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China, Solar Power & the Supply Chain

I have been giving some consideration to China's impact on the US solar industry supply chain. After a bit of investigation, it looks like the average investment for a 5KW system that is on the grid and has battery backup is about $40,000. I thought about the cost erosion as China has taken down its pricing per watt, effectively blowing away non-Chinese manufacturers.

I understand that companies like Solyndra could not compete with the Chinese pricing, so we have started adding tariffs to solar products imported from China. If we spent $1 billion to equip 25,000 homes with solar power, it would seem like we have not accomplished that much energy conservation. However, the US government spent $700 billion bailing out big banks and insurance companies, which are richer than ever. If we had used that money to equip homes with solar energy, we would have 17.5 million homes powered with some kind of solar energy assistance today. Since most homes require closer to 2KW of power, we could have easily doubled that total.

From another perspective, if we set the cost of a 968MW solar power plant in Blythe, Calif., at $6 billion and the average power supply per home at 3KW, the same $700 billion could have powered 37 million homes. As of 2011, there were 13.7 million housing units in California. That $700 billion that went to banks and insurers could have provided solar energy to more than twice the population of California. Consider Nevada (1.18 million households) or Wyoming (265,000), and you can easily understand how that $700 billion could have been better utilized setting up entire states with solar power.

The top-selling car in California is the Prius. An all-electric plugin car (not powered by fossil fuels) could be deployed even faster if we had an efficient solar grid network. The sun is not going to stop providing energy anytime soon.

Let's get back to supply chain relevance. Let China's government subsidize solar cells and panels. Don't charge a tariff. Buy as many cheaper solar panels as possible as quickly as possible. Do everything we can to reduce the carbon footprint, stave off global warming, and reduce the dependency on foreign energy. The sun is not a political power. It will not threaten us with labor shutdowns, filibusters, partisan holdouts, or increased costs.

Sustainability starts and ends with energy issues. Yes, our solar industry OEMs will feel the pinch and may go out of business. But in the long run, when we have become less dependent on the manipulations of foreign market strategies and fossil fuel interests, the same genius developing the solar businesses here will be incorporated into harvesting, distribution, and storage technologies that will augment the lower cost of imported solar cells and panels.

Transportation costs are common to all supply chains. When we see electrically powered common carriers in the form of trains, trucks, and perhaps even ocean-going freighters, we can begin to hope for the greatest and longest growth in our history. Mass deployment of solar-derived electricity will set us free from restrictive and even punitive practices now thrust upon the consumer via big money interests from both corporate and political power players.

24 comments on “China, Solar Power & the Supply Chain

  1. Kevin Jackson
    November 20, 2012

     

    I was furious when I heard we (the U.S) were adding tariffs to China's solar cells and panels.

    Yes we will lose some U.S. based cell and panel manufacturers who's business models are pretty shaky to begin with (manufacturing silicone products in the U.S. – dumb idea) but we will more than make that up on the installation/maintenance/repair segment of the solar industry.

    With solar cell based energy systems being finically viable for the first time ever (without tariffs) the installation/maintenance/repair segment of the solar industry will explode. Too bad our dumb lawmakers only listen to one side of an argument.

    Its bone-headed regulatory moves like this that are helping destroy what's left of this country.

  2. William K.
    November 20, 2012

    Purchasing lots of solar arrays from China at their artificially low price is an interesting idea, but there are a few problems that you have not brought into the discussion. One very large problem is product quality. I define product quality as the ability of a product to meet it's specifications for a period of time long enough for me to at least recover the value of the purchase price. It seems that “a few” of the made in China solar panels fail in that account, mostly through little things sucj as poor solder joint quality, or interconnetion wires cut just abit to short, so that they come loose after a few dozen temperature cycles.

