I was asked today what accounts for China’s outsized role in solar PV , amounting currently to roughly 50% of global share of production despite having a Lilliputian share of global consumption.  It comes down to three inconvenient truths.   That said, the degree of inconvenience of each truth varies with the point of view (e.g., ‘panda hugger’ vs ‘dragon slayer’ in the U.S. vs  ‘patriotic netizen’ in China) of who you happen to be talking with :

(1) Post-WWII, Asia (and notably China since 1982) has had clear advantages of cheaper land, cheaper labor and cheaper facilities relative to manufacturers in higher per capita income markets in the West. Since solar panel production has some basic similarities to the manufacturing process for computer memory chips (which in the 1990s were the basic ‘rice’ commodity of the IT boom in Asia), solar manufacturing has benefited from the natural ‘cluster effect’ of decades of chip manufacturing know-how of Chinese, Taiwanese and other investors on the mainland.

(2) The barriers to entry for solar manufacturers are lower than the earlier tech waves of integrated circuits and bio-technologies so national and local
government in China has seized on it to bootstrap their economies to a higher rung of the global value chain. This has meant various government subsidies (on the producer side) to the point of a casino mentality — more than 100 solar manufacturers in the single town of Dezhou in Shandong Province. (The Chinese government also rounded up and ramped up polysilicon supply when that key input for solar PV production tightened in 2010/11);

(3) There’s not yet an established market for solar products in China so almost everything is exported to Western markets — especially to those national
markets like Germany and Spain and state markets in the U.S. such as New Jersey that have been subsidizing the industry (on the consumer side). [Note: World Trade Organization rules tend to allow/encourage consumer-side subsidies and to sanction producer-side subsidies, hence the recent trade action by the 7 Western solar firms against China. However, these actions take time to work their way through the ‘python’ of WTO process).

As a wrote almost a year ago ( click here for link ), there’s a global boom/bust going on in PV solar and China is in the thick of it.