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

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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:

 

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

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