    So the question is “is a half priced array that fails after thre months a good value?” If the purchase was government subsidized on our end, then we have a case of “what now?” as we wonder how to make the non-functional solar array work again. It really does not matter much as to how these defects become so common, what matters is the amount of waste , both money and resources, that comes from purchasing based on initial price alone. But I would wager that product lifetime was never part of the discussion.

  3. dalexander
    November 20, 2012

    @william. I have not heard of early failures. In fact, the increasing demand arose from the fact that the solar cells are being consumed by companies who are engaged in the installation of entire systems. The solar cells and panels have enjoyed multiple reorders from the same comapnies which would imply that the products have a good standing with middleman firms and customers. I would like to read of any failure trends as I am also a component engineer involved with reliability issues. Please forward any information you have on Chinese manufacturered solar goods failures. Thanks for responding. If there is a failure trend of considerable merrit, let's get that information published ASAP. Thanks for any and all assistance on this regard.

  4. William K.
    November 20, 2012

    What I read about in a comment in a Design News blog was failures due to wires inside the cell bank assemblies having no slack at all, so that thermal expansion caused the connection to fatigue and fail. What I have observed on other electrical products made in China is a similar thing, wires as short as possible with no slack to allow for even a bit of thermal expansion of the assembly. 

    Of course it is entirely possible that the problem was realized and the assembly instructions modified. Corrections do sometimes get put into effect. That would eliminate the failure mode.

    The wiring failure would not show up in testing of the individual assemblies because it was only when a bunch of them were in a panel that the improper connection was made. Also, that was about two years ago, so things may have changed.

  5. prabhakar_deosthali
    November 21, 2012

    Douglas, you have hit the nail at the right place !

    When it comes to the technologies that are going to benefit the whole world , the politics, the country borders and those import restrictions or add-on tariffs should not come in the way. The technology should be allowed to permeate freely across the world and organizations like UN should take a lead in it.

     

    On the quality of the product point, If Chinese solar panels have some shortcomings , may be some US entrepreneurs should help them improve on those before importing them -this may still prove to attractive in terms of the final product cost. Just charging some additional duties on these products to discourage their import is not the answer.

  6. FLYINGSCOT
    November 21, 2012

    I too am frustrated at the banking bailout.  I suppose we should try look on the bright side and say that having the bankers pay tax on their fat bonuses does help us all in the long run.  Back to the point….cheap solar cell installations are probably OK in the short term but I would worry about maintenenance, longevity and the environmental impact of disposal.  Japan is doing a decent job at reducing power consumption and so maybe other countries should follow suit as there is no really clean power source yet.  Anyway I better get back to work developing this fusion reactor project.

  7. a9astrid
    November 21, 2012

    It is ironic that it is more economic to use non-renewable fuels to ship solar panels from half way around the world rather than make them locally just because labor is cheaper while we run near record unemployment levels here.

  8. Ashu001
    November 21, 2012

    Kevin,

    All US Government policy can be traced very simply to who spends how much on lobbying.

    If you follow the lobbying Dollars in DC,you realise who gains the most Bang for buck there.

    Crony Capitalism of the Highest order rules in DC today.

    Get used to it!

    Regards

    Ashish.

  9. Ashu001
    November 21, 2012

    Njnews,

    Not anymore.

    Today American employees are ready and willing to work for the same Salaries as the Chinese.

    Its just too much of an issue for most Corporations to ship their production back around the world today.

    That's the only thing stopping us from getting our jobs back today.

     

  10. dalexander
    November 21, 2012

    @Kevin…I completely agree. The bottom line is who is getting their pockets lined. The politicians and the legislators. I think Senate Bills should be limited to one item only in that way it becomes clearer to decipher what is being asked for, but when a whole bunch of piggy backing is tagged on to the critical legislation, it becomes nothing short of odious the stuff that is getting voted into law and proactice.

  11. Ashu001
    November 21, 2012

    Douglas,

     

    Don't forget the majority of politicians in DC are there to get rich by hook or crook.

    Not to take care of Ordinary Citizens like you and me.

