Assessing the drivers of regional trends in solar photovoltaic manufacturing

Abstract

The photovoltaic (PV) industry has grown rapidly as a source of energy and economic activity. Since 2008, the average manufacturer-sale price of PV modules has declined by over a factor of two, coinciding with a significant increase in the scale of manufacturing in China. Using a bottom-up model for wafer-based silicon PV, we examine both historical and future factory-location decisions from the perspective of a multinational corporation. Our model calculates the cost of PV manufacturing with process step resolution, while considering the impact of corporate financing and operations with a calculation of the minimum selling price that provides an adequate rate of return. We quantify the conditions of China's historical PV price advantage, examine if these conditions can be reproduced elsewhere, and evaluate the role of innovative technology in altering regional competitive advantage. We find that the historical price advantage of a China-based factory relative to a U.S.-based factory is not driven by country-specific advantages, but instead by scale and supply-chain development. Looking forward, we calculate that technology innovations may result in effectively equivalent minimum sustainable manufacturing prices for the two locations. In this long-run scenario, the relative share of module shipping costs, as well as other factors, may promote regionalization of module-manufacturing operations to cost-effectively address local market demand. Our findings highlight the role of innovation, importance of manufacturing scale, and opportunity for global collaboration to increase the installed capacity of PV worldwide. Broader context National energy strategies are oen driven by stakeholder perspectives on energy security, environmental priorities, and economic benets. Since the global economic slowdown of 2008, economic benets have been an increasingly important factor inuencing national policies, especially for renewable energy technologies such as solar photovoltaics (PV) that have demonstrated strong commercial growth and hold promise for substantial market opportunities. Using an industry validated bottom-up cost model, we identify the economic factors for recent changes in solar PV supply chainsthe rising prominence of China, surpassing industry growth rates in all other regions. We nd that the current advantage of a Chinese PV module factory is not related to factors intrinsic to China; but rather, it is built from economies-of-scale and related supply-chain advantages, which we argue, could be equalized. We also nd that further innovations and supply-chain developments could signicantly reduce the cost of solar energy, resulting in more widespread PV deployment and global opportunities in manufacturing. These ndings are of broad importance to policy-makers and other industry stakeholders, as they provide quantitative evidence for regions to pursue collaborations that leverage one another's asymmetric strengths for mutual benets.

Drivers of cost reduction in solar photovoltaics

“…35 The coefficient − 0.24 on the dummy for China indicates that production cost of firms from China were 22.4% lower than that of firms from other countries during the period of the study. 36 The computed cost difference is close to the 23% difference found in Goodrich et al (2013b). It is to be noted that the costs of firms from China are lower even after accounting for differences in technological factors like conversion efficiency and polysilicon usage.…”

“…In its findings (summarized in USITC (2012)), the commission concluded that Chinese firms had received subsidies from the government. The second study, Goodrich et al (2013b), uses an engineering-type factory model to estimate cost differences between U.S. and China. They conclude that subsidies provided by the provincial governments in China (which include low-cost land, free factory space, and subsidized electricity) as well as supply chain advantages (benefits from having a dense regional network of suppliers to supply the scaled up industry in China) contribute to the cost difference between firms in China and the U.S. 38 See Saga (2010) for a discussion on manufacturing process requirements for solar cells of different efficiencies and the implication for production costs.…”

The Socio-Technical Dynamics of Low-Carbon Transitions

“…The price of PV-modules, for instance, decreased more than 65% between 2007 and 2011, as a result of scale economies in Chinese production, oversupply, and price-dumping. 28 Growing market demand boosted German solar-PV generation, which increased from 6.6 TWh in 2009 to 38.2 TWh in 2016 (Figure 4). But these developments also had unintended negative consequences.…”

Photovoltaic self-consumption in buildings: A review

“…China is now the largest manufacturer of PV modules, with seven of the world's ten largest PV module suppliers [3]. The main reason to the Chinese dominance is the scale and supply-chain development [4].…”