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

The views expressed are those of the author and are not necessarily those of Scientific American.


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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.

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 About the Author: An engineer and policy researcher who writes about energy, technology, and policy - and everything in between. Based in Austin, Texas. Comments? david.m.wogan@gmail.com Follow on Twitter @davidwogan.

The views expressed are those of the author and are not necessarily those of Scientific American.





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  1. 1. Sisko 11:22 am 09/10/2013

    David

    Your dramatic headline is inaccurate. It is the cost of labor,the quantities being built, and other overhaed costs that lead the lower total cost of production. Several other areas around the globe can match China’s touch labor cost, but those areas have other disadvantages such as political corruption or a lack of reliable power.

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  2. 2. jerryd 4:04 pm 09/10/2013

    PV needs little labor that with added shipping means the US can compete with them.

    And the price mention is now for PV panels, not just cells OEM.

    I buy PV retail at under $.80/wt making it quite cheap now, thanks to the Chinese forcing others to price PV competitively.

    Many sources though a good one is sunelec as an example to see if others are giving you a good deal.

    PV is now so cheap I’m going offgrid this winter in my new home powering everything including A/C in Fla.

    I’m also rather PO that wind turbines in home, building sizes of 1-10kw are way overpriced when they really are simple machines, more simple than a moped/MC of the same power and shouldn’t cost more..

    Yet even the Chinese while they have the price around $1.5k/kw they die so quickly they are not worth buying. So I’m building a 2kw unit that matches Chinese price but will last 50+ yrs!! And good profit at that price.

    Link to this

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