President Joe Biden has emphasized green energy this early into his term, pledging to achieve a net-zero electricity grid by 2035. Biden has already signed a flurry of executive orders aimed at transitioning the U.S. economy away from its reliance on fossil fuels toward cleaner, renewable energy sources like solar and wind.
But domestic solar panel manufacturers may be unable to compete with their Chinese counterparts.
Paul Mutchler, energy director of commercial operations at Mission Solar Energy in San Antonio, Texas, admitted that U.S. manufacturers cannot compete with Chinese prices. As such, they’ve instead had to focus on the quality of their products.
“We have to make sure that everything we do here is up to a higher standard than anything else,” he told FOX Business‘ Grady Trimble on Monday, March 1. “We try to make sure that everything is made to a very high standard, even though there’s a lot of stuff coming overseas.”
Mission Solar Energy is one of the few manufacturers of solar panels in the U.S.
Cheap labor and capital not the main reasons why China dominates solar panel industry
China has cheap access to labor because of its large population. Its state capitalist system has allowed the government to support favored industries by giving land grants to build factories, low- or zero-interest loans for working capital and subsidies for finished products.
But a Green Tech Media article published in November last year explained that cheap labor and capital were not the main reasons why China has dominated the solar panel industry over the years.
“The silicon chip at the heart of your phone or laptop – made from the same polysilicon material of solar panels and with similar equipment – may have been manufactured in China, but it was likely made by an American semiconductor company. If cheap labor and capital explained China’s advantage, the country would also dominate the semiconductor industry,” the article said.
China only controls five percent of the semiconductor market despite investing far more money over a much longer period into the semiconductor industry. On the other hand, two-thirds of all of the world’s solar panels are produced in China, according to the International Energy Agency (IEA).
The article noted that over the past two decades, China has dominated the clean energy sector but has struggled to break through in other advanced technological industries such as artificial intelligence and 3D printing.
“A better explanation of China’s success in solar is that the energy industry prioritizes low costs and China excels at cost-cutting and scaling – not just from cheap resources but from a superior ability to innovate manufacturing processes to drive down cost and scale quickly, known as process innovation,” the article said.
The slow rate of product innovation – technological innovation that enhances performance – in the solar panel industry has favored China’s proficiency at cost-cutting and advantages in process innovation.
What the U.S. needs to do to be more competitive in solar panel industry
A rapid rate of product innovation would favor the U.S. because of its historically unmatched research and development infrastructure and human capital. (Related: Pentagon’s solar panel in space could one day supply electricity to any place on Earth.)
The article suggested that increased funding for research, development, demonstration and deployment could accelerate the rate of innovation in clean energy, which would give the U.S. an advantage.
“A post-pandemic stimulus package could get the ball rolling by dedicating funds to innovation and shaping industry incentives to benefit nascent and high-performance technologies, rather than simply rewarding least-cost producers,” the article said.
Clean energy is needed to combat climate change and Biden highlighted the urgency of that need with his early moves as president.
The article also acknowledged its importance. “As the industry grows to meet it – with more solar panels rolling out across the world, more turbine spires sprouting on hills and in oceans, and exciting new clean energy technologies reaching the market – clean energy will become one of the largest and most important technological industries in the global economy.”
The U.S. could be at the forefront of the industry “if we take a lesson from the chips in our phones,” the article concluded.
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