    Once you figure this fact out,everything else becomes so much easier to deal with.

    I don't know if this is any consolation or not but I just saw some Data on China's Congress and its way-way richer than the US Congress!!!

    Sure American Politicians are corrupt but they just don't hold a candle to the Chinese!!!

  12. Kevin Jackson
    November 21, 2012

    If quality is a valid concern for Chinese panels, it only means U.S. panel manufacturer's can use cheap cells from China and build quality for less.

    Still, a huge win for all humanity.

  13. dalexander
    November 21, 2012

    @Kevin, that is exactly right.

  14. bolaji ojo
    November 22, 2012

    There are standards in the West for imported products and notwithstanding the quality of products made in China, the standard of the West must be met for products to be sold in the United States and other Western locations.

  15. dalexander
    November 22, 2012

    @Bolaji, Any company that does not include in their purchase orders the requirment for the product to meet the advertized or published spec for function and reliability is flirting with poor quality issues. That is why I stated in an earlier article that all subsequent shipments by the supplier must match the articles that were sent as first articles and approved. The West does have high quality standards and as you indicate, those that don't meet the requirements will immediately lose the business if they cannot implement effective corrective actions.

  16. elctrnx_lyf
    November 24, 2012

    There were lot of choices that a government make includes saving the banks or providing better infrastructure. I do believe government can invest in solar power instead of saving banks. But is it not an unwelcome by millions of people living because of working indirectly or directly under these huge banks. But in any case the government should keep investing for the better future of country. And there is nothing better than energy that is necessary for all people.

  17. Houngbo_Hospice
    November 24, 2012

    @elctrnx_lyf

    “I do believe government can invest in solar power instead of saving banks.”

    I can't agree with that. If banking the systems collapse, it can be detrimental for the country's investment including investment in solar power. 

  18. Wale Bakare
    November 25, 2012

    A few governments are investing in solar power projects and i think in the future could save such countries great deal on energy cost wise.  Indeed, it could boost supply chain sector.

  19. Clairvoyant
    November 25, 2012

    Agreed, Wale. Non-renewable energy sources are running out. The world needs to invest more in renewable sources before we reach energy shortages.

  20. Mr. Roques
    November 25, 2012

    Well, humanity has been able to solve their problems, in a Just-in-time fashion. That shouldn't be our think pattern but it mostly refers to the different interests that are involved in solar power. 

    Big oil companies are doing their research but they still have their “cash cow” in traditional fossil fuel. 

  21. Clairvoyant
    November 25, 2012

    Based on scientific data, we are already past the point of being able to reverse the effects on the world from the use of oil.

  22. Kevin Jackson
    November 26, 2012

     

    I can't think of any energy source that doesn't have the maintenance, longevity and the environmental impact of disposal issues. Yes maintenance is low and longevity is high but when the sun wears out the environmental impact of disposal will be a huge problem to address.

    While a lot can be done to improve efficiency, eventually you reach a dead-end. Unless you say that the goal is for no one to use any energy, energy will still have to be generated and the generation of that energy will pollute.

    Thanks for mentioning fusion. So far we've spent enormous amounts of money trying to do it and for the last ten or twenty years, it has always been another ten years or so out. When I was a child nuclear power was new and exciting (like fusion is now) and we were told “the power will be so cheap there will be no point in metering it”. In reality, it's some of the most expensive electricity we make. Don't be surprised when fusion is more expensive than burning coal, collecting the CO2 and shipping it into outer space.

  23. Kevin Jackson
    November 26, 2012

    I agree. We need to eliminate minimum wage laws in this country (U.S.) so manufacturing can be done here. A manufacturer could pay U.S. employees the same as the Chinese workers plus the shipping cost that would be saved. In this way Americans could have those jobs and the company would still enjoy the same profitability.

  24. Kevin Jackson
    November 26, 2012

    Isn't the game over when the politicans tell you they didn't even bother reading the bill before making it law?

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