where public land is basically free. Then, the company utilizes the electricity from these farms to produce more polycrystalline silicon.

In contrast, electricity costs in Europe are expensive, especially after the outbreak of the Russo Ukrainian war led to Europe no longer purchasing natural gas from Russia. The land used for building photovoltaic power plants in Europe is expensive. In the southwestern United States, environmental concerns have also slowed down the construction speed of photovoltaic power plants, and the issue of land being designated for other uses has hindered the construction permits for renewable energy transmission lines.

China‘s coal consumption makes it the country with the highest annual greenhouse gas emissions in the world. But China‘s pioneering role in reducing the cost of solar panels has slowed down the growth of greenhouse gas emissions.

"If Chinese manufacturers had not reduced the cost of solar panels by more than 95%, we would not have seen so many solar installations around the world," said Tu Jianjun, a researcher at Columbia University‘s Global Energy Policy Center in Beijing.

Since 2018, the annual installation of solar panels worldwide has almost doubled.

Some new photovoltaic power plants that produce electricity for polycrystalline silicon are located in two provinces in western China: Qinghai and Yunnan. However, polycrystalline silicon is mainly produced in the Xinjiang region of northwest China, and the United States prohibits the import of materials or components manufactured in Xinjiang on the grounds of forced labor. This has led to restrictions on the import of some solar panels from China by the United States, and the European Union has been considering similar actions in the past two years, but there has been no actual progress.

More and more Chinese companies are producing the main raw materials and components for photovoltaic manufacturing in mainland China, and then shipping them to overseas factories for assembly to cope with overseas trade measures, such as the tariffs imposed by Trump on many Chinese imported goods. In addition, several of China‘s largest solar panel manufacturers are building assembly plants in the United States to receive subsidies under the Inflation Reduction Act.

The bill includes significant subsidies to revive the US solar panel industry, but establishing a self-sufficient industry will be extremely difficult. Ten years ago, the US solar industry almost completely collapsed in the face of low-cost imported products from China.

China produces almost all the equipment used to manufacture solar panels in the world, supplying almost all the components needed for solar panels, from silicon wafers to special photovoltaic glass.

"China has an absolute technological advantage," said Yuan Haiyang, CEO of Grape Solar, located in Eugene, Oregon. The company is partnering with a Chinese solar energy company that is conducting assembly business in the United States.

In the past, the technological advantages of solar energy were once in the United States. In 2010, Chinese solar panel manufacturers mainly relied on imported equipment, and if any malfunctions occurred, they would face long and expensive delays.

"At that time, it took several days or weeks to find replacement parts and engineers," said Frank Haugwitz, a solar energy consultant who has been working in Chinese industry for a long time.

In 2010, Silicon Valley‘s Applied Materials Company established two large-scale laboratories in Xi‘an, China. Each laboratory is the size of two football fields. The purpose of the laboratory is to conduct final testing on the robot assembly line, and if successful, it can produce solar panels in large quantities with almost no need for manual labor.

But in a few years, Chinese companies figured out how to manufacture production equipment, and Applied Materials Company significantly reduced the production of solar panel molds, focusing on similar equipment used to manufacture semiconductors.

Nowadays, anyone attempting to produce solar panels outside of China is facing potential delays in installing or repairing equipment.

Although Europe is considering whether to follow the example of the United States by implementing subsidies and import restrictions on solar products, Hogwarts said, "For Europeans, competing with China is still a challenge."