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Thursday, September 30, 2010

PV Manufacturing in the US and Europe

To fully leverage the economic and environmental benefits of the emerging CleanTech industry, the US and Europe need an aggressive and comprehensive approach to sustain and grow solar photovoltaic manufacturing. Wall Street may prefer the economic efficiency of manufacturing PV products in China with coal-powered electricity for deployment in Germany and California, but a more functional global market for PV would keep manufacturing next to end markets. It’s not the same as ICs; there are good reasons to take aggressive steps to incent manufacturing investments in Europe and the US.

With over 75% of the world’s installed solar PV energy capacity, Europe is the global center of the high-growth solar industry projected to contribute as much 14% of the world’s energy supply by 2030. The US is closing quickly and expected to surpass Germany in PV demand in the next 3 years. But China is now making over 50% of the solar PV cells and modules, creating a dangerous imbalance between supply and demand. It’s dangerous, in my opinion, because it’s not politically sustainable and will contrain technical advancement.

The SEMU PV Group has been advocating for meaningful and effective public policies that support the growth of the global solar industry since its inception. In Asia, we have been focused on advocating demand-side policies to encourage the development of local markets for solar products, primarily in China, Taiwan and India. In 2008, we produced a White Paper entitled, “China’s Solar Future,” a report containing specific recommendations for the accelerated adoption of PV generated electric power. The report stated, “It is important that China occupy a leading position in the demand for solar power, as well as contribute to global supply.” The PV Group made similar appeals in Taiwan and India, also supported by well-documented White Papers. In the US and Europe, however, supply side policies are needed to increase local production of PV products.

Unlike fabless semiconductor development or outsourced discrete electronics manufacturing, PV products are dependent on the continuous improvement of manufacturing process technology and require the close coupling of R&D and manufacturing. New technologies, material sets and recipes identified in the lab, must be developed and validated on high-volume production environments. Long term market success is increasingly defined by the ability to go “from lab to fab.” These requirements compel a strong link between R&D with manufacturing. Loss of the manufacturing base due to poor financial incentives, lack of financing and other policies that discourage plant locations and upgrades in Europe will create powerful incentives for R&D and other key contributors to the value chain to migrate to Asia. That may be good for Asia, but bad for the Europe and US, and bad for fossil fuel reduction.

For Europe and United States, policymakers need to develop programs that seek a balance PV demand with PV supply--and that means policies that retain and grow the local manufacturing base. Building solar cells and modules in one region and shipping them around the world for deployment in another is not an optimal greenhouse gas strategy. Unlike computer chips, there is a meaningful cost advantage to manufacturing solar PV close to where it will be deployed. It makes good economic and environmental sense to leverage this cost advantage through sound public policies that support local manufacturing.

Trade restrictions and reprisals against Asian manufacturers are not the answer and will ultimately harm all manufacturers and global environmental goals. Libertarian rhetoric and calls for “lower taxes and less regulation” aren’t realistic or substantive. The solution lies in recognizing the unique needs and important economic benefits of manufacturing and crafting sound policies that retain and grow manufacturing in the US and Europe.

Photo caption: SolarWorld 500MW Cell and Module fab in Hillsboro, OR