China Invades California Solar Market

Nowhere is China’s rapid ascension to solar dominance more evident than in California. The Golden State is America’s solar mecca, accounting for nearly half of all solar power in the country. And now, after two years of climbing, Chinese manufacturers currently account for nearly half of California’s supplied megawatts of solar electricity. The reason behind the takeover is simple: Chinese companies have low manufacturing costs.

That manufacturing edge, combined with the economic recession, provided foreign firms with a key advantage in the solar market. Despite that recession, California’s market has continued to grow by another 33 percent in 2009, but not without careful attention by consumers to their tight budgets. In three years, China’s share of California’s solar market has risen from 2 percent to 46 percent. Meanwhile, American companies’ shares have dropped from 43 percent to 16 percent.

By the end 2009, China’s share had more than doubled from 21 percent at the end of 2008. Reaping the largest share of the benefits was Yingli Green Energy Holdings, which alone holds 27 percent of the California market. Yingli is followed by its better-known counterpart, Suntech, China’s leading solar panel manufacturer, with 10 percent.

The change is all about low-cost manufacturing, as well as a lack of import-export trade policies to encourage the sale of American-made products. Yet nothing is written in stone at this point. The solar market, in California and elsewhere, is still volatile, and last year’s winner could easily be next year’s loser. The Obama administration recently allocated $2.3 billion in Recovery Act funding to promote solar manufacturing at home, but so has China, and tax credits alone cannot counteract significantly lower labor costs.

However, U.S. trade relations with China are also subject to unexpected changes, as China’s undercutting of U.S. manufacturing jobs continues to advance. Therefore, many Chinese solar firms are looking to open manufacturing plants here in the States, especially in the Southwest – close to the California market they have come to occupy in recent years.

Via the New York Times

Photo Credit: Daily Tamasha

Posted on January 25th in Solar News by Dan.