China’s dominance of solar poses difficult choices for the west

Introduction

China’s rise to dominance in solar panel manufacturing has reshaped the global clean energy landscape. Today, more than 80% of the world’s solar panels are made in China, driving down costs and accelerating renewable energy adoption. Yet this China solar dominance creates a strategic dilemma for Western countries. Relying on inexpensive imports ensures affordable clean power but raises concerns about supply security, geopolitical risk, and industrial resilience. As governments aim to meet climate goals, they must choose between purely cost-driven procurement and building a western solar industry that can withstand global shocks.

The Rise of China’s Solar Manufacturing

China’s path to leading the solar supply chain began over a decade ago with targeted policies:

1. Subsidies and Incentives: Generous government subsidies for solar companies and factories.
2. Economies of Scale: Massive factory investments in polysilicon refining, wafer slicing, cell assembly, and panel integration.
3. Vertical Integration: Control of each production step—from raw silicon to finished modules—cuts costs and boosts efficiency.
4. Supply Chain Consolidation: Mergers and acquisitions created a handful of giants like LONGi, JinkoSolar, and Trina Solar.

By 2020, Chinese firms accounted for 70% of global module shipments, 80% of cell production, and over 90% of key polysilicon refining capacity.

Advantages of China’s Solar Dominance

Unmatched Cost Leadership

China’s scale and low-cost labor drove module prices from over $3 per watt in 2010 to under $0.20 per watt by 2023. This price collapse made solar the cheapest electricity source in many regions.

Rapid Innovation Cycles

Chinese firms continuously improved efficiencies—from 15% panel conversion rates in 2010 to over 23% today—and reduced production costs through automation.

Comprehensive Supply Chains

Controlling polysilicon, ingots, wafers, cells, and modules insulates Chinese manufacturers from global bottlenecks. During the COVID pandemic and subsequent supply chain disruptions, domestic producers kept factories running while many Western firms struggled.

The Western Dilemma: Benefits vs. Risks

Benefits of Cheap Imports

• Faster Deployment: Lower panel prices accelerate renewable targets and reduce electricity bills.
• Investor Confidence: Predictable, low-cost supply draws private capital into solar farms and rooftop programs.
• Lower Carbon Emissions: Rapid scale-up of solar displaces coal and gas power.

Risks of Overreliance

1. Supply Disruption: Trade disputes, export controls, or factory shutdowns in China could halt panel shipments.
2. Geopolitical Tension: Western reliance on China for critical clean energy components creates leverage for Beijing in diplomatic conflicts.
3. Industrial Decline: Domestic solar manufacturing industries in Europe and North America have largely vanished, leaving few local jobs and weak innovation ecosystems.
4. Human Rights Concerns: Reports of forced labor in certain Chinese supply chains raise ethical questions for buyers.

The West faces a true impasse: cheap solar imports drive climate goals but undermine energy security and industrial resilience.

Strategic Responses from Western Governments

Diversification of Suppliers

• Southeast Asia and India: Encouraging investment in emerging solar hubs to reduce single-market risk.
• Allied Cooperation: Joint purchasing agreements among the EU, US, Japan, and Australia to spread demand and support non-Chinese manufacturers.

Supporting Domestic Manufacturing

• Tariffs and Trade Remedies: The US and EU have imposed tariffs on Chinese solar imports to shield local producers.
• Subsidies and Tax Credits: Programs like the US Inflation Reduction Act (IRA) offer production tax credits and loans for domestic panel factories.
• Public–Private Partnerships: Collaborative initiatives between governments, utilities, and manufacturers to build gigawatt-scale domestic fabs.

Innovation and Value-Added Services

• Next-Generation Technologies: Investing in perovskite cells, bifacial modules, and recycling technologies to leapfrog current Chinese-led silicon panels.
• Smart Integration: Emphasizing solar-plus-storage solutions, digital grid management, and local manufacturing of inverters and trackers.

By combining these measures, the West can rebuild a resilient solar industry without losing sight of climate goals.

Case Studies: Western Industrial Revivals

United States

The IRA’s 30% Investment Tax Credit now applies to domestic manufacturing of solar components. In 2024, First Solar announced a $1.1 billion expansion of its Ohio plant, and new entrants like Qcells and 1366 Technologies are building wafer and cell facilities.

European Union

Under the EU’s Net Zero Industry Act, the bloc plans to produce 40% of its solar needs domestically by 2030. Germany’s Solliance Research Center drives thin-film innovation, while France indexes renewable energy tenders to favor European-made panels.

India

India’s Production Linked Incentive (PLI) scheme offers subsidies per watt for local module assembly and cell production. By 2025, India aims to install 100 GW of domestic solar manufacturing capacity, reducing import dependency.

Balancing Cost, Security, and Sustainability

Western policymakers must navigate three priorities:

1. Affordability: Keeping installation and electricity costs low to maintain public and political support.
2. Security: Ensuring diverse supply chains and local capabilities so solar remains reliable through global crises.
3. Ethical Sourcing: Upholding labor and environmental standards across the entire supply chain.

Transparent certification systems, supply chain audits, and alignment with international labor conventions can help balance these goals.

Consumer and Investor Roles

Beyond governments, private actors play a key role:

• Investors: ESG (Environmental, Social, Governance) funds can prioritize companies with transparent, diversified supply chains, spurring more local manufacturing.
• Utilities and Corporations: Large power purchasers can include domestic content requirements in power purchase agreements.
• Homeowners and Businesses: By choosing local installers and certified panels, end-users can support the rebuilding of a robust western solar industry.

Collective demand signals guide market investments toward more secure and sustainable supply networks.

Future Outlook

Near Term (1–3 Years)

• Continued dominance by Chinese panels, with minor increases in Western capacity under IRA and EU incentives.
• Price volatility risk during potential trade flare-ups or supply disruptions.

Mid Term (3–7 Years)

• Expansion of domestic gigawatt-scale solar fabs in the US, EU, and India, driven by initial policy success.
• Emergence of Southeast Asia and Latin America as alternative manufacturing bases.

Long Term (7–15 Years)

• Diversified, resilient global solar supply chains with multiple leading hubs.
• Technological breakthroughs in next-gen solar materials and recycling reduce reliance on polysilicon imports.
• Western countries achieve a balance between low-cost renewables and independent energy security.

Conclusion

China’s solar dominance offers both an opportunity and a challenge. Cheap, abundant panels have driven historic progress in clean energy adoption. Yet Western nations now face an impasse: rely on Chinese imports and risk supply insecurity, or invest heavily in domestic and allied manufacturing to safeguard long-term resilience. By diversifying suppliers, boosting local production through incentives, and prioritizing innovation and ethical sourcing, the West can restore a competitive solar industry without sacrificing climate goals. The path forward requires coordinated policy, private investment, and consumer choice to build a secure, sustainable solar future that balances affordability with energy independence.