September 10, 2013

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Manufacturing scale, not cheap labor, driving China’s solar PV price advantage

A new study released in the journal Energy and Environmental Science by MIT and the National Renewable Energy Laboratory looks at factors driving cheap(er) Chinese made solar panels.

By David Wogan

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This article was published in Scientific American’s former blog network and reflects the views of the author, not necessarily those of Scientific American

A new study released in the journal Energy and Environmental Science by MIT and the National Renewable Energy Laboratory looks at factors driving cheap(er) Chinese made solar panels. What they found was that China’s manufacturing scale contributes more to its price advantages than country-specific factors like cheap labor inputs or lower environmental standards.

From the abstract:

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.

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These results support the notion that PV solar prices are declining as a result of improved manufacturing processes and economies of scale, as shown by this graph from The Economist:

 

David Wogan is an engineer and policy researcher who writes about energy, technology, and policy.

David's academic and professional background includes a unique blend of technology and policy in the field of energy systems. Most recently, David worked at Austin Energy, a Texas municipal utility, implementing a Department of Energy stimulus grant related to energy efficiency. Previously, David was a member of the Energy & Climate Change team at the White House Council on Environmental Quality for the Obama Administration.

David holds two Master's degrees from The University of Texas at Austin in Mechanical Engineering and Public Affairs. While at UT, David was a researcher in the Webber Energy Group, where his research focused on advanced biofuel production to offset petroleum use in the transportation sector. David holds a Bachelor's of Science degree in Mechanical Engineering from The University of Texas at Austin, where he researched nuclear non-proliferation measurement technology.

David is a 2013 Aspen Institute Journalism Scholar, joining a select group of journalists from Slate, ABC News, and The New York Times.

David lives in Austin, Texas. Follow along on Twitter or email him at david.wogan@me.com.

More by David Wogan

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