When it comes to solar power, China is outpacing everyone.
Last year it commissioned as much solar energy
as the entire world did in 2022.
The driving that China has done for the clean energy economy
actually has been really, really beneficial.
Not everyone sees it that way though.
The U.S., the E.U. and other countries
are desperate to protect their markets
and stay competitive.
They’re doling out subsidies, promising tax breaks,
and placing limits on tariff-free imports.
So how did China become so unbeatable?
And is that a bad thing?
We’ll start in Bitterfeld-Wolfen, Germany, where Swiss solar panel
manufacturer Meyer Burger makes some of its products.
The company is a leading manufacturer
of solar cells and modules.
It employs over a thousand people.
But it’s having a bit of a crisis.
Lately, it’s had to confront the challenges of
manufacturing in Europe.
Where energy and production costs have risen significantly.
Making it difficult to turn a profit.
The Chinese solar modules floodingthe market are cheaper
and in some cases, more efficient.
A reality that has pushed several European manufacturers
into bankruptcy.
And yet, by the end of the year, a new Meyer Burger factory is
slated to be up and running.
But it won't be in this German town of roughly 40,000 people.
It'll be in Colorado Springs, USA.
Where it can take advantage of incentives for green tech companies
under the U.S. Inflation Reduction Act.
Known as the IRA.
Something we’ll delve into a little later.
Meyer Burger CEO, Gunter Erfurt, has gone as far as threatening to
shut down manufacturing in Germany if the government doesn’t provide
incentives that are equivalent to those offered under the IRA.
Putting 500 jobs at risk.
Meyer Burger didn’t respond to our request for an interview,
but Erfurt has made his position clear.
So how did China get so far ahead?
Well, in the early 2000s, the country was experiencing a
severe shortage of one of the main raw materials needed to
make solar panels.
Polysilicon.
It was buying it from other countries at a very high price.
So Beijing took action.
Making polysilicon became a national priority.
Local governments fast-tracked permission for the construction of new plants,
and state-owned companies and banks
poured money into the new facilities.
And as a result, manufacturing capacity shot up.
Here’s how much, according to Chinese outlet PVTime.
One of many who tracked the growth.
China has been, in a sense, the perfect country
to do this because the political system
allows for the integration of consumption
and production policies and it allows for long term thinking.
Richard Black is the director of policy and strategy at global
energy think tank Ember.
There are some countries in the world where
this probably couldn't have happened because they don’t have those things at all.
Government policy and heaps of state funding acted as a powerful
sharpening steel to the country’s competitive edge.
China now controls 80 to 95% of the entire,
global solar production supply chain.
Its tight grip on the supply chain has driven down prices
and spurred innovation.
But what’s the impact of China’s productivity on other countries?
Let's go to Brazil as an example.
Latin America’s biggest economy is leading the renewable energy boom
taking place across the continent.
Not only does the country get copious amounts of the sun’s rays,
but it benefits from newly enacted laws that
protect local manufacturers.
President Lula da Silva’s administration scrubbed
tax reductions on imported solar modules from China and
raised import fees on assembled ones.
Brazilian trade group ABSOLAR isn’t convinced this will work.
National companies do not have
the ability to produce what we need.
They don’t have the ability to supply
what the local markets demand.
Ana Martinez says the measures
might have a negative impact.
And that’s the bigger complication.
Because we are now trying to tax something to foster
the local industry, but the local industry is not able to supply
everything that the national solar industry demands.
And while Brazil takes steps
to project its domestic industry, it still relies on
Chinese financing to help pave its path to green energy.
And Brazil isn’t the only country trying to reduce
dependence on China.
In the US, President Biden’s Inflation Reduction Act has fueled
solar investment and growth.
These blue dots show the sites of future
solar manufacturing facilities.
There are more than 40 of them.
For Meyer Burger, building a whole new plant in Colorado Springs
gives it access to tax credits up to 1.4 billion dollars.
As well as get state support and a hefty loan
from the US Department of Energy.
None of which it would get if expanded manufacturing in Germany.
But companies planning to begin or expand operations in the US
shouldn’t get too comfortable just yet.
If Donald Trump wins a second presidential race,
the solar subsidies could be in jeopardy.
His advisors have said that if elected,
Trump will look to cut much of Biden’s plan and loosen restrictions
for fossil fuel producers again.
Though at this point, there may not be much global buy-in.
It’s hard to see that working really
since especially as many other countries
are also planning to increase their fossil fuel
production at a time
when global demand is going to shrink.
But how did Europe lose its way in the first place?
Germany’s role back in the early 2000s was extremely important.
Germany created the first, real continuing
big market for solar panels.
Generous government subsidies in Germany and Italy helped
drive down costs.
By 2010, the EU had doubled growth in the solar sector from the previous year.
But soon, solar equipment from China began to flow into the market,
selling for less than what it cost to make
its equivalent in Europe.
China was subsidizing heavily solar modules
so they came up with
dumping prices on the market
and there was no control from the European side on it.
Claudia Kemfert is an economist and an energy expert.
The European solar producers, especially the German ones could
not really compete with China.
European solar panel makers like Conenergy and SolarWorld
struggled to stay afloat.
As China took steps to increase its manufacturing power,
Europe took steps to protect its market from cheaper, Chinese products.
In 2013, the E.U. imposed limits
on tariff-free goods coming from the country.
But it was too little, too late.
In Germany we lost over 100,000 jobs
in the solar sector because of
this heavy subsidizing
of solar modules in China and we had a huge debate of whether or not
the energy transition is costly and should we do it or not
and all this came to this situation that we were not the solar market leaders anymore.
But is it so bad if China dominates the market?
Today, solar powered energy is the cheapest form of electricity
for the majority of countries that use it.
And that’s thanks to China’s output.
And the price of installation keeps dropping.
Estimates put the cost somewhere between
300 and 900 dollars per kilowatt by 2030.
Though it’s not all positive.
Japanese electronics giant Panasonic shut down production at
its solar panel factories at home and in Malaysia a few years ago...
Choosing to outsource it to a subcontractor instead.
The U.S. arm of South Korea’s LG
shut down its plant in Huntsville, Alabama in 2022.
Citing higher costs for materials and logistics.
Along with severe supply issues.
Remember Meyer Burger from the beginning of this video?
They want to stay in the game, but it’s too expensive in Europe.
We should not be too dependent on imports
of solar modules and produce
and keep the jobs also here and there is a market advantage
if we would do so and not leave the whole market dominance
to one nation which is China.
So how did China become the global leader in solar energy production?
By trying to solvea domestic problem.
And then throwing state-funding and its formidable manufacturing weight behind it.
And is that bad?
It helped drive global investment and renew the commitment to solar power.
Thanks in large part to this burgeoning economy, China and
a majority of EU-bloc countries will hit their renewable energy targets for 2030 ahead of time.
In the race for more solar energy capacity,
Europe is ahead one decade,
China is winning the next.
Latin America and the U.S. throw their hats into the ring.
But it’s consumers and clean energy advocates that emerge victorious.
If your government is in favor
of international trade,
and most European governments are
in favor of international trade in principle,
then you can't really complain when companies in
another country start producing something that you want.
And they’re producing it really cheaply and exporting it to you.
That’s just part of life.