In order to understand the current solar-energy revolution, one where China plays a major role, I want to take you on a journey and give you a bird’s eye view of a number of moments that have been crucial in the development of solar-energy.
It was Albert Einstein who provided a detailed description of the theory of the photovoltaic effect for the first time. He was rewarded for his work with the Nobel Prize for Physics in 1921. However, the discovery of the photovoltaic effect in 1839 is attributed to the French physicist Alexandre Becquerel.
The most widely used pv-cells are made from silicon, and electricity is generated between two layers of silicon when light hits the cell. The light-electricity conversion is what we call the photovoltaic effect or pv-effect. The term derives from the Greek word ‘phos’ meaning light and the word ‘volt’, a unit for electrical voltage.
From the 1920’s we go to the 1950’s, when developments begin to speed up. Cells become more efficient and NASA is the first to start using the still exceedingly expensive solar cells in their space program.
In the late 70’s we fall into the second oil crisis which shows us again that fossil fuel is not inexhaustible and furthermore, susceptible to political unrest. This is a realization that has a positive effect for solar-energy; all over the world the potential to use the sun’s energy for the production of electricity gets a lot more attention. It is during these years that we see the first commercial production lines for solar panels being set up in America – the same panels as we know them now, made from pv-cells.
During these turbulent years in the 1970’s progressive local governments in the US start investing in large solar-energy fields that provide electricity for thousands of homes. These were not the panels we see today, but the cheaper thermal solar-energy ones. Most of these developments could be found in sunny southern California. Mainly because of the costs involved, private investments are hardly found at this time. The panels are still expensive and electricity cheap. This gap between the expense of the panels and the price of electricity exists everywhere, so by the 1980’s Australia and Germany start incentive programs to stimulate both individuals and industry to invest in solar-energy. In the first instance this is meant for pv-panels, and solar water heaters follow later.
Developments in the world market
Incentive programs like the one set up by the German government take hold and developments in solar-energy start to take on a clearer form during the 1990’s. Germany takes the lead and can rightly be seen as the founder of what we call solar-energy today. Next to the incentive programs that were already mentioned the German government made huge budgets available for research and development, resulting in production facilities for solar-panels and converters. The actions driven by this vision resulted in growth that had not yet been seen anywhere in the world.
In spite of the fact that Germany had given a sustainable life to solar-energy and that the solar industry was beginning to make a significant contribution to the German economy, it took a while for the American consumer to see the advantages of solar-energy. Things began to change when in 2009 President Obama gave the go-ahead for financial incentives towards the purchase of pv-panels. It was the start of a sustainable development; producing your own clean energy became achievable. The Investment Tax Credit (ITC) gives American households an opportunity to claim 30% of their investment in solar energy on their Federal Corporate Income Taxes. The ITC is set to be extended beyond 2022. Other fiscal motivators are organised by different states and councils.
Not only individuals have gained an advantage, but industry as well. Since President Obama was elected the American government has been a lot more generous with subsidies for production. Amid heavy opposition from conservatives, the opening of these green doors has created many jobs in the sustainable sector. Today 219,000 people work full-time in the American solar-energy industry, 35,000 more than a year earlier. On the other hand, the oil industry is slashing jobs rapidly, with 17,000 jobs lost last year as the price of oil plummets. There is no sign that it will recover any time soon.
Solar energy advocate: Larry Hagman
Ironically, it was the man who played the ruthless oil tycoon J.R. Ewing in the TV series Dallas who would become committed to solar energy and bring it to the public’s attention. Hagman showed us how different he was from his well known TV persona. After the disastrous oil spill in 2010 enormous quantities of oil contaminated the Gulf of Mexico, destroyed a vast amount of marine life and ended up soiling the coastline from Florida to Texas. Larry Hagman decided to go public with his sustainable hobby and used his popularity to promote solar-energy.
At that time his home in Ojai, California was equipped with a 200kWp solar-power system with which he powered his house, and even the water-well’s pump used solar-energy to pump the water from great depths. He appeared in commercials for a German brand of solar-panels, and in lieu of payment he had them ship whole containers full of panels to Haiti in 2010 to help with rebuilding the earth-quake-ravaged country. Larry Hagman, unfortunately, died in 2012 after a battle with cancer.
