In the global solar industry, the recent past is not necessarily prologue.
Stanford Law School just published the results of a workshop during which a group of high-level solar industry professionals got together to predict which countries will capture the most economic value from solar and what factors could fuel rapid growth. The executives, who work in different sectors of the solar PV supply chain, said it’s still very much an open question which countries and companies will best capitalize on solar in the years ahead.
The traditional view is that China has already won the global race for solar PV manufacturing, thanks to government subsidies, access to low-cost capital, and low-cost labor. The massive run-up in production capacity in China’s has contributed to a wave of solar bankruptcies in once-dominant Germany and the U.S., where policymakers had hoped to develop a vibrant manufacturing base. The situation has led to a trade war and tariffs on Chinese solar modules.
Academics from Stanford University’s Steyer-Taylor Center for Energy Policy and Finance and the German Ministry for the Environment asked twenty high-level executives whether even more of the solar industry will gravitate toward China. The consensus was that countries in Asia with low labor costs will continue to have an advantage for manufacturing, but solar companies in the years ahead will be global players. Participants predicted that the industry will consolidate around a handful of global companies, each with a product offering tailored to localized markets.
“This ‘glocal’ model of the solar industry would resemble the structure of the auto industry: a small number of multinational players that differentiate their products and business models in different markets based on differing regulatory models and consumer preferences. In short: global brands, local manufacturing,” the report states.
The report also notes that there are a number of “wild cards” that can make one location more compelling than another for manufacturing, including the cost of borrowing money, the cost of coal and natural gas for fossil fuel generation, and how quickly emerging technologies, such as storage and more efficient panels, are deployed.
There are also ways other than manufacturing to benefit from the growth of solar, including research and development, improved manufacturing equipment, commercializing new technologies, financing, and marketing, as well as installation and maintenance. The workshop participants noted that government policies largely shape where domestic solar companies will focus their efforts, whether it’s technology innovation or manufacturing, for example.
“The spoils in the globalizing solar industry are still very much up in air. They’ll likely go to the companies and countries that are smartest about identifying their comparative advantages -- and about structuring their policies and financial mechanisms to act on those strengths,” according to the report.
The analysis is illustrative to solar industry watchers, since workshop participants sketched out what would be required for a massive scaling of solar power worldwide. In the best-scale “Golden Sun” scenario, solar generates 8 percent of global electricity by 2025, about 25 times the current amount, according to the International Energy Agency. To achieve that would require a very unlikely set of circumstances. That would include stricter environmental regulations and technical difficulties pushing up the price of shale gas in the U.S.; a groundswell of support for climate change-related regulations; and a range of policies to provide subsidies for solar.
Ultimately, the report reflects the views of the people involved, rather than an empirical analysis. These corporate executives want to expand the market for their products around the world. That implies low market barriers and more global competition.
“For the open access of Global Sun to emerge, countries will have to shift from today’s game of erecting barriers to an approach in which they frame, develop and exploit their comparative strengths," That, the participants agreed, "is a tall order."