China Isn’t the Reason Solar is Cheap. Innovation Is.

“The only reason solar is so cheap is because China is dumping cells.”

I hear this a lot. So let me correct it. Here is the price, as of February 2015, of solar modules, per watt sold in Europe. SE Asia (Malaysia, mostly) is cheapest. China is next. Japan, Korea, and Germany are slightly above that.

First, note that SE Asian cells are cheaper than Chinese.  Second, note that the price difference between Chinese cells and cells from Japan, Korea, or Germany is about 5-7 euro cents per watt.

That difference, in the grand scheme of things, is trivial. It’s trivial for two reasons.

First: The installed cost of utility scale solar is currently in the range of $1.50 – $2 / Watt. That makes the difference in module prices from China to Japan / Korea / Germany about a 3-4% difference in total price

Second, the plunge in solar module prices worldwide has been from $77 per watt, to this current price point of ~50 cents per watt. So the difference in price between Chinese modules and Japanese / Korean / Germany modules is, at most, 1% of that.

Now, the Chinese manufacturers actually have driven much more price change than that. They’ve done so by injecting competition into the market, and forcing everyone to keep driving down the amount of energy, labor, and materials going into each watt of solar. But China didn’t even enter the market in a large way until the last several years. Solar was on a long-term exponential price decline for decades before that.

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