Plunging Solar Module Production Costs Give China Huge Advantage

China’s costs for producing solar modules have plummeted by 42% over the past year, which gives Chinese manufacturers a huge cost advantage over the U.S. and European solar equipment producers, Wood Mackenzie said in a report on Thursday.

In the past 12 months, Chinese solar production costs have fallen to US$0.15 per watt, which suggests that the United States and Europe can’t compete with the Asian manufacturing powerhouse currently, according to the report from the energy consultancy.

“As the world’s solar module powerhouse, China already commands 80% of global capacity and this is being reflected in soaring domestic installations. This year its domestic solar additions will be double those of the US and the EU combined,” WoodMac said in the report.

Solar power installations in the U.S. and Europe are on the rise, too, and so are efforts to reduce dependence on Chinese products in the supply chain.

The U.S. solar industry installed 6.5 gigawatts-direct current (GWdc) of capacity in the third quarter of 2023, up by 35% year-over-year as federal clean energy policies begin to take hold, according to the U.S. Solar Market Insight Q4 2023 report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie. As a result of this growth, the United States is expected to add a record 33 gigawatts (GW) of solar capacity in 2023, the report showed last week.

The U.S. has imposed tariffs on Chinese solar module imports, which has led to less than 0.1% of U.S. module imports coming from China this year.

The EU is also considering some trade protection measures but has met resistance from industry.   

In a joint statement, 433 European solar companies and associations, led by SolarPower Europe, warned at the end of November that “trade measures would injure the EU solar sector to the detriment of the EU's green energy transition at a critical moment in time.”   

By Charles Kennedy for Oilprice.com

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