10 Dec /12

Solar Energy – China is the home for the solar industry

solar energy ChinaThe future of the photovoltaic industry in the European Union appears uncertain. After years of staunch governmental support for both producers and consumers, including tax breaks, buying incentives, and other measures to bolster the alternative energy market, many of these state initiatives have now run their course. As the European economy faces the danger of another recession, cuts in governmental assistance to the solar industry left many producers hanging and with an overstock of photovoltaic merchandise that had already been produced in the anticipation of further growth. Accordingly, slowing demand and drastic cuts, as they occurred for instance in France in 2010 with the suspension of all government aid for solar energy, pushed down prices of solar cells and panels.

The European photovoltaic industry is facing a paradoxical situation. While the EU is officially still advocating its ambitious energy agenda “Europe 2020” and energy production from solar power is up, reaching an all-time high of over 22 GW in 2011 within the EU, local support for the solar industry has significantly decreased in the last years, leaving the industry’s future uncertain and investors uneasy. And the numbers don’t help to restore investor confidence. In the last two years alone, over twenty European companies that staked their future on manufacturing solar panels and cells, have gone bankrupt, including the former world-leading solar cell manufacturer – the German company Q-cells. If solar energy production is up and manufacturing down, who is now producing the solar panels for the European market?

The answer is China. While European manufacturers have lost their competitive edge as a result of governmental cuts, Chinese producers have surged into the market and are now providing more than 60% of the global production, and thereby delivered more than $25 billion worth of cells, panels, and other key components to the EU in 2011 alone. While European manufacturers in almost all sectors are used to heavy competition from China, the sudden rise of the Chinese solar industry was eyed in a particularly skeptical fashion by European companies. In fact, many companies from the solar power sector filed an unfair competition complaint to the European Commission, accusing Chinese solar manufacturers of selling their products to other markets at a lower price than what they charge in China, deliberately operating at a loss to put competitors out of business. In response to the large number of complaints, the regulatory commission of the EU opened the biggest-ever anti-dumping case filed within EU history. If the allegations are confirmed, the case could result in the imposition of heavy duties for Chinese manufacturers for up to 5 years.

In the light of potential future problems overseas and the possibility of losing its main market, the Chinese government is investing in the development of the domestic solar market. According to a new five-year plan, China aims to invest around $40 billion in solar power generation aiming to add 10 million kilowatts of installed capacity of solar photovoltaic power stations between 2011 and 2015. This step will allow Chinese solar companies to direct part of their production to the domestic market, thereby creating a possible outlet should aggressive legislation ban the Chinese from the EU. At the same time, however, the creation of new, and undoubtedly booming, Chinese solar market should encourage European alternative energy companies to turn eastward and claim their stake in what is surely going to be the biggest energy market of the world.

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