Germany seemed poised to dominate solar. Yet it was Chinese solar firms who used German equipment to make solar cells and modules to sell back to Germany's subsidized market. What happened?
I wonder how much does learning curve play here. At the end of the day, it is a function of demand and especially domestic demand. China now installs nearly half of global solar every single year and the scale is tremendous. And there are many favourable conditions for China the scale up.
Would hazard a behavioural explanation here. For any western (actually non chinese) business, unit economics are up and centre even if they is getting some degree of government support. In their mind they know support is an temporary tap that may stop anytime and they by default work towards a profit /RoCe achievement (to be fair their expectations on this may be higher than Chinese competitors).
Imo Chinese businesses benefit from firstly a higher level of subsidies but more importantly greater certainty of such subsidies over much longer period which gives them the mental framework /confidence to go big on e.g. setting up capacity disproportionate to prevailing market size and gain economies of scale. They believe to a larger extent that the government has their back and they will not go bankrupt. The Germans would raise the same capacity in phases but by the time they do they lose the cost advantage and eventually the market...
I think Chinese entrepreneurs has an advantage. They saw how popular rooftop solar water heaters were and they concluded from that that solar panels had a market. Fortunes were made by those manufacturing rooftop solar water heaters
China mastered industrial clustering—creating self-sufficient ecosystems…
Subsidies and innovation alone aren't enough. To compete, Western economies need long-term industrial strategiesthat combine R&D with manufacturing resilience—otherwise, they risk driving innovation while outsourcing production.
Most of this story transpired during the era of super low interest rates. Now that rates are up to normal levels and will never return to <2% long term, the near infinite subsidies and capital investment will rapidly diminish. Look at the pressure private equity funds are under to generate cash at 6+%. The Chinese government (especially the LGTVs) and all governments will have to greatly reduce the subsidies which has driven everything the past 15 years.
Not so much a paradox as a mis-allocated weighting between invention, initiation, improvement and implementation (doing), and iterative (cost curve) aspects of innovation. Western cultures are very stuck on invention and initiation by (typically) some identifiable hero genius persona as the end-all-and-be-all of innovation, but large scale collective implementation and iteration are where the most effort, risk and ingenuity is required to accomplish real world outcomes.
Has the the solar market "crash" been well-defined in terms of time period and main drivers? To me it seems like the adoption for solar has only been going down since the early 2000s.
I wonder how much does learning curve play here. At the end of the day, it is a function of demand and especially domestic demand. China now installs nearly half of global solar every single year and the scale is tremendous. And there are many favourable conditions for China the scale up.
Surely cheaper energy costs in China gave them a significant competitive advantage in what is a very energy intensive industry?
Would hazard a behavioural explanation here. For any western (actually non chinese) business, unit economics are up and centre even if they is getting some degree of government support. In their mind they know support is an temporary tap that may stop anytime and they by default work towards a profit /RoCe achievement (to be fair their expectations on this may be higher than Chinese competitors).
Imo Chinese businesses benefit from firstly a higher level of subsidies but more importantly greater certainty of such subsidies over much longer period which gives them the mental framework /confidence to go big on e.g. setting up capacity disproportionate to prevailing market size and gain economies of scale. They believe to a larger extent that the government has their back and they will not go bankrupt. The Germans would raise the same capacity in phases but by the time they do they lose the cost advantage and eventually the market...
I think Chinese entrepreneurs has an advantage. They saw how popular rooftop solar water heaters were and they concluded from that that solar panels had a market. Fortunes were made by those manufacturing rooftop solar water heaters
China mastered industrial clustering—creating self-sufficient ecosystems…
Subsidies and innovation alone aren't enough. To compete, Western economies need long-term industrial strategiesthat combine R&D with manufacturing resilience—otherwise, they risk driving innovation while outsourcing production.
Most of this story transpired during the era of super low interest rates. Now that rates are up to normal levels and will never return to <2% long term, the near infinite subsidies and capital investment will rapidly diminish. Look at the pressure private equity funds are under to generate cash at 6+%. The Chinese government (especially the LGTVs) and all governments will have to greatly reduce the subsidies which has driven everything the past 15 years.
Not so much a paradox as a mis-allocated weighting between invention, initiation, improvement and implementation (doing), and iterative (cost curve) aspects of innovation. Western cultures are very stuck on invention and initiation by (typically) some identifiable hero genius persona as the end-all-and-be-all of innovation, but large scale collective implementation and iteration are where the most effort, risk and ingenuity is required to accomplish real world outcomes.
Has the the solar market "crash" been well-defined in terms of time period and main drivers? To me it seems like the adoption for solar has only been going down since the early 2000s.