The US has woken up to a big risk when it comes to energy.
15 years ago, China could produce six times
as many solar panels as the US
Look at what's happened since then.
It now can make 70 times as many.
That massive production capacity means China alone is able
to install more than half of the world's new solar panels this year.
What's more,
it means that the relatively little solar capacity installed in the US
is made abroad, often with components from China.
Beijing’s dominance in this space is a big deal
because solar energy will be
the dominant source of renewable energy
by the end of the decade.
And the world is dependent on China for the technology.
It's a vulnerability the US wants to fix.
I've long said, when I think climate, not a joke, I think jobs.
The problem is that while America was investing
sporadically in solar manufacturing,
China was going all in.
They did everything.
Solar manufacturing is a horrible business,
and nearly everyone who's gone into it has failed.
The US is making a multibillion dollar bet to get back into that
horrible business, as the transition to renewable energy gathers pace.
It's going to be a big ask.
The impact of climate change is already very real.
The summer of 2023 was the hottest on record,
exceeding the blistering temperatures of just a year earlier.
It's the backdrop for the United Nations annual climate talks.
COP 28 wants to see a tripling of renewables by the end of the decade.
Solar is likely to be the biggest part of that, with three times
as much capacity worldwide as onshore and offshore wind by 2030.
Unlike other types of renewable
and emission-free power, solar can be deployed very quickly.
It can be scaled up rapidly and it can reduce emissions
in a very short timescale, which is what we need.
Before we get into how the US
lost so much ground and President Biden's efforts to regain some of it,
we need to understand what a solar panel consists of.
Most of the weight is actually just aluminum and glass.
But the key material at the heart of it is silicon, because photovoltaic panels
are essentially semiconductors, similar to the chips that run your smartphone.
They require a particular kind of silicon with exceptionally high purity.
Polysilicon is a raw material to make solar modules.
You get it from sand,
but you need to refine it using a lot of energy
and a lot of complicated chemical and physical processes.
So it's very energy intensive to make
and it's very CapEx intensive to build a factory to make it.
While the US used to have its own
polysilicon manufacturing,
China now supplies 89% of the world's solar grade polysilicon.
That wasn’t always the case
Japan, Germany and the US all used to be major solar panel manufacturers.
20 years ago, not only did China make very few solar panels,
it had to import most of the polysilicon needed to make them.
Then Beijing seemed to recognize something.
China was able to identify solar
as an area where it could get in at the ground floor.
It was an opportunity to really take over this industry, to dominate this industry.
From 2004, Chinese companies responded to international demand
by setting up bigger factories for solar than ever before.
With support from government, but also just competing to supply a market.
Chinese companies continued to innovate
in terms of pushing down costs
and building up unprecedented scale in manufacturing.
Those lower costs rapidly undercut the existing players,
particularly after 2008, when global capacity started to outstrip demand.
That sent prices plummeting.
The first big players in solar are mostly gone now
because solar is a viciously competitive business.
Take for example, the German company SolarWorld.
In 2008, it was expanding in the US
Go solar with Solar World, America’s biggest solar panel manufacturer
But frankly, it just couldn't compete.
It's one of the many solar manufacturing companies
that just couldn't make it in the US.
China's massive bet was starting to pay off.
They pulled out all the stops,
both on the supply side and on the demand side.
They offered cheap financing and cheap land to solar manufacturing facilities,
and they used incentives and subsidies
to encourage demand.
That's the other side of this coin.
Beijing was also ensuring that people in China would buy the solar gear.
And critically, it didn't need to import oil or other fossil fuels for this power.
In theory at least, given that solar panels are made using coal power.
All it needed was sun, sand and a ton of money.
That was also good for the world.
It made solar panels way cheaper,
way more quickly than anyone had anticipated.
China is the reason why solar is not a cottage industry anymore.
We're expecting solar new build this year to be about 392 gigawatts,
which is a lot.
It's the equivalent in generation terms of about one nuclear reactor
every ten days.
More than half of those solar panels will be installed in China.
It's one hell of a boom, and US
manufacturers are missing out on it.
Solar has just really exploded around the world and the US
and other countries,
frankly, kind of discounted how quickly it would become part of the energy mix.
Even so, there are plenty who say that the US
doesn't need to make its own panels.
China has made it cheap.
And selling cheap things is generally a terrible business.
There's an argument that the US
should just let China take on that burden,
as it does with all sorts of other electronics manufacturing.
Reliance on any foreign supplier is challenging.
Geopolitical concerns can get in the way.
And in the solar supply chain, that's not just the solar panels, but
also the inputs along the way to making them.
It's the polysilicon, it's the wafers. If any company or country
is the sole supplier of some of those inputs, they can squeeze
they can squeeze on prices
and they can also squeeze on supply at any given time.
China has a track record here. Back in 2010, a territorial dispute with Japan
saw Beijing restrict supply of rare-earth metals
used in laptop hard drives and car batteries.
If the US's goal is to reduce that kind of risk,
Here’s what it needs to do:
Boost demand, make imports harder, add support
for domestic manufacturing and make it easier to build the projects.
The core of these efforts is 2022’s Inflation Reduction Act.
The Inflation Reduction Act is very, very generous.
Every wafer, every cell, every module
that is made in the US factory gets a tax credit.
There's also tons of support in the Inflation Reduction Act
on the demand side of the equation.
So there's direct money, $7 billion of it,
designed to go to rooftop and community solar projects.
Expect solar to rise on the agenda after COP 28 in Dubai.
China got a head start on this tech,
but that doesn't mean the US
has completely missed out.
I think the best case for the US
is that it continues to support a domestic manufacturing industry
and have some control of its supply chains,
even if it pays a little bit more than most countries do for solar.
The US needs to get all in,
and it needs to do everything right, and it needs to do it for a long time.
It has to have staying power.
The lesson from the last decade is that the US
has to be committed and it has to
come to this as committed as China.