China advantage with solar does not come from cheap labor

1. Suntech Power’s CTO argues that the secret to China’s solar energy success is not cheap labor but advanced equipment for making solar cells.

Five years ago only one of the 10 largest solar cell producers was based in China. But by last year, four of the top five were based there, and each is growing fast: all four doubled their production last year.

Labor accounts for just 3 to 4 percent of the cost of making solar panels. Other factors, such as materials and the cost of equipment, are more significant. And as a result of increased automation over the last few years, labor costs are going down

Wenham says the top Chinese companies have been particularly good at identifying promising technologies—often concepts and prototypes that have been languishing in labs for decades—and finding ways to produce them at a large scale. For most of the last two decades, the solar cells that set world records for efficiency were made by researchers at the University of New South Wales in Australia. “They were trying to commercialize [that technology] the entire time,” he says. “It took Suntech to turn those laboratory processes into production processes.”

Wenham says that knowledge and experience in manufacturing were crucial to developing such advances. At UNSW, he explains, the researchers would use this “horribly sophisticated process,” including photolithography, vacuum deposition of “quite exotic metals,” and “all sorts of chemical processes,” to deposit the narrow metal contacts required for achieving high efficiencies. Suntech researchers, who were closely familiar with the needs of manufacturing, “came up with a simple, low-cost way to replace all of that while achieving the same results,” he says.

Chinese companies also have other, nontechnical advantages that have allowed them to succeed. The government assures cheap financing for expanding production and has reduced red tape for permitting. Its policies are also more stable than those of many Western governments, which helps the companies plan ahead. And while labor may account for a small fraction of the cost of producing solar cells, cheap labor does significantly reduce the cost of building new plants.

2. A trio of public Chinese companies form a new photovoltaics-focused investment consortium with access to a $10 billion credit facility.

China Technology Development Group (CTDC), TBEA SunOasis and Goldpoly New Energy Holding aim to participate at all levels of the supply chain, from raw materials to PV modules, and will focus on driving down the cost of building large PV installations by 5% annually, in a push to make the technology more competitive with conventional electricity sources.

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