Cratering Costs have Significant Implications
The conspiracy theory on Chinese solar industry has long been that the near-hundred producers would use rest-of-world incentives to build volume and cut costs, only to install domestically as costs approach local parity. We’re not there yet, but with local module prices under a dollar a watt (down 75% since 2009), installations are in high gear. The 12th Five Year Plan calls for 20 GW installed by 2015 and 50 GW by 2020. Experts believe this is conservative. If so, Chinese installed solar PV capacity will probably exceed the US’ by 2015.
Will their solar industry make any money? Well, if the measure is a 15% target gross margin, but sub-critical returns on (near free) capital, the answer is YES. The country’s most successful poly manufacturer, GCL, claims a $17/kg cash cost – at $20/kg retail, that’s $0.125/watt. Add $.70/watt (and falling), for downstream costs, and a good manufacturer can earn decent margins at sub $1/watt sales price today! Add $1/watt to install (in scale), and the life cycle cost is about a dime a kilowatt-hour – two or three years ahead of most roadmaps. Wow.
Are producers dumping? I understand that some Chinese have offered to shift final assembly to the US, but I don’t believe the US can win a fair argument – who subsidizes more – cheap capital (China) or DOE loans, arguably excessive tax credits and customer assistance (US)? The pot is calling the kettle black.
US policy/trade officials surely know that, over time, the module will comprise an ever shrinking portion of a solar installation – inverters, framing, labor and other balance-of-system issues will dominate. Better to train more electricians, plumbers (for solar hot water), and ease the permit structure than to chase ghosts you can’t catch.