And so it was America that got solar-energy going during the oil crisis in the 70’s, and it was Germany that saw commercial possibilities in the 80’s which lead to the birth of a market with great potential. Not long after the turn of the century a new player announced itself on this lucrative stage: China.
From behind its great wall, China observed the advancements in the sustainable energy market in America and Europe until it saw its chance in 2003 and embraced it. The Chinese economy was running at full speed and China had already mastered how to produce goods cheaply and was exporting these goods to all corners of the world. Internationally coined ‘the factory of the world’, millions of its citizens flocked from the hinterland into the cities in order to try to earn a living in clothing, steel or electronics factories.
A handful of Chinese companies get ready to produce pv-cells and solar-panels. Financially aided by the government, these companies have the potential to innovate and set up production lines with the goal of both feeding the expected worldwide demand in solar-panels and dominating it. It’s not long before production lines are up and running in several provinces. Often, existing steel factories are stimulated to convert their production lines with cheap government loans. And so approximately 400 Chinese brands appear on the world market between 2004 and 2008.
China grows to control 80% of the world market by 2009. Mission accomplished? You might think so, but the Chinese government continues to give out cheap loans, chiefly to provide the manufacturers with the opportunity to expand and get a firm foothold on all continents. In 2010 the top 10 of solar panel manufacturers is dominated by Chinese companies.
Due to China’s dominance in the world market, by 2009 many western manufacturers are in trouble. Not surprisingly, they can’t produce their panels for the price at which Chinese panels are sold. Many western companies fall into bankruptcy in just a short space of time. Others retreat and try to survive inconspicuously. A battle is being fought between Chinese and western panel manufacturers, but not in plain sight of the consumer. Only the falling prices are visible and that is what we all are sensitive to. More about this a little further on.
The battle becomes more grim. Now that most western manufacturers are out of the running or heavily incapacitated, the Chinese manufacturers have each other as competition. Factories in China produce at full capacity and are shipping containers filled to the brim with solar panels to America, Australia and Europe. That is, until some day in 2011, something seems to change. Buyers and traders used to line the quay to pick up their orders but now the quay remains empty.
The reason for this is that the market was going through something it had not previously experienced: overproduction. The real demand for solar panels had not been adequately estimated, and the factories kept producing resulting in a surplus. This in turn resulted in further falling prices as a panel that sits in storage only costs more money. The solution? Get rid of it. Cheap. All over the world there are surpluses and falling prices can be seen everywhere. The large manufacturers start closing production lines to cut costs. Consequently their share price falls. All of a sudden investing in solar-energy does not seem so interesting anymore.
So now it’s the Chinese manufacturers who are near bankruptcy. But of course the Chinese government does not let this happen. Losing face is not an option so neither is bankruptcy. For this reason China opts to build its own mega solar fields, and naturally all the panels are home produced. And so 2013 is the year we see large solar fields pop up all over China.
Import duties on solar panels
As already mentioned, 2011 saw many western manufacturers close their doors because they could no longer compete with Chinese manufacturers. This is the year the American government decides to investigate how much the Chinese government aids the manufacturers exporting panels to America. In 2012 the outcome of this investigation results in extra import duties for Chinese solar panels. As of November 2012 the duties amounted to, on average, 33%. The investigation continues and identifies companies deemed to be guilty of unfair practices. These are then slapped with duties amounting to 241%.
These duties are aimed at stabilizing a solar-energy market that seems to be adrift and lacking honest competition. The American government feels that American companies should have the same chances again. Of course there are opponents to these measures, and these opponents warn policy makers that duties like these will ruin the market and cost thousands of jobs.
Extra duties in Europe
Not long after America decides to slap extra duties on Chinese panels, Europe starts its own investigation. The same opposing voices can be heard warning about job losses. The European solar panel industry urges governments not to create new taxes, a message that is seconded by threatening rhetoric from China: if Europe sets import duties the same will be done to European goods.
In June 2013 Europe eventually decides on a temporary import duty of 11%. A month later China and Europe come to an agreement and set a minimum price for a panel. Interestingly, by July 2013 the extra duties that America has set show a positive effect. The solar-energy sector shows an increase in jobs by a couple of thousand!
Official White House Photo by Lawrence Jackson