The Impact of China’s Production Surge on Innovation in the Global Solar Photovoltaics Industry

October 5, 2020

China’s subsidy-aided rise to dominance in PV manufacturing has driven prices way down, but at the cost of undermining promising alternative technological pathways. Policymakers should adopt measures to sustain greater diversity in PV and similar technologies.

 

KEY TAKEAWAYS

·       Sustained innovation in solar photovoltaics (PV) is vital to achieving global climate goals. Experts differ on whether today’s dominant PV technology can be improved to the extent required. The world needs more options; China’s dominance limits them.

·       China became the dominant global player in PV manufacturing during the 2010s with critical help from government subsidies.

·       Excessive subsidy-powered competition from China decimated the industry in the rest of the world, eliminating many innovative companies.

·       China’s surge shifted the course of technological innovation: PV prices dropped, efficiency rose, and process innovation flourished. But R&D-intensity, patenting, and start-ups cratered.

·       As the course of innovation shifted, alternative technological pathways that might have led to even lower prices and better performance were cut off.

·       Policymakers should learn from this experience and adopt measures that would create and sustain technological diversity in PV and other climate-critical technologies, while working with allies to curb clean energy mercantilism.