How Chinese solar practices are actually good for the industry

What is it about the Chinese solar industry that scares us so much? Is it truly a fear that distorted market prices will lead to large-scale bankruptcies in the West? 

Or are we currently engaging in a textbook-version of “us vs. them” syndrome as we see a country and an industry moving forward at a pace that the West is struggling to replicate?

With the involuntary bankruptcy of Suntech Power, the former stalwart of the solar industry, as the backdrop to this article, a few realizations have emerged that would seemingly clarify the future of the industry and especially the future relationship between China and the solar industry writ large.

Many industry professionals claim, and I agree, that it is unfair to many Western manufacturers that the technology they have developed over the past thirty years is now being utilized by Chinese companies that can produce similar products faster, cheaper, and more efficiently than a Western labor force.

Similarly, I understand that every time a Western company sees an article in which a Chinese government-owned bank provides a loan to an LDK (or previously a Suntech), this represents millions of dollars that the average Western company could never and will never receive.

And, it is important to note that as an individual who believes in the power of free markets, I understand the eventual necessity of governments taking a step back when deciding the “winners” of a certain industry.

When innovation and a fluid business decision-making process are needed, relying on a bureaucratic government is a fool’s errand.

However, as I reflect further on this situation, I return time and time again to the idea that current Chinese solar practices are great for the industry.

For one, the flooding of cheap panels into the residential, commercial, and utility markets has decreased prices such that almost any individual/company/utility anywhere in the developed world can afford to purchase or lease a solar system.

This is good not only for cost savings to the customer but also to the environment, which no longer need be reliant upon antiquated means of energy production.

Most importantly for the long-term health of the industry, though, this flooding of the market by Chinese manufacturers has greatly increased the rate of innovation in the industry.

In addition to drastic improvements in efficiency, temperature coefficients, and other modular technology that have emerged as Western manufacturers struggle with the balance between quality and price, the need to compete at an ever-changing cost structure has led many companies to develop various financing structures and/or niche BOS products.

SunPower, the highly respected manufacturer based out of California, sells its high-efficiency residential panels for approximately $2/watt, a price that makes an outright purchase of a solar system unaffordable for the vast majority of individuals or families.

Despite this, SunPower has still found a way to thrive by developing sleek, high-efficiency, back-contact panels and a financing structure that attracts customers with its zero-money down promise.

On the other side, many companies like Twin Creeks Technologies are constantly unstealthing (and just as many eventually failing) as they try to capitalize on the ever-increasing need for companies to cut costs in areas of the supply chain other than modules.

Isn’t this, then, the best of all situations for the solar market – a gentle (or not so gentle) guiding of the market’s invisible hand in order to reward innovators and punish those that feel it is more worthwhile to rely on previous achievements, hire lawyers, and sue?

The necessity of protecting a country’s industries and jobs will always remain a point of vast importance in a democratic society; but, the circumstances at play here may just provide a little glimpse into what the future of the industry may hold – many bankrupt or failing companies and a few creative, innovative successes.

In a world where the West prides itself on its past innovations, maybe it would be wise to stop engaging in retroactive and conservative trade tariffs and begin relying on what has worked in the past – innovating.