GRN Energy

China offers best solar prices because of scale, not cheap labor, says study

Solar panels on Walmart in Calif.
Solar panels on a Walmart in Calif.

A study of China’s solar markets has produced findings that should hearten those who hope to see the solar industry take off in the U.S.

The findings — that production scale, not labor costs — have produced China’s price and volume advantage in the PV market, suggest that solar prices could improve in the U.S. with indirect government subsidies enabling the industry to access capital.

In other words, China hasn’t produced cheaper PV solar panels by underpaying workers and lavishing the industry with direct government hand outs, as is widely believed, but by scaling up the industry, according to the report by MIT and the National Renewable Energy Laboratory.

This means it could be easier to achieve the same in the U.S., according to Assessing the Drivers of Regional Trends in Solar Photovoltaic Manufacturing.  The report, funded by the Department of Energy and  peer-reviewed, is published in the journal Energy & Environmental Science.

According to a DOE statement on the study:

 The authors also found that technology innovation and global supply-chain development could enable increased manufacturing scale around the world, resulting in broader, subsidy-free PV deployment and the potential for manufacturing price parity in most regions. Their analysis indicates that further innovations in crystalline silicon solar cell technology may spur new investment, significantly enhancing access to capital for manufacturers in most regions and enabling scale-up, thus equalizing PV prices from manufacturers in the United States and China.

To put that in English: U.S.-made PV panels could become more affordable and competitive on the world market — and in the U.S. — with available financing for solar parts and technological development. Cheap labor doesn’t have to be in the equation.

DOE reports that the study concluded:

Excluding shipping costs, the team estimated that China-based manufacturers have a 23% MSP advantage over U.S.-based manufacturers today, taking into account differences in the manufacturing costs of modules, wafers, and cells within each country. Scale and supply-chain advantages account for the majority of a Chinese factory’s MSP advantage. These advantages, which are not unique to China, could be replicated by U.S.-based manufacturers if comparable scale can be achieved.

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