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Producing scale driving China PV not lower labour costs, US study reveals

NREL and MIT report finds China’s PV manufacturing advantage could be replicated globally with further solar innovation

Solar panels in Shanghai
The study’s findings suggest the current advantages of China-based manufacturers could be reproduced around the world

Production scale is driving China's current advantage in PV manufacturing and not lower labour costs, as previously thought, according to a new report. The report, from the US Energy Department's National Renewable Energy Laboratory (NREL) and the Massachusetts Institute of Technology (MIT), states the majority of the region's current competitive advantage comes from large-scale PV production and supply chain benefits.

The prevailing belief was that low labour costs and direct government subsidies for PV manufacturing in China account for the country's dominance in PV manufacturing. But the NREL/MIT study, called Assessing the Drivers of Regional Trends in Solar Photovoltaic Manufacturing, shows a majority of the region's current competitive advantage comes from production scale enabled, in part through preferred access to capital (indirect government subsidies), and resulting supply chain benefits. The study's findings also suggest the current advantages of China-based manufacturers could be reproduced in the US and around the world.

The study shows that China's historical advantage in low-cost manufacturing is mainly due to advantages of production scale, and offset by other country-specific factors, such as investment risk and inflation. The authors also found that technology innovation and global supply chain development could enable increased manufacturing scale around the world. This could result in "broader, subsidy free PV deployment" and the potential for "manufacturing price parity in most regions," NREL said.

The analysis also indicates further innovations in crystalline silicon solar cell technology may spur new investment, significantly enhancing access to capital for manufacturers in most regions and enabling scale-up, therefore equalising PV prices from manufacturers in the US and China.

The findings in the report follow China, earlier this week, announcing policies to boost solar power developments in the BRIC country. The new subsidy policies, scheduled to last 20 years, are the first of their kind for China and aim to help advance solar technologies and progress the BRIC country's PV industry.

NREL senior analyst Alan Goodrich, said, of the report: "Our analysis finds that investments in technology research and development are critical not only to the widespread deployment of solar PV in most locations, without subsidy, but also may equalise factors that affect regional competitiveness, therefore creating opportunities for US-based manufacturers. The race for cost-competitive clean energy from the sun is far from over and incredible growth opportunities remain."