The great leap inward

If there is an environmentalist’s dream technology, it is surely solar photovoltaic (PV) power generation. All you need is sunshine, and a PV array will produce electricity. No harmful byproducts. No carbon dioxide. No smog. No acid rain. No radioactive waste. No noise.

Tastes great. Less filling.

PV has grown dramatically since Bell Labs displayed the first demonstration unit in 1954. The International Energy Agency notes that the annual growth rate has averaged a mind-boggling 40% for the last two decades. Despite recently achieving the milestone of 100GW of worldwide installed capacity, growth continues – GlobalData estimates a 16.5% compound annual growth rate to 2020. This at a time when most other industries are struggling to avoid contraction.

With rising production volumes, prices have dropped, the technology has become attractive to a broader range of potential buyers, and the market has expanded. As this trend continues, PV promises to become cheaper than competing, environmentally damaging power generation technologies like coal and nuclear fission. It is in the best interests of our economy, our species, and indeed all life on the planet for PV technology to develop and to grow as rapidly as possible.

On the global PV manufacturing stage, one of the most significant players is China. Like many other products, PV modules manufactured there may not always have the best reputation for quality, but it’s tough to beat the price. If our objective is to have PV generating capacity spread as far and as wide as possible, supplanting its nastier non-green brethren, buying Chinese-made modules sounds like sound policy. If you can buy more generating capacity on the same budget, you can replace dirtier sources of energy that much more rapidly.

Not so fast. Although PV produces clean power, traditional energy sources are still required to produce the panels; no manufacturer yet claims to have built a breeder supply chain, in which all of the power to produce the PV panels comes from PV panels. If you want to make sure you’re producing clean power, you need to look upstream at the manufacturing end of things and assess whether that is as clean as the end product.

On this measure, China does not score nearly so well. The country burns a staggering amount of coal to feed its industrial machine – nearly 50% of global supply and still growing. Coal-fired electricity generation is the most carbon-intensive of the lot, to say nothing of all the other noxious emissions from this technology – remember the images of the choking smog in Beijing leading up to the 2008 Summer Olympics? Pollution in China is so bad that the government announced in December that it would spend US$56 billion to cut pollution in the countries major cities, according to professional advisor website Mondaq.

This must mean that if we want clean power, we would do well to steer clear of Chinese-made solar panels.


Right or wrong, it may soon be irrelevant.

China exports most of the panels it produces; 90% or so, according to GlobalData.  However, this state of affairs is changing. Chinese domestic demand is growing rapidly. It seems that government estimates are being revised upwards every time you turn around – a recent report in PV Magazine indicated that the state may be planning to double its previously published 2015 target of 21GW. That’s an incredible jump when you consider that only 2GW were installed in 2011, the most recent year for which data are available (not to mention the fact that the global install base only just reached 100GW). To hit a 40GW target, capacity will have to more than double every year.

If manufacturers in China will soon struggle to keep up with domestic demand, why would they bother continuing to invest in serving more costly and difficult export markets? Why indeed would the Ministry of Commerce do anything but discourage the sale of Chinese panels abroad? The days of cheap Chinese panels flooding Western markets and triggering trade disputes may be numbered. This is bad news for PV markets in Europe and the Americas, but good news for PV manufacturers in those regions.

It is also good news for the environment, be it the local smog level in Beijing or the worldwide atmospheric concentration of CO2. A domestic PV install base that is growing by leaps and bounds will hasten the day that new Chinese coal plants become an absurd economic proposition. Further down the road, it will even bring about a state of affairs where it is more expensive to continue operating existing coal-fired plants than to replace that capacity with yet more PV. Coal plants that close up shop, or are never built in the first place, are coal plants that won’t put a burden on Chinese lungs and global weather patterns.

Since many environmentalists see the People’s Republic as Public Enemy Number One, they should welcome the trend of massively growing domestic PV installations. If fewer cheap Chinese panels are available in the rest of the world, so be it. Most of those countries (consider Germany and Japan) are driven by an agenda to phase out nuclear power generation. If they install more PV, it won’t make nearly the impact on global carbon intensity. There is one place where PV modules will do the most to mitigate climate change, and that one place is China.

China’s domestic PV market will grow. Chinese PV manufacturers will shift focus from outward to inward. Competition in the PV market outside of China will ease. PV customers in the rest of the world will struggle to obtain Chinese-made modules. PV module prices will continue to decline, but not at the rate that they have in the past. More and more PV panels will appear in Chinese fields and on Chinese rooftops. Chinese coal plants will stop being built, and some will close.

And we will all breathe easier.

Brighter Tomorrow is back after an eight-month hiatus, during which I was busy adapting to a new job, a new home in a new community, a new wife, and a new baby on the way. Thank you for your patience, and I look forward to providing you with more insights into clean energy!


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